The global market for RFID systems in the pharmaceutical vertical has reached an estimated $9.3 million in 2005, with hardware accounting for approximately 42% of that amount, according to research conducted by Venture Development Corp. VDC anticipates a compounded annual growth rate (CAGR) of nearly 118% over the next three years, with revenue shipments exceeding $96 million in 2008.
With the Wal-Mart and US DOD mandates, pharmaceutical suppliers are required to tag a subset of the pallets and cases shipped to select distribution centers. However, most pharmaceutical manufacturers and distributors struggle with determining how RFID technology can benefit their operations and provide an internal ROI.
In fact, the potential benefits from RFID vary greatly among supply chain operations. Among RFID's core value propositions are increased operational efficiency, real-time visibility, reduced labor costs, and enhanced security. However, RFID implementations are unique to each user and application environment. As a result, pharmaceutical manufacturers and distributors are increasingly turning to solutions providers and systems integrators for assistance with determining their specific business case for RFID and resolving key end-user adoption and integration challenges, including:
œ Evaluating whether RFID will solely be used for outbound compliance or if it will become a part of the overall enterprise operation;
œDetermining the RFID efriendlinessf of their products, for example, evaluating performance in the presence or water, metal, RF interference, etc.; transponder form factor design; and tagged object properties (i.e., packaging materials, contents, etc.);
œ Identifying at which points in the manufacturing and distribution flow tags should be applied (and read);
œ Selecting the best physical location for the tag on the pallet, case, and/or item (placement and orientation);
œ Deciding how the RFID system should interface with existing host systems such as data capture, ERP and warehouse management systems;
œSelecting the best technology and partner(s) based on specific application requirements;
œ Managing and leveraging the influx of real-time RFID data effectively to improve business processes.
A common misconception among several pharmaceutical manufacturers and distributors is the view of RFID as a gsilver bulleth solution to supply chain problems. Any organization using, testing, or evaluating RFID in the pharmaceutical industry faces some significant challenges. RFID is one way to tighten the supply chain, but it is not a panacea.
While wide-scale deployments are limited today, the increasing number of pilots and small-scale rollouts suggest users are becoming more aggressive with RFID adoption. According Michael Liard, director of VDC's RFID practice, gEven if the true benefits will not be realized for several years, establishing the base RFID infrastructure today is critical for future supply chain integration.h