# Presentation: 153402

## Freight Security and Productivity:Strategy, Technology, Costs, and Benefits

**Freight Security: Effects to Industry**
**Talking Freight**
- October 19, 2005
**Michael Wolfe**
*noriver@att.net*

## Some 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*

- Talking Freight, 10/19/05

## Our 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

- Talking Freight, 10/19/05

## Outline

- Resiliency, Risk, and Security
- Security Costs
- Intelligent Freight Technologies and Their Benefits
- Wrap up

- Talking Freight, 10/19/05

## The Unholy Trinity of Cargo 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

- Talking Freight, 10/19/05

## Strategic Goals for Superb Supply Chains

- 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

- Talking Freight, 10/19/05

## Lean = 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

- Talking Freight, 10/19/05

## Resiliency for What?

- Market shifts
- Competitive initiative and response
- Interruptions from
- Natural disasters
- Strikes
- Terrorist attacks
- Government overreaction

- Talking Freight, 10/19/05

## Framing 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 resiliency

***The foundation stones are***
***technology and processes ***
***to enhance visibility and control ***

- Talking Freight, 10/19/05

## Outline

- Resiliency, Risk, and Security
**Security Costs**
**Intelligent Freight Technologies and Their Benefits**
- Wrap up

- Talking Freight, 10/19/05

## Security 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

- Talking Freight, 10/19/05

## There 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 technologies

*Must assess positive & negative *
*business impacts—not just costs!*

- Talking Freight, 10/19/05

**Notes:**

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

And ‘what does the widget cost?’ is the wrong question to ask – should focus on net economic impact of innovation.

## 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

- Talking Freight, 10/19/05

## Auto ID Technologies

**Auto ID Technologies**

***Conveyance***
- 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 tags

*Courtesy of The North River Consulting Group*

## Technologies That Can Support Security and 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*

- Talking Freight, 10/19/05

**Notes:**

What is a smart container or trailer?
There is no standard definition
Three main ingredients
Processing power 
Communications
Electrical power

Smart containers and trailers will come to dominate ‘best practices’

## Profiting from Better 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

- Talking Freight, 10/19/05

## Quantitative Benefit EstimatesIntelligent Freight Technologies

- Talking Freight, 10/19/05

**Notes:**
This table is drawn from the Freight Technology Story.  Most benefits were determined through a rigorous independent evaluation of so called Functional Operational Tests (FOTs) sponsored by the Department of Transportation from 1999 that continue today.
Our message here is not so much the specific numbers but the fact that we have, for the first time, pulled together all of the available quantitative data on benefits.  In addition to the numbers shown for the various tests here, there have been more recent analyses with comparable results.  While the ink is still wet on those analyses, they represent another step forward in quantifying security benefits.

Mobile communications platforms
Satellite and cellular comms & on-board computing now dominate long haul trucking
Focus on efficiency benefits in North America – US $7800-$15000 per year
Focus on security benefits in Latin America – reduced hijacking and theft

## Benefits of New Security Standards: An 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 *

- Talking Freight, 10/19/05

## Outline

- Resiliency, Risk, and Security
- Security Costs
- Intelligent Freight Technologies and Their Benefits
**Wrap up**

- Talking Freight, 10/19/05

## Critical Success Factors For 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

- Talking Freight, 10/19/05

**Notes:**
Keep technology in perspective:

	it is not magic

	it is not irrelevant

I’m a skeptical optimist

## Summary

- 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

- Talking Freight, 10/19/05

## Thank you for your attention

*Mike Wolfe *
*noriver@att.net**	*
*1-781-834-4169*

- Talking Freight, 10/19/05

**Notes:**
I would be happy to answer questions at this time.

## Sources & References for Supply 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](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 (_[noriver@att.net](mailto:noriver@att.net)__, 781-834-4169)_

- Talking Freight, 10/19/05