Using IT as a Competitive Weapon: Dow Chemical, PepsiCo, and the Internet of Things

Companies interested in exploring whether the Internet of Things (IoT) is a worthwhile investment have three different paths they can go down.

IIoT logo

The Internet of Things connects intelligent physical entities – such as sensors, devices, machines, assets, and products – to each other, to Internet services, and to applications.  IoT represents a stack of technologies that can be shaped into solutions.  At ARC, we refer to the Industrial Internet of Things (IIoT) because we are focused on how industry, rather than consumers, can use these technologies to improve their business.

IoT Component Description Functionality Examples
Intelligent sensors, machines, devices, assets Embedded intelligence, storage, and processing power Data producers and consumers; Local intelligence and data storage Containers/products with RFID tags; GPS; machine sensors; etc.
Communications Networks of all types Connectivity; Data delivery; Security Wired, Wireless, Cellular, Satellite, other Networks
Big Data Data repositories Data aggregation Hadoop, Azure
Analytics or Software Applications Data processing engines; software applications reliant on sensor data Data analysis; Insight; Planning & Optimized Execution Analytical engines, telematics, Cloud-based Warehouse Management System

IIoT Building Blocks

So how could companies approach the IIoT?  First of all they can wait for particular IIoT applications to “cross the chasm,” and invest in them only after many other companies have proven there is a good payback for a particular application.  While “Internet of Things” is a relatively new term, there are examples of IIoT applications that predate the use of this term.  A cloud based warehouse management system that makes use of RF scanners, or a telematics solution, are examples of preexisting, proven, IIoT, solutions.

A second way a company might address IIoT is to decide that this technology stack could well be strategic; that these technologies might be shaped into new applications that could provide competitive differentiation.   In this case, a company might start a technology incubation center to explore these technologies.

As one example of this, Dow Chemical started a RFID, GPS, AutoID, and the Telemetry Expertise Center in 2001, long before the term “Internet of Things” became prevalent.  If Dow was to rename that center based on current acronyms, it could well be call an Internet of Things Expertise Center.

When Dow began to explore RFID, an IIoT technology that was still maturing, it found the COE approach very useful. Fairly early in the program, the company decided that RFID and GPS would work well together for track and trace and it included GPS within the scope of its analysis.

Dow has a concept it calls “Most Effective Technology.” The idea is that certain technologies lend themselves only to certain sites or certain fairly small processes, while other technologies work so well, they should be used across the corporation. In order to determine which RFID projects to tackle in Generation 1, Dow COE representatives:

  • Listened to the “Voice of the Customer” by educating 100 leading business leaders within Dow about active and passive RFID and GPS and then listening to how these technologies might apply to their businesses.
  • Put together a list of 450 ideas, came up with a list 50 prioritized project areas, and then culled this down to the 10 projects that would be implemented in Generation 1.

Businesses within Dow were understandably not anxious to deploy new and possibly bleeding edge technologies. To overcome this resistance, the Expertise Center is used to fund the proof of concept, a pilot, and a first implementation. They may partially fund a certain number of implementations after that until they have matured their implementation processes for that technology.

Over time, Dow has harnessed these technologies to track shipments end to end.  Further, they have used IIoT to build one of the most advanced supply chain risk management programs in the world (Dow Chemical’s Distribution and Transportation Risk Management Program).

In the final path to IIoT adoption, a company may just decide that the Internet of Things is strategic and place a big bet on the technology.  In this instance, they could make it one of their key corporate wide strategic initiatives.

At JDA’s recent Focus event, Rich Beck, the Sr. Vice President of Global Operations at PepsiCo, gave the keynote on the second day of the conference where he described a key PepsiCo initiative called “The Digital Value Chain.” This strategic program incorporates the use of IIoT technologies to build new solutions in areas like smart production machinery and packaging; the use of automatic guided vehicles and robotics; and camera-based mobility solutions to be used in stores (presumably to better capture demand signals).

At PepsiCo, the digital value chain initiative, while including IIoT, certainly goes further than that.  The program also includes having a single data source that drives supply chain strategy, planning and execution based on SAP and Oracle at the ERP and database layers, and JDA as their core “performance system.”

In summary, companies interested in exploring whether IIoT is a worthwhile investment have three different paths they can go down:  wait for new IIoT applications to prove itself, build a technology incubation center to explore these technologies incrementally, or go all in and make IIoT a core strategic initiative.  The choice made will in large part reflect company’s size, appetite for risk, and technological prowess.

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