freight security and productivity: strategy, technology, costs, and benefits

Freight Security and Freight Security and

Productivity:Productivity:

Strategy, Technology, Strategy, Technology,

Costs, and BenefitsCosts, and Benefits

Freight Security: Effects to Industry

Talking FreightOctober 19, 2005

Michael Wolfe

[email protected]

Talking Freight, 10/19/05

Some Key NRCG ProductsSome Key NRCG Products

“Freight Technology Story: Intelligent Freight Technology Benefits”

“Smart Container Product and Market Reports”*

“The Dynamics of Supply Chain Security”

“Security Must Yield an Economic Benefit”

“Supply Chain Security Without Tears”**

“Freight Transportation Security and Productivity”

“Electronic Cargo Seals: Context, Technologies, & Marketplace” *Co-authored with HSRC

**Co-authored with Hau Lee


Our Main MessagesOur Main Messages

Embed freight security in a corporate strategy of resiliency

Security costs are significant, but a narrow focus on security costs takes your eye off the ball – address overall economics

Effective implementation of well-conceived intelligent freight technologies can deliver simultaneous security and efficiency benefits


OutlineOutline

Resiliency, Risk, and Security

Security Costs

Intelligent Freight Technologies and Their Benefits

Wrap up


The Unholy Trinity of The Unholy Trinity of Cargo Security ThreatsCargo Security Threats

Theft Pre-9/11

Contraband Pre-9/11– Drugs– Customs evasion– Counterfeit and gray market goods– Stowaways

Terrorism Post-9/11– High potential for trade disruption from

attacks and countermeasures


Strategic Goals for Superb Supply Strategic Goals for Superb Supply ChainsChains

The superb supply chain has– Reliability– Velocity– Value– Resiliency

Yossi Sheffi, The Resilient Enterprise

Resiliency is a new buzzword, but an old and valuable idea


Lean Lean == Resilient Resilient

Lean supply chains – Focus on efficiency and timeliness– Lean for assets, lean for inventory– Can be brittle, with little reserve capacity

Resilient supply chains– Timeliness and efficiency remain important– Premium put on agility and flexibility– Balance alternative sources, modes, &

routes


Resiliency for What?Resiliency for What?

Market shifts

Competitive initiative and response

Interruptions from– Natural disasters – Strikes– Terrorist attacks– Government overreaction


Framing SecurityFraming Security

Security problems can expose lack of resiliency– The biggest impact may come after an

attack, when governments change the rules of the game

Smart supply chain security is consistent with enhancing overall resiliencyThe foundation stones are

technology and processes

to enhance visibility and control


OutlineOutline


Security Costs Intelligent Freight Technologies and Their Benefits

Wrap up


Security and Related CostsSecurity and Related Costs

Macro– “increased security costs have been large

and added frictions to … trade” - Roubini– Maritime security, per year, $730M –

OECD– Canadian border chokepoints cost US

$4B annually – Ontario CofC

Micro– Medium-size chemical co.:

»Seals & documentation €2.7M»Annual security training€4.5M


There are Two Types of CostsThere are Two Types of Costs

Some security measures are direct costs– Fences, access controls, CCTV, etc.

Some security measures will change business processes– Smart container and trailer

technologiesMust assess positive & negative

business impacts—not just costs!


The Leverage Point…The Leverage Point…

…is intelligent freight technologies and processes that enhance cargo visibility and control – Goods in transit– Conveyances and equipment– Assured chain of custody

Auto ID TechnologiesConveyance•Bar code & 2D labels•RF tags•Satellite & cellular communications

Container•Bar code & 2D labels•Optical cards, tags, labels•RF tags, satellite, & cellular transponders

Pallet •Bar code & 2D labels •Optical cards, tags •RF tags

Multipack •Bar code, 2D labels •Optical cards, tags •Embedded RF tags

Part •Bar code, 2D

label •Inscribed part # •Embedded RF tagsCourtesy of The North River Consulting Group


Technologies That Can Support Technologies That Can Support Security Security andand Efficiency Efficiency

Tools for visibility and control– Smart trucks– Smart trailers– Smart containers– Smart cargo

Short- and long-range communications– RFID– Mobile cellular and satellite

Smart networks – the information highway


Profiting from Profiting from Better Visibility and ControlBetter Visibility and Control

Increased efficiency and productivity– Better assign people and equipment– Shorten processing time

Improved reliability and service– Better schedule adherence– Resiliency and flexibility

Enhanced shipment and service integrity– Protection against theft and terrorism


Quantitative Benefit EstimatesQuantitative Benefit EstimatesIntelligent Freight TechnologiesIntelligent Freight Technologies

SOURCE DOLLAR RANGE UNIT OF MEASURE

1. Asset tracking, mobile communications

$7,866 to $15,222 Annual savings per tractor

2. Asset tracking, chassis tracking

$210.35 Annual savings per chassis

3. Asset tracking, containers with RFID

$400 Benefits to shippers per

container load 4. Freight status

information, ESCM and biometric ID

$16.20 Time and labor savings per

air freight shipment

5. Nodal facilitation, border crossing and highway compliance facilitation

$12.8 to $24.8 million Annual regional savings

6. Network status information, FIRST-like capabilities

$21.36 to $247.57 Savings per dray terminal

trip

*Estimates developed in Field Operational Tests, all but #3 sponsored by DOT. Some were test

measurements and some from models and simulations.

Source: The Freight Technology Story, DOT/FHWA report by North River


Benefits of New Security Standards: Benefits of New Security Standards: An Industry ViewAn Industry View

WCO Framework of Standards for Supply Chain Security offers tangible benefits for Authorized Economic Operators (AEOs)– Uniformity and predictability– Simpler and faster processing

IBM sees competitive advantages– Efficiency, responsiveness, customer

relationships

– Theo Fletcher of IBM, at MIT, 9/05


OutlineOutline


Security Costs

Intelligent Freight Technologies and Their Benefits

Wrap up


Critical Success Factors Critical Success Factors For InnovationFor Innovation

Well-conceived design– Grounded in reality and practicality

Practical economics– Sound business model for users and

vendors

Excellent implementation– Must include vendors, users, and

affected supply chain partners


SummarySummary

Embed freight security in a corporate strategy of resiliency

Security costs are significant, but a narrow focus on security costs takes your eye off the ball – address overall economics

Effective implementation of well-conceived intelligent freight technologies can deliver – Simultaneous security and efficiency benefits– Support a resiliency strategy– There are tools available today and more

coming on the market


Thank you for your attention

Mike Wolfe [email protected]

1-781-834-4169

Sources & References for Sources & References for

Supply Chain Security, Productivity, & TechnologySupply Chain Security, Productivity, & Technology**

Security and productivity policy and analysis– “2005 Review and Outlook”

» Journal of Commerce, January 3, 2005– “In This Case, Bad News is Good News on Cargo Security” (2004)

» Journal of Commerce, July 26, 2004– “The Dynamics of Supply Chain Security” (2004)

» G-8 Summit edition of The Monitor, Univ. of GA, Center for International Trade and Security– “Security Must Yield an Economic Benefit” (2003)

» Journal of Commerce, December 1, 2003– “Supply Chain Security Without Tears” (2003)**

» www.manufacturing.net/scm/index.asp?layout=articleWebzine&articleid=CA278114– “Freight Transportation Security and Productivity” (2002)

» http://ops.fhwa.dot.gov/freight/publications/SecurExecSumm.doc– “Defense Logistics…” trends and implications (2001)

» http://www.ops.fhwa.dot.gov/freight/theme_papers/theme_paper_index.htm

*Articles and papers by Mike Wolfe **Co-authored with Hau Lee, Stanford

Technology for security and productivity– “RFID Technology and Container Security” (2005)

» Cargo Security International, October/November 2005– “Mobile Wireless Communications Enables Security” (2005)

» National Safety Council (to be published, Fall 2005) – “The Freight Technology Story: Intelligent Freight Tech. Benefits” (2005, with Ken Troup)

» http://www.ops.fhwa.dot.gov/freight/intermodal/index.htm– “Mechanical Seal Market Segmentation Study” (2005, with Ken Troup)

» email from Mike Wolfe– “APEC Secure Trade Project Conceptual Plan,” (2005)

» email from Mike Wolfe– Smart Container Technology, Market Forecast, and Product Reports (2004, with HSRC)

» email from Mike Wolfe– “Technology Views and Issues” (2004)

» Cairo Transportation Security Forum Resource Guide, www.tda.gov– “Automating Security: Do E-Seals Make Sense?” (2003)

» www.eyefortransport.com/index.asp?news=33911&nli=freight&ch=– “Target Capabilities for the ‘Future Smart Container’” (2003)

» email from Mike Wolfe– “Technology to Enhance Freight Trans. Security & Productivity” (2002)

» http://ops.fhwa.dot.gov/freight/publications/Security Technology Appendix, 4-25-02.doc– “Electronic Cargo Seals: Context, Technologies, and Marketplace” (2002)

» Reachable from the Intermodal Freight page at http://www.its.dot.gov/ifreight/ifreight.htm– “Trends in Freight Identification Technology” (1998)

» Email from Mike Wolfe ([email protected], 781-834-4169)

http://www.ops.fhwa.dot.gov/freight/theme_papers/theme_paper_index.htm

mailto:[email protected]

freight security and productivity: strategy, technology, costs, and benefits

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