Dow makes RFID work
Instead of laying down the mandates, the chemical giant’s management team decided to roll out a rigorous process to ensure that the technology actually makes sense for its many business units—and the diligent process is starting to pay off.
By John Kerr, Contributing Editor -- Logistics Management, 10/1/2007
The Dow Chemical Company has been a longtime proponent of RFID and is now winning praise for its early adaptation of the technology. And it’s hardly a surprise since, over the past several years, Dow’s top management has developed a deep appreciation for how RFID can improve the efficiency, safety, and security of its global supply chains.
But while the company has benefited from RFID in moving and tracking freight, senior management knew they couldn’t just mandate RFID usage to encourage its wider application across the company. Instead, the management team decided to roll out a rigorous process to ensure that the business units “pull” the technology into the applications where it can give the most benefit—and the process is starting to pay off.
So, what does it really take to achieve broad uptake of RFID throughout the $46 billion company’s many business units? To find out, Logistics Management spent some time with Dave Asiala, Dow’s IT Director for Shared Services. In his 23 years with the company, Asiala has worked with R&D, finance, human resources, and public affairs before becoming the senior manager responsible for introducing RFID and GPS technology to the many business units.
Here’s what Asiala had to say about the company’s earliest success, its ongoing quest for better RFID application, and the benefit the technology is bringing to the company’s work processes, shipment security, asset utilization, inventory control, and order fulfillment.
Logistics Management: Tell us about Dow’s stance on auto ID technologies.
Dave Asiala: We’re huge advocates for RFID because it aligns with each of our strategic priorities—driving financial discipline, setting the standard for sustainability, maintaining a people-centric culture, and investing for strategic growth. RFID lets users know the location and quantity and condition of products in transit during order fulfillment, and that directly helps us improve supply chain efficiency and, very importantly, the security of our supply chains. We also actively promote other ID technologies such as bar coding, and allied location technologies such as GPS.
Can you pinpoint one area in which RFID has made a substantial overall impact?
Where do I start? Let me come back to my point about supply chain security. First, our supply chains have an enormous footprint and many of them involve hazardous materials. We’re North America’s largest bulk shipper with more than 2.5 million shipments a year, with 20 percent of them crossing international borders.
Second, one of the core elements of Dow’s sustainability goals for 2015 is local protection of human health and the environment. It reflects our commitment to the principles of Responsible Care—the chemical industry’s global voluntary initiative under which companies like Dow work together to continuously improve performance on health, safety, and environmental issues.
So any tool that helps us accelerate those efforts is very valuable to us.
What were some of Dow’s early wins with RFID?
We have close-proximity RFID systems in the badges that our employees and contractors wear. I can go to any Dow facility in the world and my badge will log me in to their facilities and systems. That’s been in place for 10 years.
Earlier this year, our AgroSciences unit won the “Most Innovative Use of RFID” award at RFID Journal’s conference. Since 2002 that unit has used RFID tags to detect termite activity and trigger very accurate local in-ground treatment to help operators be more precise in the use of chemicals.
On the transportation side, we’re also using RFID tags to locate and track the railroad tank cars that transport much of what we make. It’s a safety and security matter as well as matter of improving transportation efficiency and keeping an eye on our assets.
What was the impetus for Dow expanding its use of RFID?
Beginning in 2005 and running into 2006, we began to develop a cohesive strategy to do this. Our IT department had had a formal “statement of direction” on the technology, but we’d concluded that it was too early to invest on a broader scale. But at the same time, we realized that we didn’t have wide-scale use of the technology across all of our business units and across the 70-plus countries where we have offices. We were not maximizing RFID’s impact on the organization.
What was the next step?
In conversations with our CEO, we realized we could look at RFID with more of a strategic lens. In fact, he challenged us to do so. So we put together a team—it’s led by my colleague Paula Tolliver, the corporate director of our Purchasing Expertise Center and Information Systems.
The idea was to figure out how RFID could do a better job of supporting everything from increasing productivity for Dow and its customers to streamlining our work processes, improving asset utilization and giving us much more supply chain visibility. For a start, there was plenty of opportunity to integrate RFID into larger processes and systems that govern how we make products and how we manage their safe and timely delivery to customers.
So, how did Dow put its RFID efforts into higher gear?
We started by using the “voice of the customer,” with the primary customers being our internal clients. A major part of the process was interviewing key managers throughout the organization to determine what they needed and learn how RFID could help them meet those goals.
We used Dow’s strategic business development process, including methodologies such as Lean Six Sigma, along with our IT value development process to determine where we should invest. And we made sure that we screened for alignment to our overall business strategy. One of the things the strategy indicated was that we had to focus on all technologies because we’re technology-agnostic. And one thing our users told us is that having the data is one thing but using it is another.
Did you pull in any partners to help?
We formed a technology advisory board that included partners such as SAP, Intel, Accenture, and Cisco. That group acted as a great sounding board for us.
The exercise of capturing ideas from Dow’s business units also worked really well. We got about 450 great suggestions. Then, with the help of our advisory board, we whittled that list down to 50 priority ideas that fit into six buckets—areas such as container tracking as part of our outbound materials activities and spare parts tracking, which is part of our manufacturing stream.
We then got really tough and screened those 50 priority ideas down to 10. For example, real-time tracking in most of our warehouses didn’t make the final cut. There, the technology is a little less feasible and the value-add isn’t there. When the technology is really ready, there’ll be some great applications there. By the end of 2007, about half of the 10 will be up and running. We’re well beyond proof of concept on most of them.
What do you mean by “proof of concept”? How does that help turn RFID ideas into real-world applications?
Proof of concept is a key step before the pilot-project stage. We’ll install a device and get some reads from it to see if the basic system works. The pilot stage means that we test the system in the real world. If it works, we’ll then move to it to another stage that we call MET for Most Effective Technology.
At the point at which an emerging application meets MET, it’s ready for roll-out. We make it available to the next business unit that needs the same kind of application, and we poll the business units to see who’s interested. Then it’s up to their pull. It’s not up to us to dictate where the technology gets used next.
What projects are being rolled out?
We’ve gotten a lot of publicity for our rail car application. Dow has 25,000 rail cars in all, and a small portion of them carry toxic materials where a spill can easily provoke inhalation hazards. Those cars have RFID tags that give us visibility of where the cars were last seen; that way, we can not only improve our supply chain efficiencies but we can be better prepared to launch an emergency response to a spill if we have to.
Now we’re adding two-way GPS capability to those cars to give us real-time tracking. In the case of an event or an alert—a mandate on hazardous freight movement from the U.S. Department of Homeland Security—we can poll our rail cars remotely and have them report their positions and status back to us. For example, if a car had been opened and wasn’t in a defined secure facility, that would trigger an alert.
We can take that application to other areas of our rail car fleet, but the costs make it prohibitive right now. I’m not talking just about tag costs—I know everybody likes to talk about that. However, the cost of the tags themselves, now down from dollars to cents, is a minor part of the cost of the overall solution. Implementation and integration with other systems are big costs, and even they are just a small part of the lifetime costs of the solution. When business users think of it in those terms, it helps with the dialog.
Has rail car tracking evolved into other transportation tracking?
Yes. We’re also tracking our intermodal containers, getting readings from a list of chokepoints. We’ll read a container’s departure at our gate, at the port, at the destination port, at the recipient’s gate. The data will give us the flexibility to minimize idle or sidelined cargo. Let’s say the customer defers receipt of the product before it gets to its destination; if we know that in time, we can re-route the cargo and perhaps offload its contents for shipment to other nearby customers who need the product now. That’s in pilot now; by the end of the year we’ll be into MET.
And what about some of Dow’s other RFID projects in the works?
We’re starting an interesting RFID project on our construction sites. When we’re building or renovating our buildings, the supplies and materials for those plant sites are dumped in one field. Today, the supplies are bar-coded, but they haven’t been integrated into the visibility we need to plan construction properly. It’s often very hard to find something when it’s really needed, so we can waste a lot of time. So right now we’re piloting a construction lay-down yard where RFID tags on many of the most critical supplies will interact with a sensor array network so we know exactly where they are. By the end of this year we’ll have done a proof of concept on that project.
We have the same sort of location-sensing application now in proof of concept in warehouse management. This project concerns seeds for farming, where the right seeds must be delivered at the right times to meet absolutely critical planting cycles. Another project is adding value for maintenance and spare parts in manufacturing.
And last year, we did a pilot on tracking our logistics providers’ tanker trucks, featuring GPS devices on their cabs. We learned from that that a lot of business processes need to be tightened up to make that aspect of our supply chains more effective. The project wasn’t ready to be rolled out widely.
What oversight do the projects have?
We have a program management office that looks at all of our RFID projects. Just as with our other IT projects, each one has a senior project manager guiding it. They’ll use scoreboards to see how spending is going compared to plan. The program leads have quarterly meetings with our CIO, Dave Kepler, and his leadership team.
There’s also oversight in terms of the industry standards that Dow is helping to push for through the EPC and the industry associations. One of our strongest beliefs is that we want our technology to be open standard—we want both hardware and software vendors to understand that. Having proprietary systems will only give you an advantage for a little while.
But we have to be careful to manage for cost-effectiveness. The business-unit managers who are rolling out the RFID applications are on the hook. At the application launch date, somewhere between one and two years after the earliest experiments, the finance people will come to those managers and remind them that they had promised value on the project. It’s a case of “Show me the money.”
What benefits is Dow seeing?
We’re very pleased with the results of our new RFID-related pilots so far. We’ve started to see real pick-up in our work processes, asset utilization, inventory control, order fulfillment, and other areas.
They’re also helping us do better jobs of managing data quality, mitigating risk, and complying with regulations on environmental controls, among others. They’re also a big driver in our continued push to improve our current safety performance of 99.97 percent incident-free shipments of highly hazardous materials.
I’ll give you a few quantitative specifics on what we expect to see. We’re pretty confident we’ll soon be able to halve our response times for identifying and resolving in-transit problems. We’re looking to reduce our entire container fleet by 20 percent. And we figure we’ll be able to make big gains in early detection of product theft. Stay tuned!
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