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Mitigating security threats and facilitating trade through the deployment of a global security network Mr. Bruce Jacquemard Executive Vice President Savi.

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Presentation on theme: "Mitigating security threats and facilitating trade through the deployment of a global security network Mr. Bruce Jacquemard Executive Vice President Savi."— Presentation transcript:

1 Mitigating security threats and facilitating trade through the deployment of a global security network Mr. Bruce Jacquemard Executive Vice President Savi Technology

2 Smart and Secure Tradelanes More then 40 SST Partners (ISO participation announcement 14 May, 03 – ISO/TC8 Chair) Current – 12 of the largest/busiest global tradelanes Global Information Network and Physical Infrastructure SST provides real-time visibility of location and security status tracking infrastructure from point of origin to destination SST compliments US (CSI, CTPAT, OSC) and other global initiatives

3 Key Drivers in Supply Chain Security Transparency and Visibility of Supply Chain –Improve visibility across entire supply chain for security and efficiency –Build capability to track and locate containers Physical Security –In addition to data layers of defense, we need physical layers of defense for cargo, containers, ports, supply chain facilities, and people. Complete System Intelligence –Point/silo requirements, decisions, and/or solutions can sub-optimize the entire network; address global supply chain security as network problem Regulatory Compliance –Implement US Customs Programs of CTPAT, CSI and 24 AMR in an integrated approach Forensics and Restart –Isolate Recover Learn –Systems and networks need to be judged not only by how well they perform but also how well they fail and restart.

4 Requires a Smart Network Transparency and Visibility of Supply Chain Make people smarter –locate containers with information from inside the system (automatic reporting of location, status, routing, contents, etc.) Physical Security Make the conveyance smarter – integrate deterrence and automated detection capabilities (location, security status, secure history and event log, automate manifest, sensing, etc.) Complete System Intelligence Make processes smarter –Manage what you measure - real-time information drives optimization of processes leveraging all available information from within or from outside the logistics system Regulatory Compliance Make enforcement smarter - Automated checks or information collection for CSI, CTPAT, AMR. ( authorized access recorded/ linked to manifest, AMR stored with container at origin, Automated Seal verifications, etc.) Forensics and Restart Allow us to continue to learn and adapt -Analyze/diagnose event and respond appropriately, ability to segment issues and restart

5 Road Transport Consolidator / Distribution Center Road Transport Port of Loading Vessel Transit Port Vessel Port of Discharge Mfg Distribution Center Road/Rail Transport Retail Store Factory Retail Distribution Center Goal: Secure the Supply Chain Secure at Point of Container Packing –Manufacture –Consolidation Reduce Shrinkage Identify Pilferage Points Limit Terrorism Threats Dirty Bomb Contamination Monitor at Key Choke & Transit Points

6 Road Transport Consolidator / Distribution Center Road Transport Port of Loading Vessel Transit Port Singapore Maersk, Hanjin, or APL Long Beach Memphis/ Menlo DC Road/Rail Transport Retail Store Venture Mfg Retail Distribution Center SST Deployment Status Updates Availability: – 100% Coverage – Partial Coverage – Not Available – Not Applicable Container Stuffing International Security Status Update Domestic Security Status Update Container Unloading

7 Systems Framework For a Security Solution Rather than securing a specific person, place, or thing as we have in the past – we now have to look at security of the process as a whole. No single process change or technology device offers a complete solution by itself Increased focus on containers vs. Vessels (container as message packet) Integrating new processes or applying new technologies to facilitate efficient distribution of information Automated methods of collecting and distributing data further up the supply chain More real-time capabilities to link information flow to the physical flow Software systems for identifying, analyzing and responding to real- time information

8 SST Network – End 2003 Hutcheson/LineHNN - AntwerpPSA - Singapore HIT Hong Kong Felixstowe UK ECT Rotterdam Yantian Guilan Island Seattle TTI HanjinLongbeach TTI HanjinSavannahSeattle APL Eagle Marine China Merch Kaohsiung (Twn) Shekou Chi wan Seattle Tacoma NY / NJ LA Long Beach New Orleans Alaska Jacksonville Puerto Rico Savi Hosted Shippers Federation NJ – PNCT NJ-Global Terminals Baltimore Houston Guatemala Tokyo Indonesia Laem Chabang Genoa Turkey SAFMarine (SA)

9 Current SST Participants 75% of the worlds container trade CategoryParticipants Supply Chain and Security Domain Expertise Stanford Global Supply Chain Forum, King s Point Merchant Marine Academy, MIT, Pinkerton Logistics, Georgia Institute of Technology, and Transportation Logistics Institute. These institutions are assisting in the security assessment, process analysis, evaluation, and the development of an economic model for efficiency and security Shippers (Importers) Target, Boeing, GE, Unilever, Michelin, Dow Chemical, Semblog Logistics, Transoceanic, LINE Logistics, PSA Logistics, Venture Mfg., and Batmindo Total of 15 shippers and service providers across 13 vertical industry sectors. Global Port Operators Stevedoring Services of America: largest terminal operator in the Western Hemisphere (16M teus ) Hutchison Port Holdings: largest port operator in the world, over 30% of world s container trade (30 ports) PSA Ports: second largest port operator, 18 ports worldwide including China P & O Ports: 20 ports worldwide, including many regional ports China Merchant: operator of 6 ports worldwide US Port Authorities Port of Seattle, Port of Tacoma, Port of Los Angeles, Port of Long Beach, Port of New York/New Jersey, Port of Houston, Port of Savannah, and Port of Charleston US Terminal Operators Stevedoring Services of America, Eagle Marine Services, Marine Terminals Corporation, Total Terminals Inc., P&O Ports, Georgia Ports, Charleston Port Authority, Port of Houston Authority CarriersMitsui OSK Lines, Evergreen, Hanjin, Yang Ming, K-Line Service ProvidersSandler Travis Trade Advisory Services, SembLog, Parsons Brinckerhoff, SAIC, Cotecna (3 rd party shipment inspection), Pinkerton, and Boeing Technology Providers Oracle, Qualcomm, Savi Technology, OneSeal, Symbol, Intermec, Sun Microsystems, Compaq, Microsoft, IBM,, EXE, Manugistics, Vigilos (security integration: access contol, video surveillance, and perimeter security) Total solution approach combining 13 different technologies to enable supply chain security InfrastructureCIMC (world s largest container manufacturer), Transamercia (world s largest container lessor), GE Capital Container Leasing, Savi Technology, and Qualcomm Prototyping new types of low cost, smart and secure containers

10 Container Stuffing Manufacturing Facility - Malaysia Import containers from Malaysia are stuffed at contract manufacturer Container sealing performed by an authorized individual using an active RFID seal. Container data – manifest route, schedule, other required information – keyed into TSS application and made available to downstream trading partners and Customs systems. Future EDI integration to eliminate keying data. Future - Video associated to record container loading and biometric worker verification Automatic verification of seal status as container departs consolidation point Software application to manage change in control for container sealing

11 Transshipment Port – Singapore Truck Entry at Gates/Arrival by Feeder Automatic recording of arrival and status information through RFID Tie-in of RFID and application to truck profile, pre- advisal, and reservation system to provide updates to terminal operator OCR/pressure sensor to check untagged containers Monitoring personnel will have the appropriate qualifications (e.g. TWIC) Yard Coverage Seal status continuously monitored through network of readers in yard Terminal areas distinguished as safe vs. uncontrolled zones Container inspection (either personnel or technology) for containers that give off alerts Software access control protocol for container seals/unseals in the yard Workaround solution of polling reader plugged into car battery used to scan containers in PSA yard while awaiting loading on mother vessels of Hanjin & APL services Quay-Side Automatic recording of container departure and status information; software application receives information Non-Intrusive Inspection Unsecured containers passed through nuclear/gamma-ray portal Data passed to software application and appropriate systems and compared to previously captured container images and videos

12 Port of Discharge – Long Beach Vessel arrival at Long Beach Quay-Side Automatic recording of container arrival and status information; software application receives information Yard Coverage Seal status continuously monitored through network of readers in yard Intrusion detection enabled Non-Intrusive Inspection Unsecured containers are passed through nuclear or gamma-ray portal; Data passed to software application and appropriate systems and compared to previously captured container images and videos Truck Exit at Gates (For truck-modal transport) Automatic recording of arrival and status information OCR/pressure sensor as failsafe device Data made available to Customs, Coast Guard, and INS & referenced with other incoming intelligence data

13 Drayage- Rail/Long Haul to Distribution Center Load to Train in LB Automatic recording of arrival and status information Long haul Automatic recording of departure status and information Container Arrives at Final Destination Automatic recording of arrival status and information Container unsealed by authorized party, tagged items deconsolidated and cross- docked (if appropriate) Software application monitoring Drayage Automatic recording of arrival status and information at Railhead Drayage Automatic recording of departure status and information at Rail Ramp Satellite Link In Transit Instant Security Status Change Notification

14 Software Application: Transportation Security System (TSS) The TSS software application: –Maintain audit trails of container security and route histories –Manage deviation alerts (including route and schedule) and tamper alerts –Provide sealing and unsealing functionality in a handheld terminal –Allow workflow configuration to enable management of business processes –Provide visibility of current container movements for further supply chain operational benefits –Provide a register of authority enabling selected personnel to perform seal/unseal activities –Sample view and drill-down functionality includes … Global Views Global visibility for containers in- transit Status and location listing for selected criteria Facility Views Current facility inventory Facility clearance verification Yard location Inquiry by container or by type of assets Inspection facilitation Container Views Current container location Container status Routing information Movement history Associated manifest data Inspection history User & historical security info Handheld Terminal Serves as localized application of software

15 Drill Down on Major Impacts of Security Infrastructure on Efficiency Economic Benefits Substitution Cost Savings: direct and indirect cost avoidance attributed to the substitution of existing 24 Hour AMR compliance processes with automated compliance & security processes. Reduction in Bill of Lading Surcharges, expedited freight Reduction of Safety Stock due to improved certainty Scale Cost Savings: across the board direct and indirect cost savings attributed to improved trade compliance, reduced U.S. Customs inspections, and cargo theft incidences. Reductions in Direct Costs of Inspections Theft Cost Savings Safety Stock savings from reduced inspections Structural Improvements: fundamental or structural savings and margin increases attributed to the flexibility provided by improved container security transparency and visibility. Reductions in Safety Stock from reductions in transit-time variations or inventory optimization or….. Margin increases from improved transparency and customer service Reductions in Risk man costs, Reductions Insurance, reduction in manual security processes KEY DRIVERS Inventory Carrying Costs High tech goods have high depreciation and obsolescence rates. The greater the depreciation, the greater the safety stock needed to cover variations in transit times. The greater the commodity value of the container, the greater the inventory carrying cost. % Reduction in Transit-time Variation A 10% reduction in transit-time variation has a 65% increase cost savings and profit increase. Margin Multiplier High Tech goods have sales multiplier effects. The opportunity cost of missed sales is a multiple of the actual retail value of goods, due to customer attrition and missed sales of add-on or complimentary products. The indifference point of this multiple in the inventory-service tradeoff is.4. Service Target Rates v. Actuals Direct relationship between difference between the target and the actual in-stock service rate.

16 Two Representative Customer Benefit Scenarios Are Created Scenario 1: Holding Customer Service Levels Constant while Reducing Safety Stock Total Inventory Cost of Safety Stock Inventory Cost Due to Inspection Inventory Cost Due to 24 Hour AMR Direct Cost of Theft & Pilferage 1.3% Total: $20M $1.8M Total: $0 $2.9M SST To-Be Substitution Scale Structural Scenario 2: Holding Safety Stock Constant while Increasing Customer Service Levels Customer As-Is % = Percentage of Total 75% 15.5% 15% 1.3% 73% 9%.9% Customer As-IsSST To-Be Increase in Sales Margin from Improved Customer Service $8.3M

17 Automated Compliance of Customs Programs Empowers Shippers with Benefit Choices: Reduce Inventory or Increase Customer Service Levels $Millions SST gives Shippers flexibility to optimize their inventories and service levels based on data collected by security infrastructure Analysis concludes that this customer should leverage security solution to increase service levels : $8.3M margin increase versus $2.9M cost savings However, depending on firms market position they can align and optimize their benefits anywhere on the SST curve Margin Increase $8.3M Cost Reduction $2.9M Customer Service Level

18 Learning Points from Real World Experience 24 Hour Advance Manifest: –Initial results indicate that 24 Hour Advance Manifest is possible through a combination of automated processes, technologies, and integrated messaging and enables better supply chain planning and execution. Data: –Initial qualitative results demonstrate improved data accuracy, completeness, and timing through enabling processes/technologies, upstream supply chain data, automated tracking, and leveraging the port or 3PL as the consolidator of information. Automated Tracking and Physical Status-Location vs. EDI: –Automated tracking is inherently accurate vs. EDI (batch). –Example: an automated SST event showed a container had physically arrived at a US port whereas the EDI transmission said it would arrive 2 days later. Pattern Analysis: –Initial results indicate that routing mistakes and deviations happen and in SST are automatically detected through an automated tracking network vs. legacy systems or EDI. This has security and efficiency implications. –Example: 2 containers from Thailand arrived in Singapore; prescribed routing did not include transshipment at Singapore. Network-based Problem Requires Network-based Solution: –The complexity and dynamic nature of global supply chains requires a common open architecture where multiple processes and technologies can be tested and innovated upon rather than having to create and integrate point solutions.

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