Chemical Makers Must Get Ready To Play Tag

RFID promises long-term benefits for adroit competitors

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By Nick Basta

America, for better or worse, loves the magic of new technology. The better mousetrap makes heroes of inventors; Wall Street begins to pay attention and, before you know it, a vast network of business developers, investment bankers, promoters — and scientists, engineers and business managers — are on board, with everyone awaiting the next new announcement with bated breath.

Such is the case with an evolving technology — not all that new, by the way — called radio frequency identification (RFID). RFID, in its current form, combines a semiconductor chip, which can save a few bytes of data, with a transmitter that allows the data to be read by a scanning device. The scanner can be a handheld tool, a station on a conveying line or even a roadside booth. Most of the popular press focuses on RFID’s application in retail merchandising, where item and pricing information in the RFID tag can be automatically read, stored and tracked, theoretically from the manufacturer through the retail supply chain and into the consumer’s home.

Superficially, RFID tagging resembles the bar code tagging that is all around us today. Smart process manufacturers are using bar codes to rationalize and streamline their maintenance management systems, and to track inventory flowing into and out of their plants. It so happens, however, that RFID’s boom overlaps with a transformation of the bar code movement into a global effort, centered around a standards-setting organization now called EPCGlobal, to provide electronic product codes to all types of commerce. Bar coding and RFID have similar purposes, but RFID has the potential to allow packages to “talk” to their conveying systems or warehouses, bringing a higher level of automation and efficiency to supply chains. Moreover, unlike bar codes, RFID is not limited to line-of-sight processes; you don’t have to look at a tag to be able to read it.

Various business surveys put the value of the current RFID market at a few billion dollars; nearly all of them project a quadrupling or quintupling of the market in the next five years. It’s the “next new thing.”

The question is: Will this affect the chemical industry? The answer is: It already has, and it promises to have a bigger impact in the near future, regardless of the accuracy of those growth projections. Consider:
 

  • As many as 43,000 suppliers to the U.S. Department of Defense, including many chemical companies, have already begun to meet a Jan. 1, 2005, deadline for providing RFID tagging for military material being shipped to staging areas in Pennsylvania and California; this supply chain already extends into support for the war efforts in Iraq and Afghanistan.
  • In mid-November, the U.S. Food and Drug Administration (FDA) issued a “compliance guideline” (FDA-speak for a coming requirement) for RFID tagging of pharmaceutical containers, mostly as an anti-counterfeiting measure.
  • In October, the U.S. Department of Homeland Security released nearly $500 million in funding for enhancing port security. The “Operation Safe Commerce” project, which was started up after the Sept. 11, 2001, terrorist attacks, includes tagging of shipping containers.


Even if your company doesn’t supply the Department of Defense, sell pharmaceutical products or ship internationally, these developments will affect a large swath of business-to-business commerce. At a certain point, the flow of RFID-tagged outbound products from the chemical industry will intersect with the flow of RFID-tagged inbound materials, such as maintenance supplies, equipment and raw materials.

There are significant problems in this technology rollout, however. The tags are relatively costly and don’t work all the time. It’s also not clear who among a group of trading partners should pay for them. Most of all, companies and entire industries need to agree on standards for communicating and sharing information with each other. None of these problems appear to be insurmountable.

The immediate goals of this effort are to address specific problems in supply chains: inventory tracking, antiterrorism and counterfeiting. Longer-term, the technology will provide another boost to the efficiency of computerized supply-chain and logistics processes. Chemical manufacturers with modernized inventory and asset-management systems in place will be in a position to take advantage of those efficiencies. Those without such systems will fall farther behind.

Nick Basta was editor at large for Chemical Processing magazine. E-mail questions about this article to mrosenzweig@putman.net.

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