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Finding the Right RFID Formula

Tracking potentially hazardous chemicals with RFID could help chemical companies secure the supply chain, reduce inventory and better manage assets. But the industry is moving slowly toward adoption, balancing the costs against the possible benefits.
By Elizabeth Wasserman
Tags: Chemical
Oct 01, 2005—In the wake of the Sept. 11, 2001, terrorist attacks, the international chemical industry came under a great deal of scrutiny from lawmakers, public advocates and citizens who live near chemical plants and transportation routes. The attacks brought out the need to better track the estimated $1.7 trillion worth of chemicals that are traded worldwide each year.

These chemicals are transported in a variety of containers—from bottles, plastic totes and gas cylinders to 55-gallon drums, cargo containers and tanks. The containers travel around the globe aboard ships and then wind their way through cities and towns onboard trains and trucks. Most often, the chemicals are destined for a variety of manufacturing purposes, to help clean up drinking water and produce pharmaceuticals, fertilizers, reliable energy sources, home-building products, synthetic fabrics and so on.

Despite slower adoption rates, many major chemical manufacturers are starting to test or deploy RFID.

For years, chemical companies have tried to develop systems for tracking chemicals to manage inventory better and ensure that hazardous substances were not either accidentally or intentionally used incorrectly, lost, stolen or leaked. Union Carbide's tragic gas leak in Bhopal, India, 20 years ago, which left thousands dead, still looms vividly in corporate psyches.

The most popular chemical-tracking system to date has been bar coding containers. But many in the industry say that none of the methods has given companies an accurate accounting of where shipments are, what they contain and whether empty containers have been cleaned and inspected. Some chemical companies in Europe, the United States and Asia have started to test or deploy RFID applications as a possible solution to safety, security and tracking needs because the technology is less labor intensive than bar coding and the tags can be programmed to carry more information.

"In chemicals, the biggest issue is safety and security," says Collin Masson, research director for chemical and process manufacturing at AMR Research. "There's a brand problem if it's your facility that gets targeted if it didn't have the right security."

Yet, chemical companies have been slow to adopt RFID. A recent AMR survey of executives found that 18 percent of chemical companies have an RFID pilot under way and 9 percent are planning to implement RFID solutions this year. Another 18 percent plan to evaluate the technology in 2006. Masson says that one reason adoption has not been as rapid as in other industries—such as consumer packaged goods, in which the survey found 39 percent of companies interviewed are either already piloting or deploying RFID—is because the chemicals industry has been less affected by mandates. Whereas CPG manufacturers are responding to retailer mandates in the United States, the only chemical companies subjected to mandates are those that supply products, such as paint, fertilizer and motor oil, to retailers or do business with the U.S. Department of Defense.

Despite slower adoption rates, many major chemical manufacturers—in addition to companies that use chemicals and transport them—are starting to test or deploy RFID. These companies see RFID as a tool not only to improve security but also to realize other business goals, such as improving demand forecasting, product replenishment and asset management.

DuPont, the world's fourth largest chemical company, based in Wilmington, Del., is evaluating RFID applications to track truck traffic at its transportation depots. Dow Chemical, the world's second largest chemical maker, based in Midland, Mich., is testing a combination of RFID and GPS to track chemical transport via truck, rail and ship. Dow is also using the technology for container tracking, product applications, and product tracking and replenishment for customers such as Wal-Mart, to which the company ships an assortment of consumer products.

"One of our current challenges is to prioritize our many opportunities in terms of which ones are most likely to bring the greatest value to our customers as well as to Dow," says Paula Tolliver, who is leading Dow's RFID steering team. "RFID and GPS are not silver bullets—perfect solutions on their own. But when thoughtfully integrated into the larger processes and systems that govern the manufacture of product and manage the safe and timely delivery to our customers, these technologies can bring great value."
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