UPS Supply Chain SolutionsSM
RFID in Healthcare -
A panacea for the regulations
and issues affecting the industry?
Subject: Information Technology for Management(BC 6501)
Name: Ms. Supatra J. (ID: 523 9228)
Patients at a hospital in England were exposed
to the human version of mad cow disease when
infected equipment was used. Human error
caused patients at the hospital to be exposed
to the infected equipment. How can health care
organizations avoid catastrophic situations
Proper protocols and the use of radio frequency identification
(RFID) technology could prevent such outbreaks by ensuring
instruments are properly tracked and classified. This and other
RFID applications can provide significant benefits to the healthcare
industry to ensure patient safety and improve supply chain efficiency.
RFID is now generating significant interest in the marketplace
because of its robust application capabilities. RFID enables
This and other RFID
healthcare facilities improve overall safety and operational
applications can provide
significant benefits to the
efficiency because it operates without line-of-sight while providing
healthcare industry in terms read/write capabilities for dynamic item tracking.
of ensuring patient safety
and improving supply chain Why RFID Adoption Has Been Slow
For a variety of reasons, adoption of RFID technology by the
healthcare industry has been sluggish because payback is
less immediately visible than what most companies prefer.
Although costs are decreasing, many companies are
reluctant to invest in a technology not yet widely adopted.
Maximizing RFID benefits also requires modifying existing
business processes, a daunting task that usually entails changes
in technology investment strategies. Without clear RFID
standards and data ownership policies, investment in RFID has
been a difficult proposition.
However, recent developments have made RFID applications
1) RFID costs are expected to decline significantly. RFID tags
costs dropped from $1 in 2000 to 20 cents in 2004, and are
expected to fall to 5 cents by 2006. In 2004, readers cost about
$1,000 but are expected to fall to only $200 by 2006.
2) Coupling RFID technology with the electronic product code
(EPC) will provide the capability to locate and track items
throughout the supply chain, allowing significantly more data
to be attached to items at the pallet and case level. EPC Global,
a subsidiary of the Uniform Code Council (UCC), is leading the
development of industry-driven standards for the EPC Network
to support the use of RFID in today’s fast-moving, information-
rich trading networks. EPC Global and EAN International are
writing specifications on the content for 96-bit EPC tags. EAN
International is the global not-for-profit organization that creates,
develops and manages the EAN-UCC standards jointly with the
UCC, one of its member organizations.
3) New regulatory requirements such as the Florida Pedigree Act
mandate that important information accompany each drug
throughout the supply chain. Using RFID will allow healthcare
companies to capture required information such as drug name,
dosage, container size, number of containers,lot/control numbers,
RFID technology can
improve the tracking of drug 4) Tampered or adulterated products entering the healthcare supply
usage throughout the chain is a growing concern. In light of the 9-11 terrorist
clinical-phase testing attacks and the anthrax-tainted mail found in the United
protocols. States, both consumers and manufacturers are looking for
ways to keep
Overall, healthcare companies need the types of solutions that
RFID can provide. Numerous RFID applications for both
hospitals and pharmaceutical companies can benefit customers
Healthcare Marketplace Needs and RFID Solutions
Pharmaceutical companies, distributors, and hospitals
need technology to deter drug counterfeiting. The World
Health Organization estimates that between 5 to 8
percent of global pharmaceuticals are counterfeit. In some
countries, the percentage of counterfeit drugs is significantly
higher at between 25 to 40 percent. Thus, the
pharmaceutical industry reports that it loses $2 billion per
year due to counterfeit drugs.
Counterfeit drugs adversely affect people’s lives by preventing
patients from receiving needed medication. Fortunately, RFID/EPC
tags can help detect products that are:
• Counterfeit or fake
• Tampered with, adulterated or substituted
• Unacceptable (i.e., expired, discarded, returned, recalled, etc.)4
The pharmaceutical drug approval process is rigorous and
dependent on meticulous documentation. As new drugs go through
the clinical trial phase, accurately tracking patient usage is crucial.
RFID technology can improve the tracking of drug usage throughout
the clinical-phase testing protocols. Improved tracking and
accountability can improve the reliability and speed of the United
RFID technology that States Food and Drug Administration (FDA) drug approval process.
improves visibility into
returns could enable faster
Manufacturers and distributors need improved visibility
throughout the supply chain to gain an accurate account of
inventory. Lack of visibility of customer orders results in
increased inventory because healthcare practitioners often keep
buffer stocks to avoid stock outs. Increased inventory visibility
could reduce buffer stocks by substituting knowledge for
inventory, thereby reducing total inventory costs.
Hospital and Medical Device Company Applications
Medical Device and Asset Tracking
RFID has strong application potential with medical device
companies. The FDA requires medical device companies to be able
to identify each unit by serial number. Medical device companies
need better control of implants on consignment with hospitals
because returns can occur more than 50 percent of the time.
RFID technology that improves visibility into returns could enable
faster redeployment since the company would know sooner when
an unused product could be returned.
Surgical instruments and other devices must be properly cleaned
and packaged between uses. Tags on the instruments and
readers on the sterilization chambers and storage cabinets can
validate proper cleaning and help locate needed instruments.
Since medical devices are often mounted on portable carts,
smart tags placed on the devices and readers installed in the
doorways can enable personnel to quickly locate a crucial piece
of equipment and immediately determine its fitness for use.
Similarly, catastrophic errors would be completely traceable
from manufacture to use, and preventative maintenance on
equipment could be more accurately tracked.
Patient identification and location assistance are often needed
to ensure patient safety when urgent medical attention is
needed. Patient tags with RFID chips will meet this need.
Hospitals currently have to track radioactive isotopes throughout
the facility from storage to transport and then from administration to
disposal. RFID tags and readers can automate these tasks thereby
saving time and resources.
Active RFID tags with read/write capabilities can be used to detect
Realizing the full benefits of seal integrity for containers and individual packages. The tag can
the technology will require record the time and duration of seal loss, allowing even
companies to make changes problems that occur mid-shipment to be detected.
in their business processes.
Large amounts of inventory typically can be found in hospital
operating rooms. Lack of visibility in the supply chain coupled
with the unauthorized purchase of certain items often results in
the proliferation of “unofficial” inventory that could be reduced
by properly managing the materiel ordering process. RFID
technology can provide an accurate account of both official and
unofficial inventory levels. Proper diagnosis of the problem will
drive the implementation of corrective solutions.
Following the example of leading retailers, hospitals could move
to the next generation of supply chain management by having
their suppliers manage product ordering and inventory levels.
Hospital suppliers would then be responsible for providing
product on a timely basis through RFID technology. A dramatic
shift in how hospital supplies are ordered could drive down
hospital inventory levels assuming the proper processes and
metrics are in place.
Barriers to RFID Adoption
Key barriers to RFID adoption stem from previously high
technology costs. Payback periods have typically been too long.
Companies are waiting for RFID technology to drop in price, thus
making it a more affordable investment. Lean information
technology budgets mean that new technologies need to
demonstrate compelling business cases and short paybacks on
investments. Companies are skeptical if the costs cannot be offset
by the promised benefits.
Realizing the full benefits of the technology will require companies
to make changes in their business processes. For example,
tagging medical devices and placing readers in doorways at
hospitals will require an initial deployment and a change in
protocols for locating assets. While the initial training will require
coordination and effort, the decrease in time spent looking for
assets and increased asset utilization will improve the overall
efficiency of the hospital.
An additional barrier to RFID technology investment stems from the
view that applicable standards are lacking. EPC Global, however, is
working to create the EPC which will provide significantly more
data capabilities for the 96-bit EPC tags. The EPC will enable more
information to be captured than the current Universal Product Code
(UPC) which can only contain 12 bits of information. The EPC will
enable more salient and detailed information to be captured for a
product down to the item level. The tag can then be programmed to
hold information such as an item’s serial number, size, manufacture
date, price, and its distribution touch points, thus enabling greater
product accountability and safety.
RFID Decision Factors
Pharmaceutical industry leaders such as Pfizer, CVS/pharmacy,
Abbott Laboratories, Cardinal Health, Johnson & Johnson, and
McKesson are studying the safety and security of the harmaceutical
supply chain. They are also interested in knowing how to improve
returns management and increasing the efficiency of distribution
The adoption of RFID technology in the pharmaceutical industry
depends on the creation of open standards, FDA approval,
packaging redesign, and technology validation. Freeing up enough
capital for investment in RFID/EPC technology can occur if in-house
consolidation across servers, networks and data storage occurs.
Many companies are also waiting for RFID technology prices to
drop and for case studies that strongly illustrate the benefits of
RFID in business operations. As the RFID technology prices decline
and applications become more robust, RFID technology will be
Retail companies are leading RFID adopters. Wal-Mart, for example,
has mandated their top 100 suppliers to adopt RFID technology,
enabling increased inventory visibility and management. Similarly,
Target has required its suppliers to use RFID technology at the
pallet and case levels for some of its regional distribution centers by
2005. Target then expects the rest of its suppliers to adopt RFID by
2007.6 The Department of Defense has also mandated that its top
100 suppliers utilize RFID technology.
While mandates for utilizing RFID technology are occurring, the
ultimate responsibility for adopting RFID will depend upon a
company’s ability to develop a compelling business case and
effectively pilot RFID applications.
Companies will have to
weigh a host of
considerations before Companies will have to weigh a host of considerations before
deciding to invest in RFID deciding to invest in RFID technology. Considerations to balance
technology. will include tag readability, tag price points, system integration
costs, hardware and setup costs, management, ownership and
sharing of data, business process changes, privacy concerns, and
standards, i.e., EPC vs. the International Organization of
Standards (ISO), a non-governmental network of the national
standards institutes of 148 countries.
Companies will be looking for favorable payback periods
because competing priorities for financial expenditures
warrant careful consideration before investing in new
RFID and Bar Coding
While the bar code is widely accepted in the marketplace,
RFID offers some distinct benefits:
• No “line of sight” requirements
• More automated reading
• Less labor required
• Improved read rates
• Larger data capacity
• Ability to “write” information on a tag
• Effectiveness in harsh environments (e.g., temperature
extremes, dusty and dirty conditions)
Companies will have to consider the cost of either implementing
RFID as a way to augment bar coding or to replace it. Bar
coding, however, is a mature and proven technology that works
well in numerous applications such as inventory management.
Adopting RFID requires careful analysis to demonstrate that
the incremental advantages significantly outweigh the benefits
derived from bar code technology.
Organizations and Associations Supporting RFID
Although the FDA has not yet mandated RFID adoption, it has
recommended tagging of unit-level drugs that are likely to be
counterfeited by 2006 and has called for the tagging of all drugs at
the pallet, case and unit levels by 2007.7 The Healthcare
Distribution Management Association (HDMA), a non-profit
organization for distributors of pharmaceutical drugs, also issued a
position statement in November 2003 recommending that
pharmaceutical manufacturers and wholesalers begin putting RFID
tags with EPC on cases in 2005 and deploy the infrastructure
needed to take advantage of those tags. The recommendation
also included the incorporation of EPC tags at the selling unit level
AdvaMed, an advanced medical technology association, supports
the use of automatic identification for medical devices on a
voluntary basis. AdvaMed also recommends that reprocessed or
refurbished items should be treated no differently than other
medical devices. AdvaMed believes it is up to manufacturers to
apply automatic identification to items where it makes sense
economically and technically.
Clearly, organizations and associations support RFID technology
as a means for addressing product safety and accountability.
However, companies that adopt the new technology will have to
carefully update their internal processes and protocols to take
advantage of the benefits that can be realized from RFID.
North Bronx Healthcare Network’s (NBHN) Jacobi Medical Center
The old process required staff to manually enter the patient’s medical
record number printed on the wristband, after medication administration
rounds, into the hospital information system using computers located at
nurses’ stations. This process took staff longer to complete and was
prone to more errors compared to using RFID.
North Bronx Healthcare Network’s (NBHN) Jacobi Medical Center (Bronx,
NY), working with systems integrator Siemens Business Services (SBS)
and Precision Dynamics Corporation (PDC), implemented an RFID
wristband system for patient identification and medication administration,
replacing Jacobi’s manual process of identifying patients, in its two
acute-care departments. The RFID system improved patient safety and
care, increased productivity, and helped cut costs. The system consisted
of an integrated RFID application, developed by SBS, which connected
Jacobi’s electronic medical records, lab systems, and billing system.
Jacobi’s existing computerized physician order entry system allowed for
a seamless RFID implementation. Tablet PCs were embedded with RFID
software and used as hand-held readers for RFID wristbands provided by
PDC. PDC’s Smart Band® RFID wristbands include a 13.56 MHz RFID.
“The RFID wristbands were an essential part of the Jacobi RFID
implementation,” said Irwin Thall, RFID Manager for Healthcare at PDC.
“They allow for peripheral applications to connect with one another and
communicate accordingly. Without the wristbands, the system would not
be functional—they are the glue that keeps everything together.”
Increased Productivity & Cost Savings The Tablet PCs scanned the
patient’s RFID wristband prior to medication administration. The RFID
wristband inlays were encoded with a unique patient ID number, and
once scanned, the patient’s medical file was instantly accessible at
bedside. Daniel Morreale, Chief Information Officer for NBHN at the time
of the Jacobi implementation, stated that “the RFID trial saved one
hour per nurse per shift. If the application is rolled out networkwide,
it could potentially save $1 million a year, but more importantly this
creates two to three hours during every nursing shift for additional patient
contact and care.” “With the new system, staff no longer had to return to
nurses’ workstations to get patient data, and accurate information was
now available without any lag time,” said Jerry Moy, senior client
executive at Siemens Business Services. “Also, doctors and nurses used
the new RFID system for wireless database access to order lab tests,
enter notes on treatment, and update medication administration right
from the bedside.” Quality of patient care and safety has
improved since hospital staff was able to gain access to patient records
quicker for better service. “Clinicians have endorsed the pilot program
and want it expanded because it makes the handling of administrative
tasks simpler than with the paper-based system,” said Moy.
RFID is a read/write technology which allows medical personnel to
instantly update patient information. RFID tags can be encrypted to
protect the patient’s information and comply with industry regulations,
such as HIPAA. Also, unlike barcodes, RFID is non line-of-sight and can
be read through bedcovers and clothing, making it less disruptive for
patients, especially when they are sleeping.
Ultimate ROI: Improved Patient Safety
The introduction of RFID at Jacobi reduced the bulk of its paper forms
while also ensuring that the information used by its medical staff was
always updated. The RFID system has the ability to dramatically reduce
errors in drug prescription, increase hospital security and help the
organization reach its goal of preventing patient identification mix-ups.
The RFID pilot was so successful that staff did not want to give back the
equipment after the two month trial. “We went in to retrieve the equipment
and the staff refused to give it back,” said Moy. “The system’s ROI is
evident in cost savings, but more importantly, in improved patient safety.”
Falabella Tries Motorola RFID on for
Size (and Finds a Perfect Fit)
The Falabella Group is a retail giant in Latin America, operating department
stores, home improvement stores and supermarkets in Chile, Peru, Argentina
and Colombia. The 118-year-old corporation employs more than 59,000 people in
175 locations and aspires to become the region’s largest, most successful
retailer by combining quality and world-class management with a commitment to
As a major retailer with aggressive
regional expansion plans, the Falabella The challenge: improve business processes to support
Group recognized early on that RFID regional growth
had the potential to dramatically
streamline their business processes. Already an established regional retail leader, the Falabella Group is investing heavily
in aggressive expansion in South America, opening 32 new stores in 2007 alone.
With this growth, Falabella’s executives recognize that continued expansion will place
ever heavier demands on the company’s business processes, from the development
of brands and products, to systems, logistics, marketing, store designs,
technologies and customer service methodologies. So, together with their
commitment to expansion, they have made a similar commitment to improving
process management and increasing customer satisfaction.
To that end, the potential benefits of adopting RFID caught management’s
attention early on. Being quite deliberate and methodical on new technologies
that might require business change, Falabella’s team followed the analyst reports
and tracked the technology as it matured. In order to outperform their peers
over a sustained time, across business cycles and industry disruptions, Falabella
believes in carefully balancing today’s needs with investment in tomorrow’s
drivers of change.
Meanwhile, today’s needs were becoming more pressing. Increasing labor
demands in both busy new stores and established flagships meant that store
inventories were being conducted monthly at best, but often no more than
quarterly. Inventory discrepancies were averaging 20% across the company. The
resulting inadequate stock visibility translated directly into potential lost sales.
When the second generation of RFID (the Gen 2 RFID Standard) demonstrated
high reliability, Falabella was ready to begin planning their own pilot RFID
deployment program. Their objectives were clearly defined and tightly aligned to
their present business needs:
• Perform daily inventory cycle counts.
• Maintain over 98% RFID reading accuracy.
• Identify and measure the cost and benefits of RFID.
Customer Profile The pilot: one store, one overriding goal
- accurate inventory
Falabella planned a four-month pilot program in one of
its Santiago department stores, close to corporate
Company headquarters. To ensure careful monitoring and
Falabella control of the test program and to ensure project
buy-in across distinct business operations, the
Santiago, Chile retailer had committed to weekly RFID pilot project
meetings between the technology integration group
Industry and business/store operations.
Motorola Products The first challenge was finding the right solution
Motorola MC9090-G handheld readers providers to help launch the pilot. After months of
Motorola XR440 fixed readers with AN400 antennas interviewing, Falabella was frustrated to discover that
RFID tags were affixed to two
Application popular lines of men’s apparel, most of the vendors they spoke with had little to no
OATSystems, Foundation Suite including tailored garments, actual experience in RFID deployment. Ultimately,
pants, shirts, sweaters and other however, they put together a world-class team of
Partners items perceived to have high
value to the store’s customers.
RFID experts that had experience in deploying RFID
Integration and Business Process Consulting in retail environments. IBM served as RFID business
process consultant and as the lead technology
Software integrator for the project. Falabella selected
OATSystems Motorola’s MC9090-G handheld RFID readers for
the receiving process and built two battery-powered
Paxar (Avery Dennison) mobile carts that used RFID readers and antennas
for inventory counting. The retailer purchased its
Benefits RFID tags from Paxar (Avery Dennison), and chose
• Faster, more accurate and more frequent inventory cycle counts • OATSystems for the RFID software.
98.4% accuracy of RFID reading for inventory counts
• Increased stock visibility for reduced stock outs, improved For the pilot, the retailer limited RFID tagging to two
customer service, higher customer satisfaction and
popular lines of men’s apparel, including tailored
• Reduction in labor involvement and human errors associated
garments, pants, shirts, sweaters and other higher
with inventory control for lower operation costs value items. Some 7,000 items would be tagged and
2,500 on-hand items would be inventoried daily.
RFID was incorporated into several business
operation segments during the pilot:
• At Receiving, precoded RFID tags were affixed
to each item to be tracked. A Motorola handheld
RFID reader with barcode scanner was used to
validate each tag and enter the item into inventory.
• For Inventory, a Motorola reader on a mobile
cart was guided by a single associate along
a predetermined path each morning before
With RFID, a single Falabella
associate pushing a mobile
the store opened. This provided a daily basis
reader cart can complete inventory count for both the backroom and the
an inventory that previously sales floor.
required as many as 50
employees working over two • At Check-out, RFID tags were removed at the
point of sale and a Motorola handheld reader
changed the item’s inventory status to “sold.”
• For Restocking, daily basis cycle counts and
sold item lists were consolidated twice daily
to identify understocked items. A Motorola
handheld reader was then used to reassign stock
location from store rooms to the sales floor.
“With this pilot, we developed a lot
of confidence in RFID, what it can do,
and what we can do with it.”
Falabella’s R&D chief
The results: beyond expectations
Falabella’s pilot RFID system quickly proved to item level, significantly reducing the time and cost
deliver 98.4 percent inventory accuracy, enabling of visual/manual shelf-level management of stock.
staff to count up to 9,000 items in one hour using
the mobile cart. During the trial, the store saw a 25 • Customer experience: RFID makes merchandise
percent reduction in out-of-stock occurrences among more visible and available, so customers can
the tagged items. more easily help themselves, interacting with
merchandise, rather than staff. They are happier
Inventory had previously been a monthly or with their experience and staffing needs are
Their pilot program convinced
Falabella that RFID can dramatically even quarterly process, requiring as many as 50 reduced.
improve inventory accuracy and employees working over two full nights while the
on-hand stock visibility while
store was closed. With RFID, a single associate • Loss prevention: RFID improves shrink
simultaneously reducing the management by enforcing tighter control of
associated labor costs and cycle walks the floor pushing an RFID-enabled mobile
counting times. cart before store opening each day. The captured on-hand inventory and the movement of that
inventory data is then read into the OATSystems inventory. Easy location of product can also help
software for inventory reconciliation and report add security to store operations, reducing both
generation. Hundreds of man-hours were reduced to a customer and employee theft.
few hours, with greater accuracy.
Next step: rollout
The speedy capture of accurate daily data yielded
additional process improvements. Routine daily reports Based on the success of its pilot program, Falabella
gave store managers the data needed to set new key is currently working on a plan for larger-scale RFID
performance indicators (KPIs) on issues such as implementation. The goal is to move from 2,500 to
shrinkage, promotions effectiveness and the dwell-time more than 10,000 products per store, focusing on
of merchandise in the backroom, on the sales floor or integration with suppliers and a uniform operation
in-transit between the two. between stores.
Eventually, the company intends to move beyond
The benefits standalone store systems to integrate the data
Falabella was most interested in making a business collected through RFID enabled items into back-end
case for RFID. In their competitive and cost-sensitive operations and enterprise-wide information systems.
industry, they focus on customer satisfaction and
For more information about how Motorola’s RFID
inventory visibility as crucial elements for continued
solutions can help your company achieve competitive
profit and growth.
advantage, contact your Motorola representative or visit
A Motorola RFID reader is attached
to a robotic vacuum cleaner. While As a result of this pilot, Falabella identified a number of www.motorola.com/rfid.
this technologicall curiosity was not key benefits of introducing RFID to their business
actually used in the pilot, the idea processes:
hints at the potential of incorporating
RFID in other automated processes.
• Inventory management: RFID improved on-
hand inventory availability, visibility and accuracy,
while reducing the cost and labor of inventory
tracking. More visible inventory is ultimately
available to sell and manage.
• Store efficiency: RFID provides significant value
in automating front-of-store management at the
About our partner About our partner
IBM is executing an end-to-end RFID Solution OATSystems, Inc. is a recognized RFID solution
Strategy from business case to pilots, implementation leader with software that empowers businesses to
and rollout. Their comprehensive solution framework is achieve competitive advantage and ROI from radio-
designed to deliver rapid ROI while providing a roadmap frequency identification (RFID) enabled applications.
for the future. For over a decade they have been a leader As a pioneer in developing RFID technology, OAT
in RFID technology innovation. has been setting the standards in RFID for over
half a decade and is responsible for industry firsts
IBM has provided business case development, that include the largest scale and largest scope
as well as pilot implementation services to many of deployments, as well as the most innovative
pioneering RFID technology adopters in the consumer approaches to providing enterprise-wide RFID
products and retail industries. Their experience solutions. OAT’s multinational client base consists
has enabled them to develop an implementation of over 100 customers in retail, CPG, consumer
roadmap for transforming the way manufacturers electronics, manufacturing, life sciences, aerospace
and retailers collaborate. The RFID solution is part and defense. OAT is headquartered in Waltham,
of a comprehensive strategy which allows in-store MA, and has a development office in Bangalore and
data to be used for multiple business processes various direct sales offices and resellers around the
including merchandising, pricing, promotion, inventory globe. To learn more about the company’s latest
management and replenishment. developments, visit www.oatsystems.com.
About our partner
Thanks to their expertise in advanced research,
electronics and roll-to-roll manufacturing, Avery
Dennison was the first to develop a high-volume,
high-yield process for delivering RFID inlays. This
process typically yields throughputs 10 times higher
than conventional assembly techniques.
The company’s experience includes developing
orientation-insensitive designs - where the device
must work regardless of its position in the RF field
- to designs that work in the proximity of, or even
under, water. Avery Dennison produces antennas
from aluminum and copper - even printed silver.
In addition, their high-speed proprietary assembly
technology combines antennas with silicon RFID
chips to make functional devices. Other capabilities
include in-line testing and infrastructure support.