Avery Dennison updates on RFID plans

Related tags Rfid

In the wake of label giant Avery Dennison's recently announced
charge into the radiofrequency identification (RFID) sector, Dan
Scarborough, the group's chief operating officer, has shed more
light on the rationale for the offensive, reports Phil
Taylor.

Speaking at the Credit Suisse First Boston 17th Annual Chemical Conference last week, Scarborough noted that RFID labels represent a multi-billion dollar market across all industries, and around $500 million (€410m) in the pharmaceutical industry alone.

This figure is smaller than some other sectors - packaged goods going through retail behemoth Wal-Mart alone represent a $750 million RFID tag market in their own right - but is still a sizeable market, and indicative of the benefits that the drug industry can accrue from adopting the technology.

For comparison, the automotive industry is a $200 million market, while retail apparel and footwear and defense applications could both tilt at the $1 billion mark.

Avery Dennison announced the formation of a new business unit​ last month to manufacture and sell low-cost RFID inlays and tags. The firm's chief executive, Philip Neal, said at the time that RFID is expected to be 'the company's largest long-term growth opportunity'.

The key to unlocking the potential of the market is to convince customers that it is worth implementing the significant price hike for labels that will follow the adoption of RFID. This means that a pressure sensitive label costing around 1 cent at present will have to be replaced with one costing anything from 5 to 25 cents. The global RFID capacity today is approximately 500 million tags a year, he predicted.

One of Avery Dennison​'s key advantages is that it has such a breadth of infrastructure in place to apply to the RFID sector, and this will allow it to keep costs to the customer down.

Scarborough noted that there are many important players in the RFID sector, but few have Avery Dennison's volume label/tag manufacturing experience, in the billions of units, or its roll-to-roll manufacturing technology base, global data management and delivery infrastructure and established label supply channels into most major manufacturers. Moreover, the comfort customers can enjoy by working with Avery Dennison - which can boast financial stability and longstanding credibility in the marketplace - should not be discounted.

"We're developing technology at almost every link in the RFID value chain,"​ Scarborough told the meeting.

For example, the company has already developed its low-cost antenna fabrication capabilities, as well as high-speed volume inlay manufacturing that makes use of Duracell PowerCheck battery label technology.

In addition to its own in-house tag design/applications team, which has developed expertise in UHF, the company has forged joint development agreements with a number of key chip suppliers and can call upon distribution through Fasson​, a leading specialist manufacturer of labelstock in roll and sheet forms.

Finally, Avery Dennison can draw on a global network for tag printing/programming through its recently formed RIS​ division, which offers in-house production and application of RFID labels. It uses a high-speed print-and-apply RFID labelling system; a high-speed, apply-only RFID labelling system; and a high-speed benchtop system.

Nevertheless, there are still a number of unknowns that will affect the timing of the RFID revolution, said Scarborough, although he remains convinced that it is on the horizon.

One is that that the attractiveness of business case will be different depending on the industry, with some moving faster than others. That said, pharma is expected to be a relatively early adopter, as there are so many potential benefits. For example, supply chain monitoring can protect against diversion and counterfeiting, a major problem for the industry, while RFID technologies can also be harnessed to improve the delivery of medicines and patient compliance with therapy.

Also, there could be an issue centered on the capacity to make the tags and the anticipated demand. If adoption takes place rapidly, there could be a shortfall, he suggested.

Other issues include the timing on the availability of so-called generation 2 chips - some customers may be concerned about investing in a technology that could be quickly superceded - and the general technological hurdles that will be faced by those embracing RFID. The availability of low cost infrastructure will be crucial, and there remains a risk that current technology standards could be replaced as RFID evolves.

Backgrounder

RFID technology is based on a relatively simple concept. It consists of two elements that communicate through radio transmission - a tag and a reader. The tag contains a small chip and an antenna and can be placed on any object. The information on the tag, such as an identification number, can be transmitted to an RFID reader over a distance of a few metres.

Pharmaceutical companies have been using RFID technology for years in niche applications such as tracking lab samples, and recently have begun examining the potential benefits of using RFID to track finished products. This examination has been accelerated by the decision by US retailer Wal-Mart to require its top 100 suppliers to use RFID-tagging early next year.

But the drug industry is leading the way with this effort, and is already using RFID to monitor the supply to Wal-Mart pharmacies of controlled drugs with the potential for abuse.

Related topics Drug Delivery

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