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  2009 MAR Issue   |   What is Digital Magazine?  |  How to use  |  Archives  |    
 
 

Global Shipment Security Comes of Age

Overcoming Technology and Cost Barriers in a Complex Supply Chain

With 90 percent of world trade conducted by ocean cargo containers, ports and terminals are the essential check-points in the global network of trade and commerce. Security is one side of the coin in terms of operator concerns; operational efficiency is the other side. As pressure on infrastructure capacity increases, adding additional verification steps to cargo handling adds to an already difficult operating environment. As container volumes grow, security regulations tighten, and as competitors and customers maintain severe pressures on costs, prices and service, the need for technology innovation is becoming increasingly significant.

By Lani Fritts

 

Leading global shippers are embracing RFID technologies at the package and pallet levels to improve the dynamic management of their inventories and operations.  (Photo by Savi Networks)

 

Leading global shippers are embracing RFID technologies at the package and pallet levels to improve the dynamic management of their inventories and operations.  Initially deployed ¡°Inside the four walls,¡± their vision today is extending to ¡°nested visibility,¡± a solution that ties together RFID cargo data with information from complementary Automatic Identification and Data Capture (AIDC) technologies such as active RFID on containers and, in some cases, GPS-equipped mobile tracking of trucks. 

Extending these RFID-based solutions by adding eSeal devices that electronically seal containers allows the tracking and monitoring solutions that shippers are already adopting to provide monitoring and notice of container security breaches at any point in the supply chain.  This logical extension of RFID and AIDC technology use has numerous advantages but also one major barrier: Each checkpoint in the global shipping network must be equipped with AIDC infrastructure in order to provide the required visibility. 

 

THE NETOWRK FOR SHIPMENT SECURITY: PORTS AND OPERATORS

 

With 90 percent of world trade conducted by ocean cargo containers, ports and terminals are the essential check-points in the global network of trade and commerce.  Ocean ports in particular have become key nodes where cargo concentrates, is orchestrated for shipping and transshipping, screened for security and customs compliance, and turned over to shippers or their agents for inland movement to distribution centers and other destinations.

Security is one side of the coin in terms of operator concerns; operational efficiency is the other side.  As pressure on infrastructure capacity increases, adding additional verification steps to cargo handling adds to an already difficult operating environment.  As container volumes grow, security regulations tighten, and as competitors and customers maintain severe pressures on costs, prices and service, the need for technology innovation is becoming increasingly significant. 

For port operators, additional efficiency is not easy to find.  Most are relatively efficient operations already.  They collect operating information on every activity from gate entries to container positioning, container lifts and vessel closeouts.  Accurate, timely, and complete data collection is critical, and operators use technologies that range from manual entry through optical character recognition and various kinds of Radio Frequency Identification (RFID).  Operators manage and exploit this data with a variety of home-grown and commercial terminal management systems. 

While customers, partners, and government regulators increasingly depend on terminal operators for critical data, and while operators continue to improve their own efficiencies, both visibility and security gaps continue to occur as container hand-offs are made among multiple parties using disparate information systems.  Customers and commercial partners expect near-seamless interfaces, especially timely and accurate notifications of receipt, lift, gate departures, and any problems, such as seal discrepancies or compromised shipments.  Ocean carriers are demanding faster vessel turns and near-perfect data exchanges for plans, manifests, and security screening.

Over the last four years, governments have also added to the demands and expectations of port and terminal operators and their customers, the carriers.  Some of the key requirements include (i) the need for 24-hour advanced manifest information, (ii) operational data interfaces with Customs and other regulatory officials, (iii) an ability to select containers for additional screening, and (iv) requirements to manage added operating complexity at the terminal.  Even without the added spur of a container-related terror event, government demands on terminal operators will continue to increase.  For example, the United States Department of Homeland Security is expected to mandate the inspection and verification of container seals, creating new data management challenges.  U.S. Customs and Border Protection also has proposed that ¡°trusted shippers¡± augmenting best practices for security with AIDC technologies, including so-called ¡°smart containers¡± can get faster ¡°greenlane¡± clearance in the future.  In addition, the World Customs Organization¡¯s Framework of Security Standards, adopted by over 70 nations so far, may also create new demands. 

Since smooth trade flows and rapid container/cargo throughput are the lifeblood of ports, prudent risk management requires putting systems in place that enhance resiliency.  Resiliency includes both real-world capabilities and perceptions of those capabilities by key stakeholders and customers.  Resilient port operators will enhance their ability to manage traffic fluctuations, including post-terror event trade stops and re-starts, providing better information interfaces with customers and partners to manage shifting priorities.  By doing so, these operators will also improve governments¡¯s confidence in their critical infrastructure security systems.

 

ADOPTION OF CONTAINER SECURITY BY SHIPPERS

 

Threat of terrorism has elevated security issues to increased public scrutiny.  However, implementing a global solution has significant operational challenges.  Third-party service providers, including terminal operators and carriers, must cooperate to execute the many chain of custody hand off points that global shipments must traverse.  Visibility at each of these check points in the supply network is required to provide accurate shipment tracking and security monitoring, and individual shippers have very little control over the infrastructure that can be deployed at these locations.  While importers and exporters have continued to increase use of AIDC technology to manage and track assets within their own facilities, there has been a great deal of confusion about whether a particular technology will become the de facto standard across the global intermodal transportation networks.  As a result and until recently, the adoption of real-time monitoring technology by port and terminal operators has been slow.  Operators have been waiting to see which standards will emerge.

Another factor is the economics of container security and prevention.  Theft prevention is a general concern to all shippers, but the threat of terrorist intrusion or corrupted contents, and the corresponding economic risk, is higher to those companies who are in industries that face high or pending regulatory pressure, or when hazardous materials are involved.  These shippers in-particular have strong incentives to implement a solution that can trace chain of custody and secure shipments on a global basis.  However, the increased extension of operations to international locations limits how far they can actually deploy any security solution that provides real-time monitoring outside of their own facilities.

 

NEW TRENDS

 

While government policy is certain to change over time, there are three current trends that are enabling increased commercial adoption of container security on a global basis: (1) the trend towards managed services versus technology acquisition, (2) industry partnerships between technology suppliers, commercial and governmental agencies, and, (3) the integration of security solutions with other solutions that drive non-security-specific ROI.

Instead of requiring shippers to take on all the capital risk of setting up an AIDC infrastructure, Global Network Service providers now collaborate with carriers and terminal operators and invest in deploying AIDC network infrastructure at each terminal in order to track and monitor containers and their contents.  The Global Network Service provider then offers real-time shipment tracking and security monitoring as an information service, paid for by the trade as needed and on a per-container basis.  This, in turn, allows each terminal operator at a port to provide the value-added service to its own customers.  As a result, customers do not have to make capital investments into technology but use an existing network on a ¡°pay as you go¡± basis.  Concerns over technology direction become lessened since the technology risk of the network infrastructure cost is largely born by the network operator.  As a result, both the technology risk and capital investment required for the shipper, carriers or terminals are dramatically reduced, while services of each participating operator become differentiated.

In the past, both price and performance pressures by shippers have resulted in fierce competition among operators and carriers.  With relatively fixed labor costs, these firms have extensively automated their existing processes.  Increasingly, these businesses are discovering that to create dramatic efficiencies they must find ways to automate processes that span beyond the boundaries of their own facilities.  As a result, operators and carriers are now seeking additional differentiation and efficiencies by collaborating with technology providers and even competitors in order to deploy solutions that span companies.  Such partnerships have the effect of balancing power in the market by providing new levels of service in an otherwise commoditizing business.

The third major trend is new combinations of container security solutions with other solutions that provide tangible productivity improvement to shippers.  These new solutions allow shippers to drive economic justification not just through risk reduction, but through supply chain performance.  In absence of governmental mandates, companies are looking for hard economic benefits.  The tangible benefits of real-time supply chain monitoring such as reducing spoilage, transportation costs, enabling more responsive customer delivery alternatives, inventory reduction and others make deploying the technology more justifiable.  Electronic seal technology, when combined with RFID, GPS and information infrastructure already available in these new global networks create an opportunity to improve shipment security as a byproduct of better operational performance.

 

Lani Fritts is Chief Operating Officer of Savi Networks (www.savinetworks.com).

 

 

For more information, please send your e-mails to swm@infothe.com.

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