Tracking chemicals through the manufacturing and distribution process is a critical requirement for Dow Chemical, to ensure safety and operational efficiency. In 2004, identification technologies such as RFID tags had gained significant buzz due to initiatives by the Defense Department and Wal-Mart to mandate their use in supply chain and inventory management applications. So CIO Dave Kepler periodically asked his IT staff whether Dow could take advantage of these technologies. The repeated answer: RFID was not mature enough.

But Kepler wasn't sure the skepticism was warranted. So in late 2005, he asked his staff to think about RFID differently. His request: Define the problems first, then see which technologies might be useful to address them—viewing RFID technology as a possible tactic in the larger product tracking strategy. "He didn't want technology for technology's sake, but he did want tight alignment to the corporate strategy," recalls Dave Asiala, a shared services IT director at Dow, who served as a member of the strategy development committee and assumed leadership of the implementation efforts.

Today, Dow has several pilot projects in place to test RFID and other location-oriented technologies such as GPS, two-way radios and traditional bar codes. Early projects have shown that sometimes—such as when it's paired with a sensor log to transmit environmental readings during shipments—the use of RFID makes sense. But at other times bar codes still prove cheaper and easier.

Dow's not alone: Despite years of discussion and "here's what you could do" stories from vendors, RFID remains in the pilot stage at many firms, especially outside the established retail warehouse and distribution use on pallets and shipping containers. Both the RFID technology and marketplace are fragmented and slow-moving, analysts say, and costs remain high. A recent Computing Technology Industry Association (CompTIA) study showed that while 84 percent of providers expect to offer RFID technology in the next three years, 66 percent say their customers have yet to implement RFID. That doesn't mean you should ignore RFID.

Dow's "keep your eyes open" approach is the right one, says Colin Masson, a research director at AMR Research. By itself, he says, RFID is still not a strategic technology that CIOs should have high on their agendas. But it can be useful in service of those strategies.

Testing the business case for an RFID project is the first consideration for a CIO. Sometimes, RFID is the wrong solution. For example, Dow uses bar codes and handheld readers to track the large metal containers used to transport chemicals. RFID tags cost more, so Dow would want to reuse them to minimize the overall price. But it's hard to find RFID tags that can survive the sandblast cleaning the containers go through as their chemical contents are replaced, Asiala notes, so applying a bar code is simpler and cheaper.