Tuesday, February 28, 2006

Ports' Technology Failure

Continued from page 1

By David Talbot

TR: But nobody was ever worried that a pack of chewing gum would help smuggle a hydrogen bomb into the United States. What's it going to take to get electronic tracking for cargo containers?

DE: The question is how fast is the U.S. government going to mandate the use of these tags? They do have new container security rules, but the affected companies oppose the rules, because it requires change and the expenditure of money. These industries have tremendous political clout.

TR: What would it cost?

DE: About $200 per container buys you active intrusion detectors linked to RFID tags that are on the market today. According to U.S. Customs, approximately 25,000 containers are offloaded daily in the U.S., which makes for an added cost of over $1.8 billion per year just for tags. Then you have to outfit ports with tag readers and information systems that support the readers. Who would pay for this infrastructure? This could be widespread on the U.S. side, and could potentially be [put into] handheld devices at the point of departure and be integrated into Customs rules and regulations. You need U.S. Customs people at departure ports, or someone trained and entrusted by the U.S. government, to perform the inspections prior to sealing the containers. Clearly, the U.S. government would need to pay for these people. And of course everyone needs to use standards.

TR: Government mandates aside, can a business case be made for RFID tags on containers?

DE: The DOD sees a very specific value. They're willing to spend $100 per tag so they can know when containers have arrived, what's in them, and to make sure troops are ready and able to fight. Wal-Mart is deriving value: they are now requiring manufacturers to put RFID tags on cases and pallets of goods.

The question is: Where is the value for port operators and container companies and shipping companies and the shippers? What is the value for Maersk [the cargo shipping giant] to know where all its containers are at any point in time? Having greater visibility of your assets can be as valuable to businesses as to the DOD. Many times, businesses will ship with containers and it can take them well over a day just to find where something is. Has it even been loaded on the ship? And containers fall off ships all the time, surprisingly enough. Providing that asset visibility is valuable -- but the cost may not provide a sufficient return on investment.