Oct. 23, 2006—There is no doubt about it: The pharmaceutical industry is expected to significantly influence how the RFID industry addresses item-level tracking and high-compliance applications on a global scale. This vertical market is not only expected to set the specifications on using RFID for tracking within high-volume global supply chains, but should also facilitate commercial deployments in other high-growth markets, such as consumer packaged goods (CPG), retail and health care.
Due to the high value of pharmaceutical products and the compelling ROI for most communities within the supply chain,
Venture Development Corp. (VDC) anticipates that the industry could become the largest RFID vertical within the next two to three years as item-level tracking takes hold.
However, several hurdles must be overcome before full-scale deployments are realized:
- Addressing the main issues that continue to challenge the use of RFID in any open-loop supply chain.
- Price: initial and continued hardware, software and services costs (at the various stages of deployment); total cost of ownership (TCO); and high costs associated with anticounterfeiting, enhanced encryption and customized transponder form factors.
- Frequency: concluding discussions on heterogeneous versus homogeneous frequency environments in the pharmaceutical supply chain—coexistence of UHF at the pallet and case/carton levels, and HF at the item level, or a single frequency (UHF) at the pallet, case/carton and item levels.
- Performance considerations: read range, read accuracy, dense-reader mode operation, reader-to-tag communication, system interoperability, RF interference, reader and antenna array configuration, and site evaluations.
- Determining the impact of RF energy on pharmaceutical products, active ingredients and samples.
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Once these issues are resolved, a domino effect will most likely ensue, since the pharmaceutical value chain is heavily integrated with the CPG, retail and health-care supply chains. These three verticals are primary end-user outlets for pharmaceuticals and are poised to deploy the technology rapidly, having conducted numerous evaluations and pilots over the past five years.
Research from VDC's 2006 RFID Business Planning Service indicates that the vast majority of end-user companies (more than 65 percent) in these verticals are waiting on the outcome from the pharmaceutical market before commercially deploying the technology. "Businesses within these verticals sell a significant amount of pharmaceuticals and need to have compatible RFID solutions," states Shan Chu, an RFID analyst at VDC. "Too early deployment of incompatible RFID systems may lead to additional capital investment and integration issues."
There are several reasons why the pharmaceutical market is a perfect incubator for item-level RFID applications:
- It has high-value products, making it easier to justify investment.
- It has high volumes, making it easier to recognize economies of scale.
- It is compliance-driven, facilitating adoption timelines by creating a sense of urgency for the technology.
- It is integrated with other high-value, high-volume, compliance-driven verticals, defining preferred specifications and driving the market closer to standardization and off-the-shelf solutions.
If item-level tracking is considered to be the Holy Grail for RFID, then the pharmaceutical market is the technology's Sir Gawain.
Drew Nathanson is the AIDC and RFID practice director at Venture Development Corp.
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