WAL-MART PIONEERING RFID USE WITH DRUGS

Christine Blank

ORLANDO, Fla. -- Though Wal-Mart Stores is better known for its radio frequency identification program with its top 100 suppliers in the Dallas market, it is quietly moving ahead with a limited test of RFID on pharmaceutical products.

RFID tags and readers are being used "to read product inbound [to a distribution center], and verify pick and store orders," said Kerry Pauling, vice president of information systems for Wal-Mart, Bentonville, Ark., at the Distribution and Logistics Conference held here March 21-23 by the National Association of Chain Drug Stores.

"We have been receiving tagged pharmaceuticals for over a year with our pharmaceutical suppliers, and we continue to share learnings," said Pauling. "This year, we will continue to define our pharmaceutical strategy."

Last fall, SN quoted Wal-Mart spokesman Gus Whitcomb as saying that Wal-Mart was testing RFID technology on Class 2 pharmaceuticals at the pack level at stores and a DC. He did not provide the locations.

Wal-Mart is one of a handful of retailers with pharmacies that have tested RFID on pharmaceutical shipments (not on bottles sold to consumers). Others include CVS and Walgreen, which have collaborated with a group of pharmacy suppliers and distributors in a program called Jumpstart, led by Accenture's Health and Life Sciences practice, Boston.

RFID efforts aimed at pharmaceuticals have focused on preventing counterfeiting of drug products, a growing problem in the industry. Last November, the Food and Drug Administration released a Compliance Policy Guide for RFID intended to encourage retailers, wholesalers and manufacturers of pharmaceuticals to become early adopters of RFID technology.

According to one pharmaceutical supplier working with Wal-Mart, Mallinckrodt Pharmaceuticals, RFID has been invaluable for shipping its products, some of which are controlled substances. However, problems abound.

"One of the biggest surprises is the entrepreneurial nature of the players [technology vendors]," said Mark Pilkington, associate director, professional and trade relations, Mallinckrodt Pharmaceuticals, St. Louis, also speaking at the NACDS conference. "You go to Wal-Mart to do business with them, and wonder if that [RFID] company is going to be in business tomorrow."

Pilkington said RFID technology is still deficient. While the company needs to track its products by item (since it is handling controlled substances), the technology is not yet able to supply an accurate read of an entire pallet of its products that may contain different items. "One hundred percent read rates are imperative in our business," Pilkington said.

Still, Pauling and Pilkington agreed that RFID has been valuable, and will be more useful once suppliers and retailers are able to analyze and use the data collected from reads.

Big Program Addressed

Pauling also addressed Wal-Mart's much larger RFID program in the Dallas market, where more than 100 suppliers, most of them the retailer's top 100 suppliers, have begun shipping pallets and cases with RFID tags to facilitate real-time tracking. In this arena, Wal-Mart is already focusing on the future uses of RFID, such as the ability to pull a box of recalled product quickly or track customers' layaway packages, said Pauling.

"As more and more manufacturers tag their shipments, we are really excited about what lies ahead. The partnership between suppliers and Wal-Mart is about to be taken to a higher level," he said.

Pauling also reviewed Wal-Mart's aggressive RFID expansion plans for the year: Wal-Mart will boost its current RFID capability from 104 stores and three distribution centers, to 600 stores and 12 DCs by October.

In addition to the more than 100 suppliers on board, Pauling said the next-largest 200 suppliers will go live by January 2006, along with some volunteers.

While Pauling declined to say which RFID initiatives would be implemented first, he listed several possible uses of the technology for Wal-Mart, working with its supplier partners.

"For the CPG part of the business, within 30 minutes you'll be able to go onto [supplier extranet] Retail Link and see the status of your products," he said.

At Wal-Mart's DCs, freight will be moved more quickly. In addition, products read at the box level will give DCs valuable information. "Can you imagine a box telling you that it's being recalled?" Pauling asked. "Can you imagine a box telling you it needs to be shipped first or used first?"

Already, the chain has improved its picking efficiencies and has cut out-of-stocks at the store level with RFID, Pauling said.