Aug 27, 2010Argentine pharmaceutical distribution company Axxa Pharma reports that it has seen a 40 percent rise in its profit margins since it began using RFID technology at its Buenos Aires warehouse 18 months ago. The company attributes the bulk of this increase to the addition of its RFID system.
Axxa's revenue has grown 250 percent since it opened three years ago, the firm indicates, and RFID has helped the firm cope with this rapid expansion by enabling it to track each container of medicine from the time it arrives at the warehouse until the drug is sold and shipped to a customer.
While the profit margin improvement is significant, even more important is the increase in the safety of its products resulting from the greater visibility RFID affords, says Federico van Gelderen, Axxa Pharma's executive director. By tracking each bottle of medicine, the company can ensure that medications are not removed from the warehouse, and that expired drugs are not sold, as well as identify whether medications are sold at a low profit margin.
The system, van Gelderen says, "can provide customer satisfaction because we can absolutely guarantee that we can trace each product back to those selling it to us, and we can ensure they were professionally handled at our own facility."
Axxa Pharmacy was launched in Buenos Aires three years ago, to distribute medicines provided by wholesalers. In some cases, the company breaks the drugs down into smaller portions for sale. It stores and then sells the products to hospitals, pharmacies and physicians throughout Argentina. The firm was growing so fast that this summer, it moved to a larger warehouse to accommodate the higher volume of medicines it was handling.
From the outset, the company sought an RFID-based solution to track its products while they were in its custody. "The market was going through a crisis with medicines [being sold] that were not what they should have been," van Gelderen says, referring to the tampering and counterfeiting of pharmaceuticals that can take place in the supply chain.
The solution, provided by software development company BDEV, uses Alien Technology tags and readers. It was installed in early 2009 to provide all of the functionality Axxa Pharma was requesting. In addition, the system tracks profit margins to ensure that they remain at a level that the company had established for itself, says Mauro Crovato, BDEV's manager of technology.
Initially, Axxa Pharma tagged all products priced at $1,000 or more (many oncology drugs fell into this category), and then began tagging individual units of all products priced at $500 or more. Currently, the firm tags all items valued at $300 or more.
When a new high-value product arrives at the warehouse—in cases, individual boxes or coolers—it is moved directly to a receiving station, where staff members unpack each item and attach an Alien Squiggle tag to it. Workers then employ an Alien desktop reader to interrogate the tag and input data regarding that product into the company's back-end system, including which business supplied it, its expiration date and the price paid.
The readers transmit the ID number to BDEV software via a Wi-Fi connection, where that number is linked to the additional data input into Axxa's database. The products are then placed on storage shelves within the warehouse. There are two RFID portals with Alien readers at the room's entry and exit points. If someone were to take a product from the shelf and attempt to walk out the door, the readers would capture that ID number and issue an alert that would be displayed on the software, as well as e-mail alerts to management.
The software also compares the purchase value of the medicine against the amount for which Axxa Pharma will be billing the customer, and determines whether the resulting profit margin meets Axxa Pharma's expectations. If the profit margin is significantly low, an alert is sent to management. The boxes are then moved through the logistics section of the warehouse, where they are read one final time as they are loaded onto trucks for delivery to customers. At that point, the software is again updated—in this case, with the shipment time and destination.
In approximately one month, Axxa Pharma expects to be able to allow its customers to access data regarding specific products from the BDEV software, such as who provided the product to Axxa Pharma, as well as the amount of time it spent in the warehouse, and the time of shipment. Customers will be able to access the information on Axxa Pharma's Web site, by inputting the ID number of the RFID label printed on the front.
The RFID system "is the best management tool we've ever had," van Gelderen says. "There's no doubt that the profit margin has increased." This is because he receives an alert on his Blackberry every time a product is being prepared for shipment to be sold at a price that would not provide a suitable profit margin. In this case, he indicates, because the order has not yet been shipped, the billing price can be adjusted right away, before the product leaves the facility.
According to van Gelderen, the company utilizes between 2,000 and 3,000 tags every month. Since the system was installed, he says, "We have a very good handle of what products we have throughout the warehouse."
