Accenture and its partners learn much from their cross-functional,
cooperative RFID “Jumpstart” pilot program.
By Jamie Hintlian Contributing Editor
In early 2004, Accenture announced the formation of a group that would evaluate
the potential of RFID technology to enhance pharmaceutical manufacturing, distribution,
and retail operations within the United States.
The next year of working with industry leaders–the Food and Drug Administration
(FDA), the Healthcare Distribution Management Association, and the National Association
of Chain Drug Stores–led to the conclusion that RFID is a powerful and effective
tool that could be used to dramatically improve safety and security issues within
the pharmaceutical supply chain.
Accenture served as the program manager for the group–nicknamed Jumpstart–which
comprised pharmaceutical manufacturers, distributors, and retailers. Included in
this collective were Abbott Laboratories, Barr Pharmaceuticals Inc., Cardinal Health,
CVS Pharmacy, Johnson & Johnson, McKesson, Merck, Novartis, Pfizer, Procter & Gamble,
Rite Aid, Sanofi-Synthelabo Inc., Walgreen’s, and Wyeth, along with solution
providers Dell, Manhattan Associates, and Symbol Technologies.
Cross-functional participation Companies had cross-functional participation, with representatives from areas
such as manufacturing, packaging, distribution, fulfillment, order management,
information technology, and quality assurance.
The group’s goal was to explore the benefits that full
adoption of RFID and electronic product code (EPC) technologies could bring to
consumers and companies throughout the pharmaceutical supply chain. The group
explored the application of EPC and RFID technologies to three main areas: enhancing
the safety and security of the pharmaceutical supply chain; improving the process
of pharmaceutical returns management; and increasing the efficiency of distribution
operations.
The effort involved shipping, tracking, and tracing nearly 13,500 packages of
pharmaceuticals over an eight-week period. Testing was confined to the supply
chain level.
In addition, the group tested how the technologies could improve expiration
date management, lot and batch tracking, returns management processing, shipping
and receiving accuracy, supply chain integrity, and product security and
consumer safety.
Technology and business processes While the group’s efforts involved deploying new technology,
the project was not just a technological initiative. Rather, it was more of a
proof-of-concept effort designed to learn about the business processes and outcomes
of using RFID for a more safe and secure supply chain.
The group did, however, team with several RFID companies to use off-the-shelf
technology such as middleware and software from Manhattan Associates; tags, readers,
and antennas from Matrics International (since acquired by Symbol Technologies);
and Dell servers.
Lessons learned: tag-related findings Some of the project team’s early learnings were about tag-related issues.
For example, packages containing real product were to be tagged at the item level,
but needed to minimize the likelihood that tagged products would end up in a consumer’s
hands. The team worked to make tags removable by the retailer, but still securely
attached to the trade package while it moved through the supply chain. The solution
was a two-ply tag with a clear base that stayed on the product, and an RFID tag
that peeled off easily. To ensure the tag design was compliant with government
and industry guidelines, the group worked with EPCglobal and the FDA.
At a fundamental level, the project achieved its objectives
of demonstrating RFID/EPC’s
potential to address industry needs. In working through the business scenarios
and processes constructed to test RFID/EPC, the group arrived at a number of key
findings.
First, RFID has strong implications for satisfying mandates. The project assessed
the potential for RFID/EPC to electronically address important regulatory mandates
such as the Florida Pedigree Requirements. The technology showed the potential
to eliminate the need for a paper-based pedigree system, which is labor-intensive
and unreliable.
The project underscored the importance of meeting infrastructure prerequisites
to prepare for industry-wide adoption of RFID/EPC. There are immediate measures
that manufacturers, wholesalers, and retailers can take as preconditions
for effective RFID/EPC implementation. For example, the broader lessons and issues
from this project can be addressed through smaller-scale initiatives within
the four walls of organizations looking to implement RFID/EPC.
Need for specialized skills Another lesson learned was that RFID/EPC projects require specialized skills,
and that implementing the technology affects many disciplines within an organization,
requiring close coordination and involvement across the entire organization, as
well as a good working interaction with supply chain partners.
Power of partnership
A defining aspect of the group was the collaborative, cross-supply-chain
approach that proved effective in pooling resources and sharing development assets.
It is unlikely that any member of the group could have achieved the same results–for
the same costs–alone.
In a practical sense, this cooperative relationship prevented unnecessary work;
in a broader sense, it allowed better development of solutions aligned with FDA
directions.
Full-scale implementation on an industry-wide basis may be more complex than
some believe, requiring more time than anticipated to refine issues unique
to the pharmaceutical industry. Requirements for systems and packaging in this
highly regulated environment may present greater costs and efforts than those of
other industries.
Other key conclusions Other key conclusions about the future of RFID/EPC in the pharmaceutical supply
chain include:
- the technology must continue to evolve for an effective full-scale
industry implementation
- tag manufacturing and converting processes must be improved to deliver
tags with defect rates at least as low as other packaging components that pharmaceutical
manufacturers currently use.
- tag technology needs to advance so that tags will function effectively
with liquids, biologics, and cold-chain products, as well as in mixed-tote shipments
- tag costs need to decrease significantly
- greater consideration should be given as to how RFID hardware interacts
with other devices
- testing of hardware after deployment is critical to ensuring both networks
and hardware are configured properly. This can be time-consuming,
and needs to be taken into account when multiple organizations try to coordinate
and move to the same schedule.
This effort achieved its stated objectives: assessing
the potential for RFID/EPC technologies to provide business value in an end-to-end
supply chain context, and helping to establish an industry operating model.
Perhaps most important, it established a forum for the industry to
ask tough questions and provide companies with the knowledge and confidence to
move forward with RFID/EPC. Fortunately, the enthusiasm for this group’s
efforts has only grown since its inception.
Taking the next steps Phase Two of the RFID pharma group involves working with individual companies
on their strategy and work plan for implementing RFID within their supply chain.
The next evolution will look in-depth at what capabilities an individual firm needs,
and what the best integration approaches will be.
Members of the pharmaceutical industry have taken a leadership
role in RFID by working together to examine the technology’s potential to improve its
members’ operating
performance. The industry is moving ahead because its leading companies are looking
critically at where the value is and how they might harness it in an effective
way. By taking a pan-supply chain view, they also are well-positioned to recognize
key benefits and avoid focusing on the wrong aspects.
Why Pharma?
Several characteristics of the pharmaceutical industry explain why its leaders
are so interested in using RFID and EPC technologies.
• Counterfeit drugs. The World Heath Organization estimates that 5%
to 8% of all drugs sold worldwide are counterfeit. In some countries, counterfeit
drugs represent 80% of the pharmaceutical output. Moreover, a recent FDA investigation
found that counterfeit drugs at U.S. postal facilities are virtually indistinguishable
from real drugs. Since 2001, counterfeit drug cases logged by the FDA have
more than tripled. Because it’s easier to counterfeit the pharmaceutical
product than it is to create a fake RFID identity, the technology has potential
to winnow counterfeit drugs at check points across the supply chain.
• Florida’s pharmaceutical “Pedigree Papers” act.
Pedigree papers require histories identifying previous sales and product information
that date back to the drug’s manufacture. Required information includes
prescription name, manufacturer/ distributor name, dosage form, prescription
strength, container size, lot number, quantity, prescription owner’s
name/address, prescription shipment location and transaction dates. RFID
technology automatically and routinely captures this data.
• Challenges of track-and-trace. Because purity
and accuracy of ingredients and dosages are incredibly important, monitoring
the flow of inventory through the supply chain is hypercritical. During
a recall, for example, it is vital to know the exact location of all products,
and to be sure that all recalled product has been returned or destroyed.
Approximately 1,300 recalls were processed in 2001. Applying RFID will make
it possible to manage recalls and outdates more effectively.
• Order-fill problems. Pharmaceutical distributors and manufacturers
blame out-of-stocks and manufacturing problems for the 8% of orders that can’t
be filled. RFID has the potential to improve revenue by reducing out-of-stocks.
• Return concerns. Returns cost the pharmaceutical industry about $2
billion annually. The estimated typical percentage of a facility’s total
monthly prescription volume returned by customers is 4% for distributors
and 2% for manufacturers. RFID technology is estimated to cut product returns
in half. |
 Jamie
Hintlian serves as lead partner for the Accenture Health & Life Sciences Supply
Chain Management practice. Based in Boston, he has teamed with clients across
the pharmaceutical and medical products value chains to improve supply planning,
manufacturing, distribution, warehousing, procurement, and customer service performance,
as well as regulatory compliance.
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