December 06, 2005
RFID deployment drivers
Retailers such as Wal-Mart and Target have a low-cost business model and they maintain an edge over competition by achieving saving on cost. One way of doing this is to streamline the supply chain. The RFID initiatives of these organizations are aimed at doing just that.
According to a recent study by Gartner, RFID can help retailers to reduce location errors by 90% and to increase productivity by 15%. It helps retailers in managing recalls and reduces inventory counting time by 40%.
Wal-Mart’s initial mandate required that its top 100 suppliers tag cases and pallets of selected products destined for three Texas distribution centers of Wal-Mart. With the technology maturing, standards gaining acceptance and uniformity, and the deployment costs reducing more suppliers are expected to start tagging a greater number of products.
Target announced its RFID mandate in the spring of 2005 and expects compliance from all its suppliers by the spring of 2007. The retailers envisage a tag on each product in their store and hope for savings that will help them to further cut costs.
The policy guidelines released by the DOD in August 2004 stated the mandatory use of RFID tags to be included in contracts signed from October 1, 2004. The tagging was to be done on the pallet and case level, mission critical items, and for items valued at $ 5000 and above. The RFID policy will be incorporated in the updated version of the Defense Federal Acquisition Regulations.
The DOD RFID mandate was slated to be released on January 1, 2005; however, it got delayed to April 2005. The reasons for delay were the DFARs not being ready in time, RFID tags not being available in sufficient quantities, and inability to notify the 43,000 DOD vendors in time.
The DOD mandate consists of three distinct phases; the first phase involves the tagging of cases and pallets of rations, individual equipment, repair parts, etc. The second phase which will commence in January 2006 will include the tagging of cases and pallets of subsistence and comfort items, petroleum, chemicals, ammunition, pharmaceuticals, etc that will be shipped to 32 depots and two DLA distribution centers. Phase 3 which will commence in January 2007 will require the suppliers to tag cases and pallets of all goods dispatched to the various DOD locations.
The FDA released a report in 2004 in which it has mentioned RFID as a major weapon against spurious drugs. The report recommended using RFID for maintaining a pedigree of the drug. The FDA hopes that by maintaining a recorded history of the manufacture and distribution of the drug, pharmaceutical companies can minimize the entry of counterfeit drugs in the supply chain. The genuineness of a product can be assured by tagging it at the manufacturer’s end and following its passage through the wholesaler and druggist premises. FDA hopes to have RFID on individual items by 2007. Even though the FDA has not mandated the use of RFID, its guidelines are taken very seriously by the pharmaceutical industry.
The FDA created the “RFID Workgroup” in November 2004. The workgroup monitors RFID adoption in the pharmaceutical industry, identifies and rectifies regulatory issues that are raised by the adoption of RFID. The FDA also released a Compliance Policy Guide (CPG) that permits pharmaceutical companies to conduct tests with RFID without prior consent from the FDA. The CPG frees, till December 2007, pharmaceutical companies from several regulations if they are running tests and pilots with RFID on their products. The waiver covers regulations regarding tracking, shipment verification, product authentication, etc. Purdue Pharma, GlaxoSmithKline, and Pfizer are some of the companies that have announced RFID implementation projects.
The absence of a uniform protocol for tag/reader communication had prevented the growth of RFID up to now. Incompatibility between hardware, software, and low production output from tag manufacturers were some of the results of the different standards such as EPC Class 0 and Class 1 that vendors chose to adopt. The Gen 2 tags ratified by EPCGlobal in 2004 have performance and compliance attributes that will help to achieve interoperability in RFID. Gen 2 will also enable users to key in more information as it can hold at least 96 bits of information, this will lead to greater transparency in the supply chain. In terms of facilitating global interoperability, Gen 2 is a major step forward as it conforms to the FCC, European, and Asian regulations regarding UHF.
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