Asset Management in the

Chemical Industry Supply Chain

This document is Part Three of Savi Technology’s five-part white
Introduction paper, “Fundamentals of Asset Management.” In Parts One and Two,
we covered the importance of attaining real-time visibility of assets,
provided an overview of different automation technologies and
described asset management challenges and solutions for Defense
organizations. Part Three of the white paper focuses on supply chain
challenges common in the Chemical industry and how Automatic
Identification & Data Capture (AIDC) technologies can help overcome
those challenges.

Modern industry relies upon a steady supply of gases, fuels and

The Chemical Industry
other industrial chemicals used in the manufacture of a broad variety
of products. The business of the Chemical industry is to produce
these substances and transport them to the facilities where they will
ultimately be used. Because the Chemical industry commonly transports
highly toxic, explosive or otherwise dangerous substances through its
supply chain, extraordinary care must be taken to ensure that Chemical
supply chains function smoothly and safely. In addition to spoilage,
spills, accidents and compliance with government regulations, security
is also a major concern since hazardous chemicals, if they were to fall
into the wrong hands, could wreak untold destruction on human life and
property.

Controlling the movement of chemicals and the assets that transport

them is a top-level priority for the Chemical industry. Every stage of a
chemical shipment’s journey from production facility to end-user must
be carefully planned and executed. In what type of container will the
chemical be transported? Will the shipment travel by rail, road or sea?
What organizations will have custody of the shipment as it travels? Will
these various parties be able to share information on the location and
status of the shipment in real time? Chemical companies must carefully
consider these questions, and many others, in order to maximize risk
reduction while still meeting customer demand for chemical products.
Fortunately, AIDC technologies such as active and passive Radio
Frequency Identification (RFID), GPS and sensors can help Chemical
companies achieve these goals.

A Savi Technology White Paper | February 2010 Copyright © 2010 Savi Technology, Inc. All rights reserved.
Asset Management in the Chemical Industry
The Chemical industry relies heavily on large fleets of supply chain assets for shipment
transportation. These mobile assets include cylinders, drums, intermediate bulk
containers, tank trailers, rail cars, intermodal tanks and small containers. For the Chemical
industry these mobile assets have high intrinsic value and play a critical role in production
and delivery fulfillment processes. To meet customer demands, Chemical companies
must maintain the right quantities of assets in the right locations. This balance must exist
across all plants, depots, distribution centers, warehouses and ports to meet the day-to-
day operational needs of the Chemical enterprise. Visibility enabled by AIDC technologies
allows Chemical companies to achieve this balance through close monitoring and control
of supply chain assets.

Asset Visibility
As mobile assets move through the Chemical supply chain they are often misplaced and inadvertently stockpiled. This is
further complicated by the nature of the supply chain, which involves multiple parties handling assets across multiple locations.
Additionally, most companies still rely on error-prone, labor-intensive manual processes to maintain asset visibility. The net result
is that Chemical companies face significant challenges in maintaining visibility of mobile assets across the supply chain.

Compounding the inherent difficulty of attaining visibility, legislative initiatives for improving traceability and mandating the use of
expensive reusable containers are gaining momentum. Governments around the world see the benefits of lowering waste disposal
costs and addressing the ethical and environmental concerns of their constituencies. For the Chemical industry, however, meeting
legislative requirements can be a costly endeavor.

The challenges of attaining asset visibility and complying with governmental regulations put pressure on the Chemical industry to
maintain reliable, up-to-date asset visibility information. When planners lack asset visibility, they are pressured to create surpluses
in the supply chain. These surpluses cost money whether they appear as additional capital expenditures and leases, the rental of
emergency assets or the stockpiling of inventory.

Chemical companies that cannot afford to expand their asset fleet or inventory levels risk local asset shortages and the disruption
of production operations and customer fulfillment obligations. This in turn can create the need for costly rushed shipments, or
worse yet, lost business. Even without impending government mandates for asset visibility, Chemical companies stand exposed
to real visibility costs through the labor expenditures required to track down misplaced assets and the high demurrage fees often
triggered by misplaced assets. These scenarios result in a higher cost of doing business than what should be necessary.

Amid these difficulties stands an opportunity for Chemical companies to differentiate. From a customer service perspective, an
environmental perspective and a bottom line perspective, there is tremendous value in addressing the aforementioned challenges.
Affixing AIDC devices to Chemical industry assets and making the asset data those devices collect available via an enterprise-wide
software platform are steps that several large Chemical companies have taken, allowing them to enjoy the considerable benefits
that asset visibility can provide.

AIDC & the Chemical Industry Supply Chain

AIDC solutions for the Chemical industry supply chain should overcome the challenges of maintaining visibility of mobile supply
chain assets, monitoring the movements of hazardous materials and securing chain of custody hand-offs throughout the global
supply chain. The ideal solution must also be able to integrate all types of AIDC and track and manage all types of supply chain
assets and inventory. Let’s now examine five common types of Chemical industry assets, the critical business challenges they
present and the requirements for any AIDC solution implemented to track the asset type.

Copyright © 2010 Savi Technology, Inc. All rights reserved. 2

A Savi Technology White Paper | February 2010
Chemical Industry Asset Types
Rail Cars: Of the thousands of rail cars moving at any given time on the 140,000 miles of track in the
U.S., about 1% are transporting potentially hazardous chemical substances. The movement of these
Toxic Inhalation Hazard (TIH) substances has been regulated in recent years by the Transportation
Security Administration (TSA). Of particular concern to Chemical companies, rail companies and the
TSA is the movement of the TIH fleet through urban areas. Considering the potentially devastating
consequences of an “exception” event, particularly in a densely populated urban area, Chemical
companies are wise to implement rail car AIDC tracking solutions that provide the following:

••Constant monitoring of location and tank car condition

••Environmental sensors including dome open, lading and temperature
••Rules-based alerting for condition and location exception
••Messaging to facilitate emergency response communication

Intermodal Containers: Intermodal containers, commonly transported by ship, rail or truck, pose
a number of challenges to Chemical companies. For instance, companies often lose in-transit
visibility to intermodal containers for long periods of time as they are transported across the ocean.
Companies also may find themselves unable to accurately account for floating inventory, unable
to re-route shipments to fulfill order demand and unable to validate the security of shipments. To
address these issues, Chemical companies need an AIDC solution that provides:

••Customs clearance benefits

••Re-routing (in-transit reallocation) capabilities
••Real-time location information for all container shipments
••GPS tracking capability for select trade lanes

ISO Tanks: ISO Tanks, large cylindrical containers used to transport chemicals, are problematic in
the areas of visibility, allocation and fleet reduction. Chemical companies often lack visibility to in-
transit ISO Tank shipments, and suffer from poor ability to plan the return of ISO Tanks located on
customer sites. Maximum utilization of large fleets of ISO Tanks is also difficult. An AIDC solution
for Chemical ISO Tanks should have the following capabilities:

••Provide real-time location information with GPS devices

••Enable reduction of ISO Tank fleet size or defer new purchases
••Alerts for excess dwell time
••Automated ship and receipt based on geo-fencing
••Re-positioning of empty ISO Tanks

A Savi Technology White Paper | February 2010

Copyright © 2010 Savi Technology, Inc. All rights reserved. 3
 Road Tanker Trailers: Tanker trailers are often used to transport chemicals overland. With these
assets, Chemical companies must be mindful of detention and demurrage fees. Asset visibility
is usually provided by driver-initiated carrier transactions, which are prone to error. Chemical
companies often find themselves unable to audit or verify carrier billing, and unable to provide
accurate updated arrival times to the customer. Furthermore, when trailers are not utilized efficiently,
they may sit unused for long periods of time in far-flung corners of the supply chain, resulting in high
detention and demurrage charges. AIDC can rectify these problems through:

••Dwell time alerting

••Auditing of detention and demurrage charges
••Real-time location information independent of carrier processes
••Border crossing information

Small Assets: Small assets pose challenges in the areas of visibility, security and chain of custody.
Chemical companies often have difficulty locating and securing shipments of hazardous materials
contained in small assets. It is also difficult to maintain chain of custody information on small assets
through a complex, multi-tiered supply chain. Poor asset utilization and a lack of visibility to small
assets on customer sites are other challenges. AIDC can address these problems by providing:

••Ability to track high-volume small assets in different geographies

••Multiple AIDC support for different small asset types
••Multi-level nesting capability (package to pallet to container)
••Analytics and KPI reports to monitor asset utilization

Supply Chain Solutions for the Chemical Industry

With such a wide variety of chemical substances and assets in which to ship them, it is no wonder that the Chemical industry
supply chain faces so many challenges. Compounding the industry’s supply chain issues is the fact that many Chemical companies
rely on a combination of Enterprise Resource Planning (ERP) systems, Supply Chain Management applications and spreadsheets to
manage supply chain assets. This mix of tools is ill-suited for tracking assets beyond the boundaries of the enterprise and into the
supplier and customer supply chains. Chemical companies need a new breed of application that is designed for real-time tracking
and management of mobile assets.

The ideal answer is a web-based application that provides continuous on-line tracking, environmental monitoring, and
management of chemical industry assets and their contents from point of origin to point of destination. Such a software
application must be able to manage mobile assets outside the four walls of a single company as the assets move among suppliers,
plants, distribution centers, warehouses and customers. Application requirements include:

••Support for automated collection of supply chain asset data from a wide variety of AIDC devices
••Modeling of customers, suppliers and business units as discrete entities that share common supply chain transactions
••Granular permission controls that allow micro-visibility for business units, suppliers and customers with macro-visibility for the
parent company
••Automated alerts, chain of custody audits and other reports to reduce the risks of transporting hazardous materials

After partnering with an experienced AIDC solution provider and developing a solution that solves their unique business
challenges, Chemical companies deploy AIDC devices such as active and passive RFID tags, bar code and Satellite
Communications (SATCOMM) devices. These tools provide the raw asset data that forms the foundation of asset visibility. Data
from AIDC devices, ERPs and supply chain systems is then consolidated by a powerful software application that packages the
data and makes it actionable. With AIDC-enabled real-time visibility, Chemical supply chain managers can overcome all of the
challenges that commonly arise in the Chemical supply chain.

A Savi Technology White Paper | February 2010

Copyright © 2010 Savi Technology, Inc. All rights reserved. 4
Conclusion
There are many ways that AIDC technology can correct problems in the Chemical
industry supply chain. The major benefits of AIDC in the Chemical supply chain
are: optimized asset utilization, improved safety and security of hazardous material
shipments, improved inventory management, scalability and more efficient operations.
The end results of a successful AIDC implementation in a Chemical supply chain are
lower supply chain costs and improved customer service with decreased risk. Savi has
been helping companies in the Chemical industry achieve these results in their supply
chains for nearly 10 years. If you’re in the Chemical industry and are ready to reap the
benefits of an AIDC-enabled supply chain, give Savi a call today.

A Savi Technology White Paper | February 2010

Copyright © 2010 Savi Technology, Inc. All rights reserved. 5
 About Savi
Savi Technology provides an integrated suite of complementary
Automatic Identification & Data Capture technology products
and solutions that drive business value by reducing supply
chain assets, inventory and operational costs for commercial
enterprises, defense agencies and other government customers.
Founded in 1989, Savi is a wholly owned subsidiary of Lockheed
Martin [NYSE: LMT], with headquarters in Mountain View, Calif.,
and offices in Singapore; Melbourne, Australia; Farnborough, UK;
Lexington, Ky.; and Washington, D.C. For more information, visit
www.savi.com.

About Lockheed Martin

Headquartered in Bethesda, MD, Lockheed Martin is a global
security company that employs about 140,000 people worldwide
and is principally engaged in the research, design, development,
manufacture, integration and sustainment of advanced technology
systems, products and services. The corporation reported 2009
sales of $45.2 billion. For additional information, visit
www.lockheedmartin.com.

Contact Savi
Let us show you how Savi’s supply chain solutions can work for
your organization.

United States
+1 888 994 SAVI (7284)
+1 650 316 4700

International
Savi Asia +65 6403 8000
Savi Australia 1800 891 960 (Dial from within Australia only)
Savi EMEA +44 (0) 1252 553200 (United Kingdom)

Copyright © 2010 Savi Technology, Inc. All rights reserved. (10-03a) 6

A Savi Technology White Paper | February 2010