European Convocation on RFID Mike Rose

Tom Aelbrecht

Vice President Johnson & Johnson

Technology Manager Johnson & Johnson

Agenda ƒ Business Overview ƒ RFID/EPC Program ƒ Innovation ƒ Research Challenges

Business Overview ƒ World’s most comprehensive, and broadly based ƒ ƒ ƒ ƒ ƒ

manufacturer of healthcare products $53.3B Net Trade Sales in 2006 Approximately 122,000 employees More than 200 operating companies Selling products throughout the world Major business segments – –

Consumer Medical Devices & Diagnostics

– Medicines & Nutritionals

>>

Medicines & Nutritionals

>> Medical

Devices & Diagnostics

>> Consumer

Johnson & Johnson Credo Guides Our Actions

The Four Tenets ƒ Customers ƒ Employees ƒ Community ƒ Shareholders

RFID/EPC Program

RFID Vision Johnson & Johnson will be a leader in the appropriate use of RFID technology to develop innovative products and business solutions that improve the quality, safety, and efficiency of healthcare delivery.

RFID/EPC Strategy Johnson Johnson & & Johnson Johnson will will be be aa leader leader in in the the appropriate appropriate use use of of RFID RFID technology technology to to develop develop innovative innovative products products and and business business solutions solutions that that improve improve the the quality, quality, safety, safety, and and efficiency efficiency of of healthcare healthcare delivery. delivery. OBJECTIVES Healthcare Delivery Innovation

Supply Chain Efficiencies

Brand Protection

Product Innovation

RFID Leadership

GOALS Improve ImprovePatient Patient Safety Safety

Improve ImproveSupply Supply Chain ChainEfficiencies Efficiencies

Reduce Reduce counterfeiting counterfeiting and anddiversion diversion incidents incidents

Develop Developnew new RFID RFIDenabled enabled products products&&services services

J&J J&Jrecognized recognizedas as industry industryRFID RFIDleader leader

Program Highlights Consumer

In the beginning….

Tagged Product is Re-Palletized & Shrink-Wrapped

Read Point Outbound Dock Door

Tagged Product is Loaded onto Trailer

Promotion Execution Pilot Consumer

RFID Promotion Observations ƒ Compliance lower than anticipated ƒ Backroom dwell time is low (~1 day) ƒ Early execution was unexpected – With RFID, can proactively set replenishment levels rather than waiting for Out Of Stocks for action

ƒ Ability to better calculate sell thru – Real time information on the exact dates promotions are at retail

ƒ Uncovering additional opportunities

First Aid Kit: RFID Daily Data Visibility at multiple points can lead to increased sales and reduction in cuts Comparison of When the Store Rec'd the Display vs. Store Effective Date Normal

1

120

Mean StDev

Mean: -7.4

N

-7.386 7.417

# of Days Before or After the Store Effective Date that the Display was Set 120

2

Mean: -3.6 100

211

Store Effective Date: 4/1/06 Store Effective Date: 4/1/06

80 60

With RFID visibility, we could have Can see when displayswho prompted reorder at stores were received at took display down early Backroom

40 20 0

1.2 million retail sales

-15 0 15 30 45 60 75 # of Days Before or After Event Date that Display was Rec'd

~$

opportunity Average Daily POS for Stores that Set and had Box Crucher reads before 4/1 Stores with reorders vs. no reorders

4

90

50 40 30 20

40

3

# of POS Units Sold

60

~75% of Displays Set Early

60

Can see when displays went to sales floor

With RFID visibility, we could 0 0 20 40 60 80 have realized early execution Day Display was Set in Relation to Event Date here to prevent Out of Stocks

500

4/1

Mean 11.74 StDev 12.58 N 18698

400

Began cutting due to early execution; Customer thought product supply issue

300 200

112 100

10 0 3/15

3/27

4/9

4/22

5/5

5/18 Date

5/31

6/13

6/26

7/9

100

Histogram of POS Units Sold by Day 600

70

80

20

Variable Reorder No Reorder

80 Average POS Sales

# of Displays

# of Displays

100

0

-18

-12

-6

0

6

12

Day (in relation to store effective date)

18

Program Highlights Medicines & Nutritionals

Counterfeiting A Key Challenge ƒ Counterfeit drugs (according to WHO): – 30% in some parts of the developing world – >50% from rogue internet sites

ƒ In 2000 FDA opened 6 cases; In 2006 opened 53

ƒ Increasingly sophisticated methods ƒ Lack of focus on product authenticity in some countries

ƒ Many potential entry points ƒ No track & trace systems

Technology Solutions ƒ Multifaceted layered approach ƒ Track and trace solutions – Bar code and RFID – Electronic product codes – Serialization – unique identifier numbers

ƒ Pedigrees using a uniform code

RFID Proof of Concept Flip Off Seals with Identity ƒ Goal – Evaluate incorporating 13.56MHz tags into flip-caps and safety closure seals

ƒ Scope

– Development consortium of 8 partners – Exclusive In Mold Label (IML) Technology modified to accommodate RFID tags

ƒ Outcomes – Technology feasible – RF effects on biologicals?

Program Highlights Medical Devices & Diagnostics

…Tracking Use of Instruments and Consumables

…Tracking Equipment in a Hospital

RFID enabled inventory cabinet - France

Business Value

Stent inventory management system

• Better replenishment of stents • Reduced out of stock, increased revenue • Faster invoicing • Reduce # of FTE’s required to execute onsite inventory management.

Now

Future 21

Innovation

RFID Research Laboratory ƒ Established in 2003 ƒ Locations - Beerse, Belgium and Raritan, NJ ƒ Center of excellence across operating units ƒ Investigate leading edge technologies ƒ Evaluate impacts to business processes ƒ Leverage learning’s across decentralized units

RFID Incubator Fund ƒ Established in 2004 ƒ Stimulate RFID-enabled innovation ƒ Co-funding model ƒ Enriches RFID knowledge base ƒ Enhances community of practice

Research Challenges

Creating Value ƒ Why should a consumer care about RFID? ƒ How do we create value for the consumer? ƒ Once we have all this event data, what do we do with it?

ƒ How do we create business value? ƒ How do we redesign our processes to use this information?

Technology Research Areas ƒ RFID deployment vs. infrastructure implementation – Reduce tag cost and complexity. ƒ Low cost tags, Printable tags, etc.

– Convergence of RFID with other wireless protocols to leverage existing wireless infrastructure – Reducing the complexity of RF application to liquid and metals – HF vs. UHF discussion in item level tagging

ƒ RF effects on biological products

Healthcare Research Areas ƒ How do we address the challenges associated with healthcare? – What areas are ripe? What are not?

ƒ How do we deploy a "common" infrastructure across a very diverse industry? – Why should patients care about RFID?

ƒ What are the incentives for various supply chain parties to deploy RFID?

Close ƒ Encouraged by promotional displays results ƒ Exciting new opportunities for RFID enabled services and products

ƒ Standards are important for broad adoption ƒ Continuing research investment is critical to advancing RFID

Questions?