BUSINESS WEEK, OCTOBER 9, 2006
CIO Dave Kepler talks about the company’s new technology, which combines radio frequency identification with global positioning systems
As the largest bulk chemical shipper in North America, Dow Chemical (DOW) has to keep close tabs on shipments, especially when they contain hazardous materials.
Dow is looking to step up the effort. Under the direction of CIO Dave Kepler, Dow is testing a technology that combines radio frequency identification with global positioning systems. The service, provided by Savi Technology, tracks both truck and rail shipments, and it’s designed to reduce the risk of theft, spills, diversion, product contamination, and tampering, as well as other dangers.
In coming years, Dow plans to increase use of RFID and GPS as the technologies mature. The company generated $46 billion in sales in 2005, from businesses that range from chemicals to plastic materials to agricultural and other specialized products and services. Last year, Dow identified 50 projects related to RFID and GPS that it plans to pursue—not only in tracking products but also in manufacturing and plant maintenance.
Kepler joined Dow in 1975 and over the years has helped the company stay at the forefront of new technologies including enterprise resource planning, or ERP, which refers to the applications that help businesses manage a range of operations. He’s also helped navigate voice-over-Internet protocol (VoIP), which delivers voice communications over networks rather than traditional phone systems. BusinessWeek.com’s Rachael King spoke to Kepler about Dow’s RFID projects and other uses of technology.
What are your goals with RFID in the next two to five years?
We plan to drive all our hazmat rail shipments with a highly visible environment through RFID. We’re already tracking workers on pipeline inspections. And we have a commitment to implement all hazmat shipments in that timeline.
What are some of the challenges you face?
One of the key ones is in rail car visibility. Today we track that through the rail system. We make 2.5 million product shipments each year, and we’re the largest bulk chemical shipper in North America by truck and by rail.
So there’s a real value for us to look at that asset we’re shipping. If you take something like rail, for example, we’ve had the rail tracking system that requires that the train passes by a reader so we have certain segments where we can’t see that. And if we look at hazardous materials shipments, one of the things we want to do is to get into closer proximity to where that shipment is.
So by putting a GPS system recorder on that, we can identify that. As we get into visibility, it’s not only about where equipment is but it’s also about the condition of the equipment. Has it been tampered with?
How does RFID help you stay on top of tampering?
We’re looking at RFID smart boxes that would have things like sensors for light, humidity, temperature, and shock. Suppose something got dropped or tampered with. We could go back and put those signals together.
What are your long-term goals over the next 10 years?
If you look at our next 10 years around RFID, it’s essentially to drive that supply chain visibility throughout the program for all materials. Also, we have a huge focus in terms of manufacturing process optimization—how we look at automation of some of the plants and plant maintenance.
We also look at asset management tracking, so when we’re building plants to make sure all the materials are there in time is the key application. Another key area is product inventory and warehouse management.
Is the idea to save labor in tracking all these things?
Labor is actually a minor component of it. If you think about it in the supply chain it’s really about product optimization. It’s the ability to know where the product is and to route it. One of the long-term objectives we have is to improve the safety and security and reliability of delivery. There’s also a huge performance opportunity here. Ensuring where products are allows you to route things differently.
How do RFID and GPS work together?
If you can imagine you’re usually using several sensor technologies, so you might have an RFID smart box on a container and that may be communicating to a box or embedded with a box that has GPS and you don’t just need GPS, you need two-way communications. You have to communicate where you are and you have to be able to communicate through satellite links or other communications vehicles to pass that information on as we go forward.
How much money do you plan to invest in RFID?
We’re spending millions of dollars over the next several years in RFID. The sensor technology is a small part of it when you’re dealing with track and trace because you’re thinking about one unit per train or one unit per truck.
We’re spending tens of millions of dollars in systems implementation to integrate these in. Everything you do has to return some value so we’re driving it by value as we go forward. The early pilots are going to demonstrate how much we’re going to invest, but we’re spending significant money on applications like improving our maintenance management process. If you can integrate RFID into that, then you can add a lot more value.
How soon are you looking for payback on these projects?
We do invest for the long term, but in general, we would say that a very good return for automation is a one-and-a-half-year payback.
Turning to the broader topic of technology in business, can you give me a sense of what technology has made the biggest difference for your company over the last year?
I would say the integration we’ve done with Voice over IP. That really lays a foundation for how we’re going to build all these other applications. The fact that we’re building a network infrastructure that integrates voice, data, and video applications helps us enable sharing information a lot differently between people and the application.
We’re about two-thirds of the way done in that process. That’s allowed us to do something as simple as putting smart phones with some of our sales folks so they can share information with these applications to [something as complex as] integrating container tracking systems with our enterprise systems. That’s probably been the biggest enabling application that we see right now.
What is the one thing that technology vendors could do to make your life easier?
One thing is that they can make sure their code runs well. That’s always a good thing. The quality and performance in software really needs to continue to improve. And I think [we need] effective standards and open standards so that these things can plug and play as we go forward.
The value is in the integration and companies have to be able to move forward in that. That’s why Dow does try to work with open standards and get that built into the industry because it’s not just about what we do at our company, it’s how we integrate with all our partners around the world.
What is the most important technology your company will grapple with over the next few years?
There are two things we look at. We have a business strategy and then we have to look at technologies that we have to put in to enable that and I would say the biggest one is in the area of our integration points, things like SAP’s (SAP) NetWeaver and their mySAP are key integration points for us. They provide us with a service-oriented architecture. We look at new technologies coming in the market that are pervasive, that we can start to think about how to change the way we do work because of what’s available in the market.
Then I would say that this whole area of sensor technology, wireless capability, the fact that employees can work from anywhere now. The whole idea of being able to identify who people are and what components are and access to our systems. The whole idea of sensing external performance, whether that’s on supply chain visibility or assets—these are things that will change the way things work. So with huge bandwidth you’re getting more and more to the individual applications. You can see this in your personal life, but you can also automate a lot of different practices in that kind of environment.
Rachael King is a writer for BusinessWeek.com in San Francisco