The complicated world of extended, global supply chains in the consumer packaged goods (CPG) industry gives rise to security concerns about shipments that travel thousands of miles and are handled by many people and organizations, often relying on multiple modes of transportation.
With both incoming ingredients and materials and outgoing finished product at risk, CPG companies not only want to protect their brands and customers, they also must comply with an ever-growing list of regulations from around the world aimed at preventing theft, diversion and terror tampering of goods crossing their borders.
The United States' regulations alone are cumbersome, including port security initiatives, the U.S. Container Security Initiative to target and prescreen incoming cargo containers before they leave certain ports, country of origin labeling mandates, tariff requirements, prohibited party lists and record keeping and facility registration requirements related to the Public Health Security and Bioterrorism Preparedness and Response Act of 2002. The latter includes rules requiring most food suppliers shipping product to the United States to register with the U.S. Food and Drug Administration and maintain records related to sources and recipients, and requires prior notice for incoming shipments. Generally, this data must be submitted electronically.
In fact, advanced electronic information and "smart" shipping containers equipped with radio frequency identification (RFID), or other condition sensing/identification technology, are two pillars described in a document being developed by the World Customs Organization (Brussels, Belgium) called the "Framework of Standards to Secure and Facilitate Global Trade."
Smart shipping containers also would be required under the Intermodel Shipping Container Security Act currently being considered by the U.S. Senate's Committee on Commerce, Science and Transportation. The bill specifies that "beginning with calendar year 2007, no less than 50% of all ocean-borne shipping containers entering the United States during any calendar year shall incorporate 'Smart Box' or equivalent technology." It also calls for the development of international standards for smart containers, implementation of an integrated tracking and technology system and an increase in the number of containers that are physically inspected, monitored and tracked within the United States.
VISIBILITY ENABLES SECURITY
Shipment visibility is considered key to protecting products and the population. "The more real-time information you have in the event of a bioterrorist attack, the better," says Kevin McNelly, vice president of solution management, at Manugistics Group Inc. (Rockville, MD), a supplier of supply chain, collaboration, visibility and performance management products. "If you know where the affected product is, it's easier to segregate it," he explains. Sharing information in real time also mitigates risk. "The sooner you know there?s a problem, the faster you can deal with it," he adds.
CPG manufacturers can gather visibility information from a variety of sources including product lifecycle management, supply chain execution and global trade management solutions. Most CPG companies will need more than one of these enterprise applications to manage the incredible level of detail involved with sourcing and shipping globally, simplifying compliance with regulatory requirements and communicating with ports and customs agencies that have installed systems to receive and transmit shipping documents electronically.
On the front lines, smart containers like the Tamper Evident Secure Container (TESC), developed by GE Security's Monitored Solutions Group (Washington, DC) and China International Marine Containers Group Co. (Shenzhen, China), integrate GE's CommerceGuard container security device into an enhanced maritime shipping container. In a recent test, more than 15 security breach attempts were made and successfully detected during travels in mainland China, Hong Kong and the United States.
The TESC combines improved door locking mechanisms and door seal placement and tamper-proof hinges with an electronic integrated Container Security Device (iCSD). This device allows the shipper to arm the container using a unique, encrypted code after it is loaded and sealed with a traditional bolt seal. The RFID-based system enables the iCSD to tell logistics and customs officials where the container is located, when it arrived and if the container was opened en route.
Another container security system option for CPG companies, the Movement Tracking System from Comtech Mobile Datacom Corp. (Melville, NY), continually tracks and manages both transport vehicles and the cargo on board.
Originally developed for the U.S. Army, but scheduled to be available to commercial customers in June 2005, the Movement Tracking System integrates a SMR-650 active RFID reader from Savi Technology (Sunnyvale, CA) with Comtech's MT-2012 mobile satellite transceiver and GPS location and satellite communications system. The SMR-650 reader collects information from active 433.92 MHz read/write tags, also from Savi, which are affixed to the shipping containers. The MT-2012 mobile satellite transceiver uploads this data, which includes GPS location, via an embedded satellite modem to a satellite system that communicates with the customer's server and software.
SAFETY IN REAL TIME
The Movement Tracking System also provides drivers with near real-time messaging capability so they can report location, environmental conditions and detours from scheduled routes, and logistics personnel can redirect a shipment to a new destination if necessary. "This packaged offering ... brings a new level of in-transit visibility between supply chain chokepoints, providing end-to-end visibility from the shipment's origin to its ultimate destination, while also enabling users to dynamically manage their shipments in support of the customer," says David Stephens, senior vice president, public sector, at Savi.
Savi offers a number of active RFID products to address shipping container security needs including the Savi Tag ST-645 electronic bolt seal and the Savi Sentinel sensor seal. It also supplies RFID readers, site managers that collect, filter, validate and forward reader data and Web-enabled Transportation Security System (TSS) software that monitors the real-time location, status and security of shipments. The TSS is installed at a number of ports worldwide with the most recent adopter being the Port of Busan, South Korea, the world's third largest container port.
The TSS can work in conjunction with systems like the GTN Portal from GT Nexus Inc. (Alameda, CA), which streamlines transactions with ocean shipping lines via a digital platform, and is used by most ocean carriers as well as various ports including Antwerp, Belgium, and Valencia, Spain. For CPG companies, the GTN Portal automates bookings and then generates bills of lading and manifests electronically. It also makes it easy for shippers and forwarders to check on shipment status.
DESIGNING FOR SECURITY
Ideally, protecting CPG shipments starts during the design process. In fact, product lifecycle management (PLM) tools based on service-oriented architectures allow a brand owner to tightly integrate product development with its supply chain. As a result, PLM software, like the rules-based Optiva V from Formation Systems Inc. (Southborough, MA), can help identify and qualify acceptable suppliers, and define any testing regimen needed to confirm the quality/purity of incoming products or ingredients.
Testing is essential, says Steven Phelan, senior vice president and founder of Formation Systems, because it's the only way to guarantee that data provided by the supplier is accurate. "One of the holes that remain [in product security] is that people tend to trust the data they see on computers," Phelan notes. "Often, there's no basis for that confidence," he adds. As a result, he predicts major increases in testing budgets to verify the quality and purity of incoming shipments. PLM programs also can provide an early warning if an ingredient is not acceptable in a certain country or must be listed on the label when present above certain levels. This allows CPG makers to formulate products for their destination, if necessary, and ensures labels are complete and accurate.
Once a shipment leaves the CPG manufacturer's dock, supply chain execution programs can help provide the visibility needed to track its movement and provide alerts if unexpected events occur. Thus, security investments can drive efficiency into the supply chain, reduce costs and enhance revenue, according to "Prospering in a Secure Economy," a report published in September 2004 by Deloitte Touche Tomatsu (New York). In fact, the study cites a private-public supply chain initiative that generated cost savings of up to $462 per shipping container. Enhanced visibility also tends to reduce inventory, which, in turn, boosts revenues, the report notes.
One of the most important tools to provide CPG shipment visibility and ensure compliance with regulatory requirements are global trade management (GTM) solutions from companies like NextLinx Corp. (Rockville, MD), Vastera Inc. (Dulles, VA), SSA Global (Chicago), TradeBeam Holdings Inc. (San Mateo, CA) and Kewill's TradePoint Systems LLC (Nashua, NH). These programs typically provide pre-validated entry data for incoming shipments and automatic shipping documentation, as well as information about customs duties and denied party lists. It also provides an audit trail of import and export activities.
GTM PLAYS A ROLE
An indication of how significant GTM has become is the recent purchase of Vastera by JPMorgan Chase (New York) so that it can provide services related to both the financial and information aspects of global commerce. In the same vein, TradeBeam's acquisitions of Qiva and Open Harbor in 2004 have strengthened its ability to provide a broad, integrated suite of products capable of streamlining the entire global trade process -- from compliance to inventory management, to supply chain event management and financial settlement.
A new version of its Supply Chain Event Management application provides customers with greater visibility on a central dashboard of both the physical and financial supply chains by tying invoices, letters of credit and trade finance requests to orders and transportation documents such as transport orders, shipping notifications and physical supply chain events.
"CPG manufacturers need to continue to drive toward a synchronized supply chain," says McNelly of Manugistics. "We've done a good job at moving product; we need to get better at moving information," he concludes.