Oct 27, 2005The U.S. arm of RFID industry body EPCglobal has developed a version of its EPC Value Model software and documentation geared toward helping pharmaceutical manufacturers find the business case for using EPC RFID. The software and a supporting white paper—titled Assessing the Value of EPC/RFID in the Pharmaceutical Industry—lay out the expected benefits and costs, calculated over a five-year period, of implementing an EPC-based RFID system. The benefits are measured in the reduction of product counterfeiting, product diversion, reverse logistics and other areas specific to each company's test EPC RFID scenario.
Available free to EPCglobal US subscribers, the EPC Value Model for Healthcare and Life Sciences software comprises a Microsoft Excel spreadsheet and supporting documentation that calculates specific detailed projections of potential costs and savings based on numerous real-world variables. These include the number of products to be tagged, as well as factories and distribution centers to be equipped with RFID interrogators (readers). The Value Model can assess the potential of tagging at the pallet, case and even individual packaging levels, as well as determine the value of tracking those units throughout the global supply chain.
In May, EPCglobal US delivered its first version of the EPC Value Model, designed specifically for consumer packaged goods (CPG) manufacturers (see New Tool for Assessing RFID's Value). According to the group, EPCglobal US members have downloaded the software hundreds of times.
Although the concept behind the two Value Model offerings is the same, the two industries and their incentives for using EPC RFID models are not identical. "The types of issues and the business drivers are very different. While stock issues are a keen interest for CPG, it's counterfeiting and diversion where the most interest in RFID lies in pharma," says Bob Celeste, EPCglobal US's director of product management.
In addition, says Celeste, while the CPG Value Model has default settings companies can use for some parameters, the pharma version takes in more product-specific attributes. This made it impossible to incorporate some default settings. Therefore, in order to get the most from the value model, pharma companies will require a more complete notion of what RFID equipment they are likely to deploy, and what products they are likely to tag.
The new EPC Value Model was developed by the Stanford Global Supply Chain Management Forum and Eindhoven University in the Netherlands. Pharma manufacturers Aventis, GlaxoSmithKline, Johnson & Johnson, Merck, Pfizer, Wyeth and Purdue Pharma, as well as wholesalers AmerisourceBergen, Cardinal and McKesson, helped the Value Model researchers determine which issues were the most important to the pharmaceutical industry. The top three major business issues that could be most effectively addressed with EPC RFID were deemed to be product counterfeiting, product diversion and order reconciliation.
Every company interviewed as a basis for the Value Model already had experience using RFID. "They all have RFID test sites," says Celeste, "and most are either planning to tag in 2006, or are already tagging at the case level."
With Value Models now developed for CPG and pharmaceutical makers, EPCglobal says it is trying to decide which industries will be next; automotive, aerospace and the chemical sectors are all being considered. The reason for producing the models is clear, says Celeste. "It's all about implementation. The better the tools to build a business case for EPC RFID, then the more our standard becomes a reality," he says.
Beginning Oct. 28, the EPC Value Model for the Healthcare and Life Sciences software and the accompanying white paper will be available at EPCglobal US's Web site. EPCglobal US subscribers will be able to download both for free.
