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Transportation Tracking: RFID Gains Credibility

Dec. 28, 2006
Manufacturers are starting to realize the strategic benefits of RFID.

Executives at The Dow Chemical Co. believe there's a future for radio frequency identification (RFID) within manufacturing operations. The Midland, Mich.-based chemical and plastics producer already has implemented an RFID system combined with global positioning system technology for its rail fleet and will begin another pilot program for intermodal containers this year.

The company hopes RFID will provide greater visibility and traceability of chemical products as they move through the supply chain, says Dave Asiala, shared services IT director for Dow. "Our experience to date has proven that enabling technologies such as RFID will play a very important role in our supply chain sustainability strategy by helping to provide enhanced shipment visibility and information sharing with our supply chain partners," said David Kepler, Dow's chief information officer, in a statement released shortly after the 2006 EPCglobal US Conference in October.

Dow was one of at least three manufacturers touting RFID's benefits at the conference. To date, most manufacturers have used RFID only to comply with corporate and federal tracking mandates because of high implementation costs. That could be changing as tag prices continue to drop.

Currently, RFID tags cost about 10 cents to 20 cents each -- a 50% to 75% drop in the past year, according to Dan Mullen, president of AIM global, a trade association for automatic identification technology based in Warrendale, Pa.

But industry experts and published reports suggest RFID costs still outweigh any of its purported supply chain benefits. "The jury is still out on whether manufacturers can really drive top-line growth using RFID," notes Patrick Connaughton, a senior analyst specializing in supply chain software solutions for Cambridge, Mass.-based Forrester Research Inc. "Tag cost is still a barrier to adoption when using RFID to track cases and pallets in the supply chain."

A rail tank car carrying hazardous materials for the Dow Chemical Co. cruises by a passive RFID reader.Connaughton adds, however, that a stronger business case exists for RFID in application, such as the ones used by Dow. "Where we see manufacturers shifting their attention in terms of RFID is in physical asset tracking -- keeping tabs on the location of assets within the warehouse like tools, racks and forklifts, as well as on-the-road identification and tracking of trailers and containers."

Dow has affixed rail cars with RFID tags that provide information about what's in the cars along with a GPS system that informs the company about the cars' location. Dow hopes to increase safety and efficiency by monitoring routes and locations of rail cars carrying hazardous materials, Asiala says. With the intermodal pilot, Dow is looking to gain improved visibility of cargo as it moves to international ports.

Dow estimates that its RFID pilot projects will take 10 years before they reach their full payback potential, according to Asiala.

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