From crude iron ore to food products and chemicals, Mitsui, a Japanese trading house based in Los Angeles, buys and sells products globally every day, which means tracking a myriad of shipments for customers in locations worldwide. When you’re running this kind of a mega-worldwide business, where do you go for supply chain management?
Given such a vast working terrain to manage, Mitsui turned to Savi Technology of Sunnvyale, California, a major contractor in the prototype RFID work being undertaken by the U.S. Department of Defense. Mitsui became one of the first commercial clients to piggy-back on Savi’s DoD work, signing up last fall to participate in the first commercial test of the SaviTrak (tm) information services, which evolved out of earlier defense technology.
The pilot involved tracking consumer product goods for a Japanese supplier of major U.S. retailers from a factory in China to a distribution center in Southern California. The program deployed several types of active RFID tags, including the a Container Security Tag, which clamps onto the container’s door and communicates the container’s identification, contents, location, security status and interior environmental conditions to the network, say Savi officials.
“The interesting part and challenge was how to integrate all RFID technology into one single platform capable of tying in multiple sources of information—in this case the passive and active tag,” according to Yoshibumi Kotsuka, Mitsui Director of Logistics. “We read our containers at the factory site, the Chinese port, at the U.S. West Coast port and a read at the customer’s distribution center and had a 100 percent read ratio.”
The pilot was a success and Mitsui is now considering full-time use of the Savi tags and network.

The Savi/Mitsui collaboration is just one example of how technology designed for either defense, or Homeland Security purposes, is starting to trickle onto the marketplace for commercial use. Savi has recently released its SmartChain(r) solutions for commercial uses in the retail, chemical, asset management and ocean cargo management and security markets. All these solutions have evolved from solutions previously restricted to military logistics experts who wanted to manage their transport conveyances and consignments in real-time as they passed through U.S. DoD’s RFID networks and then onto networks of allied defense forces.
This spring, Starbucks Corp. announced it was installing a security device in all its containers used to ship coffee beans from Guatemala to the U.S. using technology developed by GE Security, based in Bradenton, Florida. A Starbucks spokesman said the coffee house giant was not only intent on protecting the “safety and security of customers, partners (employees), communities and countries of origin throughout the world,” but being proactive in “reducing the risk of suspending container traffic while contributing to real-time management and quality assurance.”
The device in question is GE’s CommerceGuard. About the size of a stapler, it is “attached in seconds” inside the container and reportedly detects unauthorized opening and tampering of the container door. GE CommerceGuard officials say the device has a 30-meter range and is based on the internationally-accepted Blue Tooth standard for wireless transmission with a reported batter life of eight to ten years. Security may be everybody’s top priority but return on investment and increased supply chain efficiency are also major concerns for Savi and GE customers. Lani Fritts, Chief Operating Officer (COO) of Savi Networks, says the fact that RFID security-related tracking devices also provide shipment visibility throughout a global supply chain is a major sell point.
“Visibility is about enabling decisions, especially getting data to the decision-maker downstream so they can act and guarantee estimated times of arrival for a customer’s shipment,” says Fritts. In selected cases, the customer may even be able to by-pass the customary sorting at a distribution and have goods shipped straight from the docks to the final destination, eliminating days of wasted time, he says.

From DoD to NATO

Savi’s work on global supply chain tracking for the DoD dates back to 1994 when it won military contracts to create the In-Transit Visibility system, a global electronic network that allows for tracking of goods and assets worldwide. This network aims to provide visibility “to one of the most complex and demanding supply chains in existence,” says Jacquemard, operating out of 2,000 locations in over 50 countries and tracks 35,000 shipments daily. Since the inception of the program, Savi reports that DoD has tracked over 1.5 million RFID-tagged shipments using the company’s technology. (One measure of success, DoD funding of Savi product and services was recently increased from $207.9 million to $424.5 million while extending the ordering period for the company’s active RFID products.
Jacquemard says the DoD/Savi collaboration’s main intent “has always been to provide visibility to the supply chain, which is the tracking of assets,” which can be anything conveyed by pallet whether moved by truck or rail or a container. The focus is on active, battery-powered RFID tags, which have programmable memory of up to 128,000 bytes and can be read from up to 100 meters, he explains. (The other model is passive tags, whose vendors include companies like Intermec and Symbol, which lack any power source and are designed to replace bar codes.) Lt. Col. Beth Rowley, product manager for the U.S. Army’s Joint-Automatic Identification Technology (PM J-AIT) in Newington, Virgina—which falls under the auspices of the Program Executive Office for Enterprise Information Systems (PEO EIS)—sees plenty of commercial applications for the RFID tags and networks that have evolved since Desert Storm 15 yeas ago when stockpiles of containers sat in the desert and could not be identified without being unpacked. Not long afterward—lesson learned—the Army Central Command mandated that all shipments to Southwest Asia would bear active RFID tags. The whole system, explains Col. Rowley, was developed “between Army people in Germany and out of the Logistics Transportation Agency, who did all the research and development.” The Army then went out to bid the building of the system in the mid-1990s and Savi won the contract.
“One reason the Army chose to use an active tag, which has memory, is because we’re not always in places with reliable communications. Having the manifest in the memory of the tag means a soldier can read it without going to a data base,” said Rowley. Although commercial operations don’t always have that level of constraint, she agrees that this sort of system would prove beneficial, particularly as commercial supply chains snake around the world.
Her department is also looking at having global positioning capabilities added to the tags, “which would obviously help with tracking pallets and containers,” she says. “The active tag that Savi developed is a good example of taking existing technology and evolving it for soldiers.”
Jacquemard says the Army network has worked so well that there is now a DoD policy as of July 2004 that mandates all goods moving outside the U.S. through DoD transportation system “must have an active tag on all pallets and containers.” A major push is to add additional sensors, including those for temperature, humidity, shock and light. The new tags are being tested and could be available for Army use within a few months, according to Rowley. No one at NATO was available for comment.

And back to commercial use

The transition from military to commercial applications is in the early stages but has already acquired preliminary momentum. The leading edge is security concern, but the reasons go much further. Speaking to the Senate Committee on Homeland Security at the end of March, Stephen Flynn of the Council of Foreign Relations, underscored a “powerful commercial case” for developing the means to track and verify the status of containers, which “provides benefits that go beyond security.” Benefits he cited included growing a larger supplier base, reducing overhead costs through reduced inventories, and potentially reduced insurance costs.
Vendors such as Savi and GE Security are finding Flynn’s arguments resonating with their commercial customers. Savi officials are finding plenty of commercial interest in their RFID solutions and the network that backs them, especially when combined with a variety of sensors of the sort DoD is seeking for light, temperature, and shock. GE Security reports that is has new partners in Siemens’ Building Technologies Group, which has exclusive marketing and distribution rights in Europe, and Japan’s Mitsubishi Corp., which is a minority shareholder in CommerceGuard, will operate in Japan and elsewhere in Asia as GE CommerceGuard.
Savi’s Fritts cites the example of a customer who has lost multi-millions due to large-scale product damage while in transit. The manufacturer is seeking a combination of shock sensors embedded in RFID tags so they can monitor problems during transit. “We have another customer losing millions dollars to what may be either theft or loss, but they can’t be certain. They want more information about what happens as goods leave the dock so they can measure where the loss or theft is happening,” he said.
Other customers, he says, are seeking real-time locating system (RTLS) to locate specific containers or pallets in the yard or in a warehouse. This technology “requires power for the long range. If you want to cover the nodal supply, as a factory being a node in your chain and the port another node, you want long-range readers like those tested in the government’s Operation Safe Commerce pilot in Washington State.”
In building out a commercial RFID network similar to cell phone networks, Savi’s Jacquemard says, “The real value is in the service model, which in our case is the information. The more people who use the network, the more valuable it becomes to everyone using it. The best security and visibility is end-to-end. For the military, it’s factory to foxhole, and the key savings is in lives. For the commercial world, it’s the origin (factory) to final destination (store, warehouse, DC, etc. . .), and the key savings is in dollars.”
The technology flow isn’t entirely one-way, it also moves from the private sector to defense. The DoD’s passive tag mandate actually developed when Wal-Mart mandated its suppliers—many of whom also supply DoD—use the passive tags. This process has been aided by national and international standards converging so that manufacturers and shippers can use one tag model that works everywhere.
International standards for the commercial use of active RFID technologies at various frequencies exists; the next threshold is to establish uniform rules for specific applications such as e-seals on containers for security purposes. In this case, the military has a distinct advantage. As Fritts explains, the DoD “can operate essentially anywhere on the frequency they use because of their size and mission, and therefore it has created a de facto standard worldwide.”

The costs

GE Security reports that CommerceGuard has an “expected cost of $20 per end-to-end container shipment” for the whole package, which includes the device, the readers, networking and access to the network.” A final price depends on the number of shipments the customer generates.
Savi offers an opening rate of $15 to $20 per container. “The pricing depends a lot on the size of the company and volumes of containers the customer is moving,” adds Fritts. Savi also offers a range of services—what Fritts calls “nested visibility”—so the customer can build its own package. Of course, each has own costs attached. For example, if a customer wants additional sensors, alarms and alerts he said the monthly bill can add up “to $100 or more” per end-to-end shipment for very high functional requirements.
Kotsuka at Mitsui wouldn’t talk specifics but he says they paid a “monthly user fee subscription” to use Savi’s network and platform. He says they expect up-front costs, but anticipates savings down the line “since we will have better control of our supply chain and will be able to predict a tampering or delay. This could lower our insurance and help us avoid liabilities,” he says.
Jacquemard echoes Kotsuka’s assertions. “People who manage supply chains in the commercial world understand the value of supply chain visibility and that visibility is an enormous cost factor. For shippers, savings can amount to over $1,100 per container move.” wt

Sidebar: How the DoD System Works

“When the Defense Logistics Agency (DLA) puts together shipments of pallets or containers going to Southwest Asia, they place an active tag on the asset. Information from the container is uploaded into servers, which is then available to whomever needs it to track the shipment. As the pallets move through the defense transportation system—for example, a warehouse in Pennsylvania to Dover, Delaware—the tag is read at strategic locations along the route. A read is taken again before the shipment leaves Dover on a flight or at Charleston, S.C. by ship. Estimated times of arrival are then transmitted from the final location read to soldiers receiving the shipment.”

—Lt. Col. Beth Rowley, product manager for the U.S. Army’s Joint-Automatic Identification Technology (PM J-AIT)