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The Business Value of Supply Chain Visibility and Monitoring

Article  in  Transportation Research Record Journal of the Transportation Research Board · July 2015

DOI: 10.3141/2479-11

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The business value of Supply Chain visibility and monitoring

Joseph H. McKinney

SCV Solutions, 7000 Kenneth Drive, Annandale, Virginia, 22003, USA

Tel: +1-703-338-9041, e-mail: jmckinney@sysplan.com

Arthur Radford

SCV Solutions, 7000 Kenneth Drive, Annandale, Virginia, 22003, USA

Tel: +1- 703-307-9444, e-mail: AHRWRK@aol.com

Alexander Stathacopoulos

Hellenic Institute of Transport/Centre for Research and Technology Hellas (HIT/CERTH)

6th km Charilaou-Thermi Road, Thessaloniki, 57001, Greece

Tel: +30 2310 498465, Fax: +30 2310 498269, e-mail: alexstath@certh.gr

Georgia Aifadopoulou

Hellenic Institute of Transport/Centre for Research and Technology Hellas (HIT/CERTH)

6th km Charilaou-Thermi Road, Thessaloniki, 57001, Greece

Tel: +30 2310 498451, Fax: +30 2310 498269, e-mail: gea@certh.gr

Prof. George Giannopoulos

Hellenic Institute of Transport/Centre for Research and Technology Hellas (HIT/CERTH)

6th km Charilaou-Thermi Road, Thessaloniki, 57001, Greece

Tel: +30 2310 498457, Fax: +30 2310 498269, e-mail: ggian@certh.gr

Word count: 5434 words text + 7 tables/figures x 250 words (each) = 7184 words

26/02/2014

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 2

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Abstract

Over the past decades, freight transport and supply chains have seen extremely sophisticated and

advanced state-of-the-art applications of Information & Communication Technologies (ICT) that

have increased the “visibility” of the whole transportation and supply chain and have increased the

ability for collection, analysis and use of data to improve performance. This involves both the

“demand” side i.e. data about items being sold, inventories, order and receipt of goods as well as

the “supply” side i.e. the data about the available “capacities” for packing, shipping, and

transporting freight etc.

Having dynamic reliable and relevant information and data can prove essential in improving the

whole freight transportation process through factors such as security information (e.g. theft,

tampering), location and condition of cargo (e.g. temperature variations, humidity), optimization

of routing etc. The development of technologies which allow for this information to be available

to enterprises has a number of benefits including financial benefits from more efficient

management of stock and supply chain operations.

This paper attempts to identify and quantify these benefits based on the results of research work

and monitoring of specific supply chains through the development and use of Container

Monitoring Devices. This quantification of benefits has been made possible through specific

practical tests and experience gained by the authors through field research at enterprises using

these systems and also through their participation in relevant international research projects

especially funded under the 7th Framework Package of the EU.

Keywords: Security, Container Security Devices, business value, monitoring, visibility

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 3

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INTRODUCTION

Over the past decades, businesses have increased their use of information technology for the

collection of data and reporting of this data and the information derived, and the use of data to

efficiently analyze the possible future performance. For Supply Chain managers this development

focused on the demand side of the Supply Chain, especially through progressively precise methods

of collecting the data about items being sold, inventories on hand, and on the ordering and the

receipt of these goods at the Distribution Centers and then progressively at the stores where these

goods are sold. On the Supply side of the Chain, data availability has historically been limited to

collecting information similar to the Demand side data (quantities received from production or

suppliers, quantities on hand, and quantities shipped to customers) different from the Demand side

data only in the unit of measure. This lack of information leads to significant amounts of time

searching inventories and therefore, wasted labor time (1).

However, the supply side of the Supply Chain has lacked information about the various

factors which during the transportation process impact the condition of the actual goods in-transit

and their eventual salability. These once “untraceable” factors are now considered as very

essential. They include factors such as product tampering, theft of either the conveyance or a

portion of the load, temperature variations, presence of moisture when a dry shipping conveyance

is important, and shock or damage. Some of the risks of the supply chain which the supply chain

managers are required to understand. These risks can be placed in several categories along with

their sources. The main categories are disruptions, delays, systems, forecast, Intellectual Property,

procurement, receivables, inventory and capacity. Some of the key sources that influence the above

are: for delays, inflexibility of the supply chain, excessive handling of cargo (border crossings or

change in modes), for forecast, inaccuracy due to long lead times, seasonality, short life cycles,

product variety, lack of visibility and for inventory, holding cost, product value and demand and

supply uncertainty (2).

Precise, real-time information recorded directly in and during the Supply Chain Operations

activities has now been demonstrated to deliver supply chain operations and inventory investment

savings. These benefits can help the supply chain side of business improve efficiency and decision

making in the manufacturing line (1). These types of beneficial results have been achieved in a

number of independent trials by several different organizations. These results were achieved in

several globally executed research and demonstration projects, one of which was the SMART-CM

project (SMART Container Chain Management - http://www.smart-cm.eu). The Project was based

on the collaboration of commercial, academic, and regulatory organizations.

BENEFITS OF VISIBILITY

Today the amount of technologies and brainpower applied to supply chain performance

improvement is greater than ever before. Scanners, seals, RFID, Container Security Devices

(CSDs), etc allow companies to get a better picture of the customer’s requirements and needs and

give this information to all parts of the supply chain in order to respond quickly, efficiently,

accurately and in mass (3). Among the above are technological solutions which provide visibility.

Visibility is considered one the top challenges of the supply chain. Despite this fact though, supply

chain managers are focusing more on strategy alignment, process improvement and cost reduction

(4).

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 4

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Thus a large portion of the industry still lacks precise information on their supply chains.

In some cases information is available, but companies state that they are either too busy to share

this information or do not believe that collaborative decision making is important (4). In response

to this lack of information, which can provide information/insights to the root cause of supply

chain problems (i.e. theft, cargo tampering, cargo damage), buyers have developed a system of

involuntary deductions from payments to suppliers, standard “allowances” based on some

averaged experience of damages, and the purchase of insurance coverage by all supply chain

participants, including the seller and the buyer as well as all other operators in the Supply Chain.

In this manner the owner of the product at the time of the damage or disappearance can receive

financial compensation for the loss of salability from some party in the Chain, often at great

expense by analysts and lawyers to determine exactly which party was responsible to the loss, and

doing so without precise information about exactly when or how the loss was probably incurred.

According to Peleg-Gillai et al. (5) some of the most significant reported benefits from the

use of such technologies include improved product safety, improved inventory management,

improved supply chain visibility, process improvement, more efficient customs clearance, speed

improvements and better customer relationship. These benefits are illustrated in figure 1. The

improvements to inventory management are mainly because of reduction of theft/loss/pilferage,

reduction in tampering, reduction in excess inventory, increase in reported on-time deliveries,

reduction of incorrect quantities received, reduction of back-orders and others. The main visibility

improvements are due to increase in access to supply chain data, increase in timeliness of shipping

information, reduction in inaccurate shipping information and cost saving due to improved

visibility. The main process improvements involve automated handling, reduction in process

deviations, increase in process compliance, reduction of the number of times a product is handled

and reduction of the cycle times. The main speed improvements are reduction of cargo delays,

reduction of cargo inspections, reduction of transit time, reduction of delivery time window,

reduction of time to clear customs and reduction of transit time variance. The main customer

relations benefits are reduced customer attrition, increased e-mail exchange with customers,

increase of new customers, increase in joint customer activities, increase in customer satisfaction

and increase of customer confidence. The benefits for customer service and inventory management

are shown in figure 2.

The economic benefit of RFID technologies alone in the UK is estimated at $40 billion for

retail and healthcare despite the low adoption level of RFID tagging of items. The infrastructure

investment in RFID technologies is estimated at $4.4 billion indicating a 900% return on

investment. The study by Barua et. al (6) indicates that the financial benefits for retail from the use

of RFID tags result from reductions in labour costs, shrinkage losses, inventory write-offs, non-

working inventory, increased product availability, faster time to market and provision of

ubiquitous access to customers. A study for the use of RFID in Germany, by the Ministry of

Economics and Technology (7), estimated that 8% of the gross value added for manufacturing,

retail, transportation and private and public services will be influenced by RFID. RFID is

acknowledged as a productivity enhancing technology. According to Berg Insight (8) the usage of

remote tracking systems with GPRS or satellite communication capabilities for cargo reached 0.29

million units in 2013, while it is expected to reach 1.3 million units in 2018.

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 5

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In field studies conducted between 2005 and 2010 by Radford and McKinney at various

companies including IBM, Dow Chemicals, Transmed, Royal Foods, Target Stores, Hillebrand,

General Motors and Marks & Spencer’s it was determined that the lack of real-time visibility &

monitoring has hidden everyday costs from commercial enterprises. According to some

authorities, approximately 85% of shrinkage in the supply chain occurs while the cargo is in transit

from one location to another. Insurance can cover the financial loss, but not the customer service

damage.

In the SMART-CM project international container shipments were monitored by Container

Security Devices (CSDs) from the time that the container was loaded and sealed until the time that

the container was unsealed and unloaded (‘Stuffing to Stripping’). During the entire journey the

device reported to its home monitoring system on a regularly scheduled basis, as well as in real

time if there was an alert of any kind. The home system then passed the data into the message

format required by the collaborative “data pool,” known as “the Neutral Layer” in SMART-CM.

This data pool was accessed by the participating Customs Agencies, which view the security data.

In these trials, due to the nature of the project which focused on security and customs clearance of

the container, only the security data about the “door opening” status was collected and analysed,

but the devices utilized can also monitor other cargo condition indicators, such as temperature,

humidity, shocks and vibrations. At the same time through an added value system the shipper and

the consignee could also receive real time notifications on the location and status of the container.

If required the system could request information on specific events, such as notification of entry

or exit from specific geographical areas selected which is relayed to the user also in real time (9).

Therefore, CSDs and, in a broader sense, Container Monitoring Devices (CMDs) allow the

tracking of the entire supply chain, providing data considered useful by the enterprise to bring a

level of precision to real-time operations and operations planning which was not available before.

A number of business benefits from the use of monitoring systems were also identified in

the project INTEGRITY (10). These include:

- Diversion monitoring. The monitoring device provides information regarding the

actual routes followed by the container, which compared with the planned route can

show variations, delays and risks which may have occurred.

- Diversion identification. Any diversion of the container/cargo which may occur can

be identified earlier, allowing the customer to act on the disruption.

- Improve reliability of ETA’s. The visibility of the cargo and its exact location on

the globe allows the owner to make a more accurate estimate of the arrival time.

- Brand protection. The installation of tracking devices on containers containing

genuine cargo can help with the identification of counterfeit products, thus

protecting the brand.

- Lower insurance rates. The enhanced visibility of containers through the use of

container tracking service providers and has achieved the reduction of insurance

rates for customers, as the increased visibility has decreased the risk for the

insurance companies.

- Prevent unnecessary demurrage costs. With the visibility of the cargo, the holding

time of a container can be reduced to a minimum. The geographical information

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 6

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availability allows for the customer to check whether a container was held at a

terminal and confirm the demurrage costs.

INTEGRITY identified these benefits through its project evaluation activities, which were

in some cases common with those of the SMART-CM project. The project aimed to develop the

Shared Intermodal Container Information System (SICIS) allowing authorised companies and

authorities to access planning and status information of selected transports. Proactive planning

following the Supply Chain Event Management (SCEM) approach allowed the forecast of

problems well before their occurance. Matching logistics data with security information, e.g. from

electronic seals, container security devices and scanning equipment, together with the integration

of the AEO (Authorised Economic Operator) approach allowed to satisfy both the logistics

industry and Customs Authorities fulfilling their duties thus creating win-win situations (11).

According to Biciocchi and McKinney (12), companies conducting merchandise flow

management analyses understand and document the cost of the supply chain activities more

accurately. The subsequent development of a system of customized product flow can thus result

in greater cost effectiveness. The benefits of merchandise flow management are not only cost

benefits. The efficient analysis of this flow can allow the enterprise to identify also hidden costs,

opportunities for improved supply chain functions, business cases for investments and safety stock

alternatives.

QUANTIFYING THE FINANCIAL BENEFITS OF CARGO VISIBILITY AND

SECURITY SOLUTIONS IN REAL WORLD SUPPLY CHAINS.

The development of CMDs has helped monitor and improve the visibility of the global supply

chain. The implementation of the devices and the analysis of the information collected from their

use have helped quantify the financial benefits of the use of CMDs for the businesses. The various

systems and technologies enable the comparison of the information provided by each system and

the quantification of benefits for the enterprise in terms of time, effort and cost savings. Kelepouris

et al. (13) developed a methodology for evaluating track and trace systems and measuring their

value for aerospace enterprises. The system operates on the basis of analyzing the problems and

assessing the performance of the system based on the input received and the output of the system.

A graphic illustration of the methodology is shown below in figure 3.

In order to more accurately conduct cost-benefit analyses of the supply chain processes and

operations of specific enterprises (IBM, Dow Chemicals, Transmed, Royal Foods, Target Stores,

Hillebrand, General Motors and Marks & Spencer etc.) Radford (14) identified cost drivers, labor,

time, processes fees, interest and safety stock holding costs and identified the possible savings by

deploying a CMD solution. The methodology used the following steps:

1. Understanding the current trade processes of the enterprise.

2. Determining the organisation’s trade requirements.

3. Mapping the CMD solution features to the requirements and the trade processes.

4. Developing the as is and to be costs in order to estimate the financial benefits of

deployment of the CMD solution.

5. Developing the comparative analysis.

6. Preparing the findings and recommendations.

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 7

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The key to fully costing the transaction is determining the ‘internal costs’ of the enterprise.

The analyses identified these costs as constituting approximately 40% of the actual total landed

costs of a trade transaction and were key to identifying savings. The various ‘vendor’ costs (i.e.

LSP, insurance, terminal etc.) are market driven. Thus the internal costs contain many costs which

are usually overlooked or unacknowledged that add 30 to 40% to the explicit cash expenses and

are subject to process refinement that were identified by deploying a CMD solution that provides

the physical and logical visibility into the process and actions of the trade.

The life cycle costs as identified by the cost-benefit analyses performed are illustrated in

figure 4. As mentioned above the ‘internal costs’ which correspond with the costs of the cargo

owner, the distribution network and the supplier network constitute 40% of the actual landed costs,

while the supply chain operations constitute 60% of these costs.

Thus, the expenses of the trade do not need to be immeasurable and considered as the cost

of doing business. With the use of precise information from CMDs on supply chain operations the

enterprises which had the cost-benefit analyses performed were identified as able to achieve a cost

saving of 3-5% for supply chain operations and 7% or more for inventory investment cost savings.

These savings combined reduce the unit cost of Goods sold by an average of 0.5% for the products

which were analyzed, without impacting physical materials, production or marketing costs.

Expense reductions were also directly observed in the following:

1. Reduced labor costs, derived by automating the actual tracking function, allowing the

analysts to manage by exception, reducing the number of FTE's involved in monitoring

each shipment

2. Reduced Safety Stock costs derived from physical and logical visibility mitigation of

“stock-outs”

3. Reduced shipment financing costs (interest expense) derived from reducing the

duration of individual shipments

4. Reduced vessel operations costs and incidence of “supplemental charges” and

demurrage fees

5. Reduced shrinkage of all forms including theft, damage and delay

6. Additional savings which were indicated in these studies as potential for the future, but

which were not observed directly:

a) Reduced insurance claims costs

b) Reduced transaction processing costs

Observed Inventory Management cost savings are derived from the impact of using data

and information to improve the consistency of and the measurability of actual in-transit supply

chain operational performance. This enables lowering the statistical variances which heretofore

had been tolerated as “reality” because there was no observable real-time in-transit measurement

of the actual events, delays, routings, and cargo environmental conditions. The combined impact

of these variances had been increased safety stock, increased cycle stock, and the ever popular

“just-in-case” stock.

The detailed data provided by the CSD’s has been observed to enable:

1. Reduced on-hand inventory, attributed to increased physical and logical visibility,

which reduces the risks of shipping and the associated costs of:

a. Product

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 8

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b. Financing

c. Handling

2. Reduced warehousing costs (less stock = less space required)

3. Reduced inventory financing costs (visibility enables faster turns, lower holding times

and associated costs)

Unquantified savings that should be cited are:

1. Brand Protection and the incidence adverse cost impacts of recalls and “sourcing” cost

identification: examples were the recent spinach, peppers, and lead-paint incidents.

2. Supply Chain process improvements attributable to physical and logical visibility and

the elimination of Supply Chain constraints that are in place without in-transit visibility.

3. Improved supplier performance by product sources and logistics service providers that

a shipper will receive by leveraging in-transit physical and logical visibility, including

the in-transit real-time shipment data that a CSD (CMD) senses and reports.

4. Reduced product damage costs derived from using the physical and logical data of

shipments to identify both the causes and the occurrence locations of damages.

The trade costs for an enterprise with and without the deployment of a CSD solution (averages

based on multiple value analyses performed) are shown below in tables 1 and 2 (15).

THE FINDINGS FROM THE SMART-CM PROJECT DEMONSTRATORS

The SMART-CM project (www.smart-cm.eu) developed and tested a solution for making the

global container supply chain more secure and more efficient, through improved visibility. The

SMART-CM platform deals with the security aspect, through the Neutral Layer component of

the supply chain by transmitting ‘neutral’ information on the container security status to customs

with the aim of facilitating secure trade lane implementation. At the same time the Logistics

Business component collects information and provides a broader range of available status

information potentially suitable for applications that do not share the stringent security

requirements of customs operations. In order to achieve this, the project used Container Security

Devices (CSDs) to provide the real-time information to the system.

When quantifying benefits of an IT system there is a number of considerations to be made.

IT is not a source of value on its own and in order to achieve the strategic benefits it must be

supported by a redesign of the business process. This is a recursive relationship which is shown in

the figure 5 (16).

In order to demonstrate in a real-life environment that the project’s developments enable

improved security, efficiency, increased visibility and reduced costs to the global container chain

operation two demonstrators were set up, the EU-Middle East corridor and the EU-Asia/Pacific

corridor. Flows were covered from the point of stuffing (loading) and stripping (unloading). A

total of approximately 150 containers were monitored from Asia and the Middle East to the EU

and information on the container security was sent through the neutral layer to customs authorities.

This allowed the customs to authorize the clearance of container from customs prior to the arrival

of the container at the port. At the same time real time information was provided to the commercial

partners on the condition, location and estimated time of arrival of the container. Alerts and

messages were sent in real time allowing the partners to modify their operations accordingly.

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 9

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The SMART-CM project (17) identified additional benefits for the business process of

industry through the use of the CSDs and the SMART-CM Neutral Layer and Value Added

Services. These additional benefits are identified in the economic evaluation deliverable and are:

Potential lead time reduction.

Better management/arrangement of the whole supply chain. Better

organization of intermodal connections. Alerts regarding the availability of

the cargo (when and where it is available) can assist in better managing

truck or rail operations. Better arrangement of procedures in terminals due

to information regarding the exact time of vessels’ arrival. Enhanced supply

chain cooperation through information sharing between partners along the

supply chain.

Fleet reduction (2-3%) and better decision making as a result of the real-

time management of containers and accurate data on containers’

movements.

Competitive advantage among competitors resulting from the ability to

create premium services, through the real-time tracking of containers,

making companies unique in the market

Reduction in communication costs.

Easier communication with customs authorities – early notification of

container ETA and integrity.

Improved containers’ safety & security through alarms and alerts regarding

any unexpected events (exception management).

THE BUSINESS VALUE OF SUPPLY CHAIN VISIBILITY

The SMART-CM project also evaluated the cost and benefits of the full visibility of the supply

chain which was implemented through the ‘Green Lane’ concept for the shippers. The “Green

Lane” concept involved the establishment of fast, secure trade lanes for containers. Provided that

the containers have been checked by the authorized relevant authorities when being packed and

are monitored throughout their journey by a container security device that provides regular security

status information, the container will be approved for release from the port of entry without

customs inspection before arriving at the port. The supply chain visibility platform that was

developed and tested in the demonstrators of the SMART-CM project was intended on improving

the visibility and security of international maritime container transport. The main benefit of the

platform is the reduction of the transport time by making the transport more reliable and

predictable. Other cost savings were also found from lead time reduction through reduction of

pipeline stocks, safety stocks, service charges, administrative expenses, pilferage and theft. The

SMART-CM project also applied the concept of Value of Time (VOT) to estimate the benefits of

the reduced transit time. The VOT concept refers to the costs an average cargo owner applies to

the goods in transit.

The following conclusions were formed from the demos analyses:

1. Waiting time at departure ports is significantly smaller than at the arrival ports 12,83

hours against 60,54 hours, the difference is almost 5 times more. Speculatively, more

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 10

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efficient port operations and less stringent checks could also add to the shorter waiting

time.

2. Despite the fact that the waiting time is shorter at departure ports, the average waiting

time at the arrival ports is higher. This indicates that there is the possibility of random

interruption of operations at the arrival port or if this high waiting time is common that

operations in the port are not coordinated well and cause delays.

3. The waiting time at the departure port has no influence on the waiting time at the arrival

port.

4. The time that the containers spend at the departure port is less than 1 day for all

containers in the set. Therefore, efficient operations at the port can allow a dwell time

of 1 day or less.

5. Assuming that the average dwell time at the arrival port can be reduced to 24 hours (1

day) as well, SMART-CM technology can achieve a transit time gain of at least 1 day

for containers.

For the business case of SMART-CM the Value Of Time (VOT) concept along with the

World Container Model (WCM) (18) were used to estimate the financial benefits of the solution.

For the containers of the SMART-CM project the VOT can be estimated to be 0.0035. This means

that for a container containing cargo with a total value of 100,000.00€, the economic benefit for

each day saved is equal to 350€. When it is considered that the total number of 20 tone container

trips between the EU and China with a value of time greater than 300 Euros per day is estimated

at 330,000 annually, it is evident that the flow that would benefit from the SMART-CM solution

is substantial. The initial economic benefit from the adoption of the SMART-CM solution is

calculated at 60million Euros annually. Commodities such as machinery, appliances, engines and

parts and transport equipment are high value and time sensitive, thus most suitable for monitoring

and tracking for reducing the lead time.

In brief the benefits for businesses by real time monitoring of containers for security,

proven during the SMART-CM project demos, can be split into short term and long term benefits.

The long term benefits based on reliability improvement are savings in the magnitude of +/-300€

per imported container of value 100.000,00€. Based on all the above, it can be shown that, if

SMART-CM achieves reliable lead time reduction of at least 1-day, then about 17% of seaborne

goods flow between China and the EU and 9% between the EU and China (both in terms of number

container trips) would have sufficient VOT costs reduction These savings are a result of the

reduced pipeline and safety stocks, which are directly linked to the average container value. The

short term economic benefits are in the magnitude of +/-5€ per container of average value

10.000,00€, which are a result of efficiency gains for individual transport and logistics service

providers around the sea/hinterland interface through reduced waiting times, container movements

and stays in ports. The overall benefits for businesses are:

Short term

o Notification of actual real-time terminal events

o Information provision on hinterland operations in case of carrier haulage

o Potential customs clearance for cargo release

Long term

o More reliable end-to-end service

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 11

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o Fiscal clearance postponed to hinterland

o Information provision on hinterland operations in case of merchant haulage

CONCLUSIONS

This provision of “precise information” about the conditions and events that are unseen by the

stakeholders at either end of the shipment represents fertile ground for many operational and

relational improvements in business, while also providing a few crucial pieces of data to regulators

that are responsible for the security of all. As the technologies of CSDs, remote sensors, and

wireless communications continuously improve in functionality and decrease in both cost and

physical size, the commercial value will be proven by an increasing number of trading partners.

The commercial value of the granular data will mature in a manner parallel to the maturation of

POS terminals as they replaced cash registers. Forty years ago some retailers actually declared that

POS terminals were too expensive and the data provided was not worth the cost; these retailers no

longer exist.

The interest from industry in Container Monitoring Devices indicates that there are benefits

from their use. Their use by the industry is therefore dependent on whether or not the benefits from

the use of these devices outweigh the financial cost from their use. The analyses performed on

enterprises between 2005 and 2010 by Radford (14) proved that cargo visibility at all stages of

business operations (from supply chain to warehouse/distribution centre visibility) creates added

value for the enterprise. The visibility of cargo can help reduce lost work hours of personnel trying

to locate required cargo. Additionally, the continuous location information can help reduce risk

and therefore insurance fees for the cargo. Furthermore, the security status monitoring of the

container can provide additional benefits to companies by reducing the waiting time of the cargo

at ports, expediting customs clearance and overall the time required for the delivery of the cargo

to the consignee. These benefits have been proven by companies who employ visibility solutions

thus identifying reduction in operational cost and also by the demonstration of the SMART-CM

project which demonstrated in two real-world demonstrator corridors the benefits of the use of

CSDs on supply chain visibility and security.

The lack of real-time visibility and monitoring of cargo has hidden real everyday costs of

companies, either operational or supply chain costs. CMDs and CSDs can provide a solution to

more than just the occasional theft or damage of the cargo, it can bring to light issues such as

handling errors, which can affect the delivery and condition of the cargo and thus cause damage

to the company’s reputation and finances. CMDs can provide a means of observing the supply

chain process and evaluating the areas where improvements and savings need to be made. At the

same time the use of CSDs can provide direct financial benefits short term and long term.

REFERENCES

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Management Review. Fall 2004

3. Fisher, M. S. (1997). What is the Right Supply Chain for Your Product? Harvard Business Review,

March-April 1997.

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4. IBM (2009). The Smarter Supply Chain of the Future. Global chief supply chain officer study. IBM

Corporation, January 2009.

5. Peleg-Gillai, B., Bhat, G. and Sept, L. (2006). Innovators in Supply Chain Security: Better Security

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on the Retail and Healthcare Sectors. University of Texas in Austin, Center for research in Electronic

Commerce. http://www.pharmamanufacturing.com/assets/articles/2006/U%20of%20TX%20ROI-

RFID%20Study.pdf Accessed on March 2nd, 2014.

7. Federal Ministry of Economics and Technology (2007, editor). RFID: Prospects for Germany. The

state of radio frequency identification-based applications and their outlook in National and

International Markets. Berlin

8. Berg Insight (2013) Trailer and Cargo Container Tracking,. Study Summary. M2M Research Series.

http://www.berginsight.com/ReportPDF/Summary/bi-container3-sum.pdf accessed on November 1st,

2014

9. SMART-CM Project. Deliverable 8.1.5, CEN Working Agreement 16505: 2012 Container Security &

Tracking Devices - Technical Specifications and Communication Standard. Smart Container Chain

Management, September 2012.

10. INTEGRITY project. Deliverable D0.3 Final Report, Intermodal Global Door-to-door Supply Chain

Visibility. December 2011.

11. INTEGRITY Project. http://www.integrity-supplychain.eu/ Accessed on November 6th, 2014.

12. Biciocchi, S. A. McKinney, J. H. (2001). Merchandise Flow Management: A Competitive Necessity

for Retailers. CSC. USA.

13. Kelepouris. T., Da Silva. S. B. and McFarlane. D. (2007). Tracking System Evaluation and

Performance Measurement: Embraer Case Study. Aerospace-ID Technologies White Paper Series.

2007: Auto-ID Labs, Cambridge, UK.

14. Radford, A. and McKinney, J. M. (2014). The Delivered Financial Value of In-transit Cargo Tracking

Data. Supply Chain Management Review, January/February 2014.

15. Ledyard, M. McKinney J. M. and Radford, A. (2011). Bringing Visibility to the Invisible Supply

Chain. Presentation at CSCMP Annual Global Conference 2011, Philadelphia, October 2011.

16. Davenport, T. H. and Short, J. E, (1990). The New Industrial Engineering: Information Technology

and Business Process Redesign. MIT Sloan Management Review. Volume 31, Issue No. 4, Summer

1990.

17. SMART-CM project. Deliverable 7.3.1. Assessment of economic and socio-economic results. Smart

Container Chain Management, 2011.

18. Tavasszy, L. A., van Meijeren, J., Minderhoud, M., Burgess, A., Bowden, N. and Perrin, J. F. (2008)

World Container Model. Paper in Bijdragen 15de Vervoerslogistieke Werkdagen 2008, Deurne, 13-

14 November 2008 Nautilus Academic Press.

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 13

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FIGURE 1 Visibility benefits from technological uptake (5)

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 14

14

FIGURE 2 Inventory Management and Customer service benefits (5)

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 15

15

FIGURE 3 Tracking system performance measurement method overview (13).

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 16

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FIGURE 4 Trade Life Cycle Costs (14).

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 17

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TABLE 1 Total Trade Costs As is % to total To be % to total Savings % savings % of

savings

Internal

Costs

$4,934.78 40 $4,472.15 38 $462.63 9% 75%

Contracted

Services

Costs

$7,402.10 60 $7,247.89 62 $154.21 2% 25%

Totals $12,336.82 $11,719.98 $616.84

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 18

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TABLE 2 Saving By Cost Category Cost Type Percent Opportunity

Trade Management Labor 5%+ (Trade monitoring)

Logistics Management 5.5-6% (Trade Management)

Safety Stock 7-9% (Reduction in Stock)

Distribution Center Operations 3-5% (Reduction in Facilities and Labor)

Loss, Damage and Delay 1-3% (Reduced Delay and Claims Costs)

Insurance <1% (Reduction in Premiums)

McKinney, Radford, Stathacopoulos, Aifadopoulou, Giannopoulos 19

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FIGURE 5 The Recursive relationship between IT Capabilities and Business Process

Redesign (16).

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