Tuesday, October 03, 2006

RFID – Making a Smart Investment in Your Company’s Supply Chain

RFID Law Journal
Newsletter No. 22
October 3, 2006

Our headline could’ve been “Making a Smart Investment in Your Industry’s Supply Chain”; however, corporate actors usually won’t individually undertake costly measures unless such adoption is part of implementing an industry standard. Is this true even if an industry’s viability/survival is at stake? Apparently so. Historically, when it comes to the safety and security of the U.S. food and drug supply chains, industry standards often arise out of regulations, not self-regulated best practices.

The FDA has done little to encourage the food and drug companies to deploy auto identification technologies in connection with improving their health and safety best practices.[1] On their own initiative, leading food and drug manufacturers haven’t shown many signs that mass deployment of auto ID technologies is coming anytime soon.[2] The stakeholders are adopting these technologies slowly, notwithstanding a number of discernable, positive ROI benefits (e.g., improved visibility of objects within the supply chain, speedier and less costly product recalls, better risk management, etc.). While the instances of tainted goods may be infrequent within the U.S. food and drug supply chains, the massive downside of any related bad publicity evolving out of the rare instance of tainted goods should be taken into account as part of industry risk management calculus and, in light of the recent E.Coli outbreak of late August 2006-early September 2006 attributed to “tainted” spinach, may be reason enough to shift the tide of opinion within industry leadership.

Had spinach growers and their distributors (and regulators!) made smarter choices in favor of technological deployments supporting their supply chains, the industry would’ve probably been better positioned to address the recent E. Coli outbreak. Better tracking tools would’ve presumably enabled public health authorities to track the source of the E.Coli outbreak faster and enabled innocent industry stakeholders to defend their brands by quickly and definitively pointing to the results of federal health investigators. Unfortunately, timing is everything in the 21st century. As of late September 2006 (weeks after the announced outbreak!), innocent industry stakeholders can now rely upon the results of health investigations to support and reinvigorate their spinach brands; however, over the past few weeks, these stakeholders lost a substantial percentage of their inventories and exposed their brand reputations.

Now re-wind the clock a few weeks. Imagine being one of a few companies equipped with a technology that could definitively rule out a health concern. That’s not only a branding opportunity. It’s an opportunity to gain sizeable market share from competitors.

From 2001 to 2005, spinach growers reportedly doubled acreage from 15,000 to 31,000 acres to purportedly meet the demand for pre-washed, packaged spinach – i.e., packaged products ideally suited for the grocery aisle! Presumably, with the benefit of hindsight, stakeholders would’ve opted for a modest RFID infrastructure investment to coincide with their not insubstantial core investment in their spinach patches.

© 2006 – RFID Law Journal, LLC. All rights reserved.

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[1] We’ve extensively written about FDA pedigree rules. While we (and the affected industries) recognize that pedigree is the future, it’s worth noting that the regulators and impacted industries are seemingly taking, at most, baby-steps toward adoption of the technologies required to make pedigree a reality within the supply chain.
[2] Note: Several drug companies have held early stage RFID pilots, but it does not appear likely that the industry will deploy across their supply chains until the next phase of adoption.


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