Stuttgart, Germany -- March 24, 2009

IBM (NYSE: IBM) today announced it is working with Volkswagen Group, Europe's leading vehicle manufacturer, to improve the automaker’s material logistics operations through the use of sensor technology.

The new system will significantly enhance the carmaker’s efficiencies in day-to-day operations, for instance at the goods-receiving stage. As a result, Volkswagen is preparing to introduce this technology at its central logistics hall, located at its major plant in Germany.

Volkswagen is deploying the new system following a one-year pilot project in which the automaker and IBM tested RFID technology with suppliers. Using this system, shipping containers carrying auto parts destined for Volkswagen will be increasingly fitted with RFID tags.

“The pilot project has been ground-breaking,” said Kurt Rindle, global sensor Solutions executive, IBM. “Volkswagen is driving innovation by becoming the first vehicle manufacturer to make daily use of RFID technology in the flow of materials between suppliers and the manufacturing line.”

The information on the tagged containers is automatically collected by readers at all key locations throughout the supply chain -- first at the supplier's shipping department, through the transportation process until they arrive at Volkswagen, then during storage, collection and installation on the automaker’s assembly line. The same process is used when Volkswagen returns the empty shipping containers to its suppliers to ensure that all containers are returned after the auto parts are received. The technology is also reducing the need for paper documents and barcode labels.

“Our long-term goal is to implement an integrated, paperless production and logistics chain throughout the whole Group,” said Klaus Hardy Mühleck, Group CIO and head of Group IT at Volkswagen. “The pilot project showed that we can reliably integrate RFID technology into our business processes at a low cost,” he said.

For the pilot, Volkswagen fitted around 3,000 shipping containers with passive RFID tags, supplied by Intermec. The technology has been refined so that it can also automatically register metal containers, which normally interfere with RFID technology. The tags were used on containers carrying sunroofs for the new Volkswagen Golf. Readers at the entrances to the manufacturing line, along with mobile handheld scanners and forklifts were used to identify the containers and their contents.

The IBM technology being used for this project is comprised of IBM Global Technology Services’ RFID container management solution together with the IBM WebSphere Premises Server, an application-neutral RFID middleware product.