Halo 3 hit the market last month amid great fanfare?and tight security. But an emerging RFID-based technology might make security hassles a thing of the past.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
In a scene reminiscent of last year's pre-holiday releases of Nintendo's Wii game station and Sony's PlayStation 3, video game enthusiasts lined up for their chance to purchase the latest version of the popular video game Halo in September. The interactive video game, the final chapter in a trilogy that began in 2001 with the launch of Microsoft's original Xbox game console, surpassed $170 million in sales on the first day it hit the market, making the game the biggest entertainment launch ever.
But with all the hype about the game's lifelike images and dramatic story line, one factor was overlooked: the daunting security challenges presented by a launch of this scale. Theft is an ever present concern with video game distribution—industry statistics show that approximately 10 percent of new releases disappear into the black market. A high-profile launch like Halo 3's only ups the ante, essentially presenting Microsoft's distribution team with a challenge on a par with Master Chief's quest to save the galaxy from predators one more time before riding off into the sunset.
"The early shipments of Halo would be gold dust to thieves, so we did take a few extra measures," acknowledges David Warrick, general manager for Microsoft's entertainment and devices manufacturing and supply chain group for the Europe, Middle East, Africa, & Asia Pacific regions. Specifically, Microsoft employed third-party freight security firms to help it understand the risks involved and recommend best practices. It also worked directly with carriers to create security plans, which included the use of convoys as well as GPS tracking devices.
All in all, Warrick reports, Microsoft spent at least 12 months laying out its distribution strategy in preparation for the launch, which represented the video game industry's equivalent of this summer's Harry Potter book release. Included in the deliberations were numerous sessions that focused on security.
Safer travels
Right now, Microsoft and other entertainment industry players have little choice but to spend millions of dollars on security each time they release a new video game or movie. But relief might be on the way. An emerging RFID-based tech-tion, the technology could be used to secure shipments of nology is showing great promise for discouraging theft without sending costs into the stratosphere.
The new technology differs from traditional RFID-based security applications in one important way: Rather than simply leveraging the technology's tracking and tracing capabilities, it also makes use of its capacity to activate and deactivate electronics. In other words, it allows suppliers to disable items like video games, DVDs, and consumer electronics while they move through the supply chain and onto store shelves. Once a consumer has paid for it, an item can be scanned and reactivated at the point of sale in a matter of seconds. The idea is that thieves will have no incentive to steal a pallet of goods from a DC or a tractor-trailer if they know the product won't work.
With the new system, which is being developed by San Francisco-based Kestrel Wireless, an enhanced RFID chip is embedded into the product at the point of manufacture. The RFID chips used for this purpose incorporate innovations such as RFA (radio frequency activation) specific activation logic; protected memory to support security requirements; power outputs to manage an external activation switch; and connectors for an external antenna. Of course, these enhancements come at an added cost. Altogether, they add about 20 percent to the cost of an RFID tag.
Though video games and DVDs are an obvious application, the technology could be used to secure shipments of a wide range of electronics, says Frank LoVerme, senior vice president of business development at Kestrel. He says the system would work for anything that carries a power switch, including television sets, printers, and video cameras. Many of those items are now manufactured in China and other overseas locations, which holds down costs but increases their exposure to theft and pilferage. "Consumer goods that are manufactured in China are at risk of theft every step of the way along the supply chain," says LoVerme, who adds that the cost of insuring these items can be prohibitive.
LoVerme says that radio-frequency activation technology offers other potential advantages as well. For example, by minimizing the threat of pilferage, the technology would allow manufacturers to simplify packaging and eliminate waste. In addition, it would allow products to be displayed openly, rather than under lock and key, in venues like grocery stores, which would encourage more impulse buys.
Kestrel is in the process of recruiting retailers and consumer electronics distributors in the United States and Europe for a pilot program that will get under way early next year. A major U.S. grocery store chain has already agreed to test the technology, and Kestrel says it's close to reaching agreement with a big electronics retailer to participate in the project.
Many happier returns
Potential applications for the RFA technology aren't limited to security. The technology also holds great promise for slashing product return costs, particularly for DVD producers, according to LoVerme.
For DVD makers, reverse logistics costs can be an enormous financial drain—the cost to return a single DVD can exceed $1, which is more than it costs to make it. And with return rates on new releases running as high as 30 percent at big box retailers, the expenses mount up quickly. There's little chance manufacturers will recoup those expenses—studios acknowledge that they end up destroying about half the returns.
RFA technology could eliminate a step in the returns process by killing the release at the retail site. That would allow it to be shipped directly to a materials recycler, instead of going back to the manufacturer before being sent on to the recycler. Streamlining the process would reduce manufacturers' costs and spare retailers the headaches of securing the products in their DCs until they can be returned. There's another potential advantage as well. Theft in the returns channel tends to be high, often leading to disputes between retailers and manufacturers when they go to settle their accounts. RFA technology could eliminate that problem, too.
The technology could also be used to increase retail sales without increasing logistics costs. For example, when a new movie is released on DVD, it may be bundled with a downloadable version of the movie's soundtrack, which is not part of the original DVD purchase. When the consumer takes the movie home, he or she could then use a near-field communications-enabled cell phone to authenticate the DVD to gain access to a restricted music download site, where the soundtrack can be purchased for a specific fee. The retailer gets a percentage of the sale from the download—with no added logistics costs. Kestrel's network tracks and limits uses of the soundtracks'"rights certificates" and reconciles the number of uses per licensor for settlement.
User beware
While all of this might sound like science fiction, Kestrel executives say the technology is just around the corner. In fact, they plan to follow the retail pilots with a commercial rollout late next year.
Though he's careful to stress that the technology is still in the early stages and has yet to be thoroughly tested, LoVerme reports that it is generating a lot of excitement. "Everybody wants to shake out the system and see what the details are," he says. "The attraction for some suppliers is to get in on the ground floor and [help influence the technology's development] as well as get a head start on the competition as far as merchandising opportunities."
Security experts, however, advise shippers to use caution when evaluating new technologies designed to enhance security.
Barry Brandman, president of Danbee Investigations, a Midland Park, N.J., firm that provides investigative, loss prevention, and security consulting services, says that his company endorses the use of technology in security applications, but warns users that many technologies are over-hyped in terms of applications and reliability.
"While I can safely say we do support and utilize a good deal of security technology, at the same time, the old expression of caveat emptor is extremely relevant," he says. "There are a certain percentage of providers introducing new technologies as a silver bullet, but no silver bullet exists. If it did, everybody would have it in their pocket."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."