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."
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."