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American Shipper

Special Coverage: Physical asset tracking in container logistics gains renewed interest

Falling costs and the value of data are spurring renewed interest in physical asset tracking in container logistics.

Source: MACROVECTOR / SHUTTERSTOCK.COM

   The container shipping industry has always been founded on a bit of faith. An international shipper contracts for goods it can’t see, using unseen logistics providers, and loaded onto ships in faraway lands. Those goods spend weeks in transit aboard trucks, trains and ships, and only come into physical view when they reach the shipper’s receiving facility.
   Given this, it’s not too surprising that shippers over the last ten years or so came to embrace a wave of freight visibility capability that relied less on physical tracking of goods and more on intangible data around key milestones.
   Visibility in recent years has become a critical function upon which global shippers and their service providers rely. Status events act not only as key milestones in the life of a shipment, but as trigger points for downstream logistics activities. A message that a container has departed a foreign port or arrived at the destination port, for example, might set in motion the next supply chain domino.
   Much of this visibility has been built upon the collection of data from various providers inside and outside of the industry. The ones inside the industry largely include aggregators of shipment status events, companies connected directly to carriers and 3PLs. Those aggregators then sell data to consumers, like logistics companies, supply chain software providers, or shippers themselves.
   That data is fed into transportation management systems to provide visibility, commonly referred to as “track and trace.” However, because the global shipping industry is almost wholly reliant on electronic data interchange (EDI) messages, TMS data isn’t always accurate or timely.
   American Shipper benchmark research into data quality finds that only around half of shippers are satisfied with the data provided by their ocean carriers.
   Interestingly, the rise in use of intangible data to drive visibility initiatives coincided with a dormancy in interest by the supply chain industry in radio frequency identification (RFID) devices. A decade ago, Walmart made waves by requiring suppliers to use RFID tags on all inbound shipments, a move that seemed to herald a new era of logistics visibility.
   But that initiative fell flat, largely because the economics around RFID never seemed to work. Tags were too expensive, and the technology wasn’t reliable or useful enough to justify the expense.
   So it’s somewhat surprising to hear about a gradual rise in interest in recent months in the use of physical asset-tracking devices. To be clear, there has been movement for the past few years in asset tracking for refrigerated containers, for reasons that are quite clear.
   For one, reefers already have a built-in power source that regular dry containers don’t, alleviating a key constraint in the use of tracking devices – battery life. Reefer cargo also tends to be more valuable and thus provides carriers a higher profit margin. Higher margins mean there’s a greater appetite for investment in technology, especially if that technology could in turn yield higher rates associated with better visibility.
   But the renewed interest in physical tracking of dry boxes isn’t as easy to explain. These sensors are not simple RFID tags, but tracking devices (anywhere from the size of a credit card to the size of a large modem) built to feed into data and analytics platforms.
   A device that just pings its whereabouts isn’t really enough anymore. That information needs to be stored and analyzed to be useful.

Unit Costs. The biggest inhibitor for the physical tracking of assets has always been the price tag, as the cost to build a tracker has traditionally been higher than the ultimate consumer of that data can afford.
   There’s an underlying reason for this. American Shipper research into supply chain visibility last fall found that the majority of shippers don’t know what it costs them to acquire visibility from 3PLs and software providers, and that 3PLs largely struggle to quantify the costs of providing that same visibility to shippers. In other words, there hasn’t traditionally been a good sense of the value of visibility.
   But physical sensors have a defined cost, both in terms of the materials needed to build a tracking device and the telecommunications service needed to transmit the data it collects.
   Until recently, that cost was seen as too much for supply chains to bear, but a couple key fundamentals have changed. First, the cost of building a simplified, yet reliable tracking device has come down. At the same time, global shippers have begun to better understand the value of real-time visibility into the location of their goods, even if those benefits aren’t perfectly quantifiable.
   A logistics executive at a major consumer products maker spoke with American Shipper in October about precisely this issue. For years, this shipper had depended on visibility based around EDI status events to monitor its complex global ocean freight network, but always suspected the data wasn’t as accurate as advertised.
   So the shipper ran a pilot test on several export containers using tracking devices from a third-party provider of container sensors. The goal was to compare how the company’s legacy, EDI-based visibility accuracy measured up to the sensor-based version. On the very first shipment, the two systems told very different stories about the location of the container.
   Let’s talk price for a second. The “magic” number one hears kicked around the maritime industry as to what a viable price for a container sensor usually comes in around $50. Speakers at the Journal of Commerce’s TPM 2017 conference in Long Beach in late February referenced the $50 price point as the point at which physically tracking a container makes financial sense, as did Matt Morgan, director of maritime product development for Genscape.
   Morgan spent time at a visibility startup called Weft, which was acquired by Genscape in 2016, trying to tackle the problem of creating a viable tracking device.
   “We kept coming back to that $50 number,” he said in a recent interview with American Shipper.
   But Morgan said cash-strapped carriers, as much as they’d like to invest in container sensors, are loathe to spend even that amount on a fleet of, say, one million containers. He believes the more realistic way to get widespread use of sensors is to charge carriers a monthly fee per container (around $5 to $9) to minimize the upfront cost.
   Meanwhile, Alexandria, Va.-based Savi Technologies says it already has a product that’s less than $50.
   “When these were $100 or more it was hard to justify the ROI,” said Jim Hayden, vice president of product at Savi. “Now, we’ve got it at less than $40. People kept saying the price was going to drop. And we’re good at building at these.”

Intelligent Action. As those dynamics of falling costs and greater demand have run headlong into one another, there’s been another development that impacts the equation. Data is now seen more and more as an asset to direct shippers toward future actions, as opposed to simply informing past behavior.
   From a visibility perspective, this is important, because any form of visibility – whether EDI- or sensor-based – has in the past been used to define where cargo is and what, if anything, has befallen it. Data analytics solutions, however, give shippers the power to use visibility data to anticipate what will happen to their containers, not just wring their hands about what’s already gone wrong.
   The marriage of physical sensor-based data with new analytics engines has the potential to unlock some serious horsepower when it comes to both predictive (what will happen) and prescriptive (how a shipper should respond) analytics.
   Think of it sequentially. In a traditional track-and-trace scenario, a shipper gets an EDI message at noon that a container that was supposed to be aboard a vessel due to depart at 11 a.m. that same day has not been loaded. That creates a reactive situation. The shipper then has to scramble to either get the delayed container on another sailing as quickly as possible, or figure out another way to fulfill the orders attached to the goods in that container.
   Not only that, the shipper is left to diagnose what caused the container to miss its sailing. Did it arrive late due to traffic between the factory and origin port? Was there confusion in the terminal about the box’s location? Was there a regulatory hold? Did the carrier reject the container due to a fee not having been paid?
   Now, imagine another scenario, one in which that same shipper’s container has a sensor mounted on it relaying information about the traffic jam on the way to the terminal to a shipper’s analytics tool, which then predicts that that the box is likely to miss its intended sailing. That information, in turn, is fed into the shipper’s other transportation management or optimization systems to figure out a corrective course of action before the container even arrives at the terminal.
   It’s this predictive visibility that has many in the industry intrigued, if not salivating.
   “Beyond leveraging ubiquitous technologies such as geographic positioning system (GPS) signals, we are moving into a world where the Internet of Things and the sensors that enable it are pervasive, and where advanced processing power and machine learning allow the mining and processing of insights from massive amounts of unrelated data,” Fab Brasca, vice president, solution strategy, intelligent fulfillment at JDA Software, wrote in a January blog for CSCMP’s Supply Chain Quarterly.

“Visibility without intelligent action is like a car with advanced sensors and warnings, but poor brakes and steering. Both will have difficulty avoiding identified disruptions.”
– Fab Brasca, vice president, solution strategy, intelligent fulfillment, JDA Software

   “Visibility without intelligent action is of limited value,” he said. “Just like a car with advanced sensors and warnings but poor brakes and steering will have difficulty avoiding an identified potential collision, a supply chain with advanced visibility but poor planning and execution systems will have challenges responding to identified disruptions.”

What To Track? The next big set of questions shippers should ask themselves is whether some or all of their shipments are important enough to track.
   Are they high-value, rare, or critical to downstream processes? Are they temperature- or vibration-sensitive? Is damage or theft a systemic problem? Is there a particular mode or region that’s problematic? Can a certain representative percentage of containers be tracked with sensors to act as valid statistical proxies for everything that needs to be tracked?
   “I never recommend the ‘big bang’ approach,” Hayden said. “We start with ‘where do you have the least amount of visibility,’ and ease into other areas. If you’ve had issues with a specific lane or specific product or suppliers, let’s do that and see where it goes.”
   Hayden said Savi generally sees supply chain customers trying to address one of three areas:
     • From raw material suppliers to a plant;
     • From a plant to distribution center;
     • Or from a DC to a customer.
   “All of those have a consistent black hole, and that’s the carrier handoffs,” Hayden said. “Between modes especially.”
   Anecdotally, shippers and 3PLs have said modal handoffs create visibility problem areas, because the EDI capability, timeliness and accuracy of data from a drayage provider, for example, might not match that provided by the ocean carrier or railroad on either side of that leg. There are technology layers that can homogenize the EDI visibility data to a certain extent, but it doesn’t eradicate the latency or accuracy problems altogether.
   But sensor-based visibility does, because the sensor stays on the container for as long as that shipment stays in a container, regardless of the mode.
   Still, cost is a factor. EDI status events aren’t free, but they cost a shipper or 3PL a small fraction of what a container sensor would, never mind more advanced associated analytics services offered by Savi, or other major asset-tracking device providers like CalAmp.
   Shippers should think about what they absolutely need to track, and also how often it needs to be tracked.
   “Chain of custody is where the market is evolving to,” said Ted Wlazlowski, vice president and general manager of CalAmp Supply Chain Integrity. “Things like traceability and serialization. Where did things go wrong?”
   Wlazlowski said from a supply chain tracking perspective, CalAmp focuses not on the transportation mode, but on the goods themselves, an important distinction as sensor-based technology moves forward.
   Shippers may want to get increasingly sophisticated, tracking different goods within the same container as they split out to different destinations after being transloaded, for instance.

Battery Life. Aside from pure cost, the viability of container tracking devices really comes down to a few logistical issues, ironically enough.
   First is battery life. Can a single charge on a tracking device last long enough to be commercially useful for shipments en route for weeks, if not months? Are the units durable enough to withstand harsh climates, anything from cold and wet conditions at sea to 110-degree deserts with rough terrain?
   Are the units reusable or meant to be single-use? This last issue is crucial, because it speaks to who is best positioned to “own” the tracking devices. A shipper that wants to work directly with a provider of reusable sensors needs to have some arrangement with its carriers or logistics providers to ensure that the box or sensor is returned.
   Battery life is less of an issue for cargo that doesn’t need constant monitoring. For instance, a product that’s not temperature-sensitive might only need to ping its location once an hour while at sea, or even once a day to ensure the shipment is following its predicted path. It’s not rocket science, but the fewer times a device needs to provide its location, the less battery power it uses.
   There are other methods to conserve battery life, such as setting up a sort of location relay system, where a certain number of containers ping another box on a vessel, which relays the location of all the boxes, sort of like how a foreman might relay a judgment on behalf of a jury.Another method is to shut down a sensor once a container has been confirmed as loaded on a ship, using automated identification system (AIS) data instead while at sea, and then turn the sensor back on once the box is nearing its destination port.

Picking Up The Tab. One of the tricky aspects of widespread deployment of sensors is that there’s not a ton of extra margin with which to work in current supply chains.
   The financial plight of global ocean carriers is well documented, and they’re unlikely to agree to a massive investment in fleet-wide container sensors without an assurance that rates would rise commensurately. It should be noted that CMA CGM and Mediterranean Shipping Co., the second and third largest carriers in the world, have invested in a French firm called Traxens that is developing a sensor-enabled container. As of the time of this writing, however, that technology has yet to be deployed.
   Maersk Line has also invested in tracking technologies for some of its reefer fleet, announcing in September that it ordered nearly 15,000 units with embedded sensors.
   But most lines don’t have the available cash to invest in sensor initiatives unless shippers and logistics companies force them to do so to remain competitive. It’s just as likely that shippers and logistics companies take on the burden of sensor investment to create their own competitive advantage.
   Hayden believes 3PLs will especially begin to see physical tracking and the associated data as a key way to underpin differentiation in an increasingly commoditized market. The theory is that the ability to collect and synthesize huge amounts of data about the position of in-transit goods could set a logistics provider apart from competitors offering bread crumb-based track and trace.
   Shippers, meanwhile, would need to have the in-house or outsourced ability to analyze real-time data to make such an investment worthwhile. At this point, virtually every carrier, 3PL, and supply chain software provider offers track and trace for a nominal cost.
   But to see the ROI on a physical tracking device approach, the shipper either has to have vulnerable, sensitive, or high-value goods, or it has to have an innate ability to take accurate cargo position information and turn it into actions that affect its bottom line. Most shippers are not in that position yet.
   The tide, however, appears to be shifting back toward physical tracking of goods, because as the old axiom goes, the data accompanying a shipment is as important as the shipment itself.

Eric Johnson  Eric Johnson is Research Director and IT Editor of American Shipper. He can be reached by email at ejohnson@shippers.com.

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