Improved Cargo Security Offers Financial Incentives for Importers

Feb. 1, 2004
McLean, Va.-BearingPoint, Inc. (NYSE:BE), one of the world's largest business consulting and systems integration firms, announced today the results of

McLean, Va.-BearingPoint, Inc. (NYSE:BE), one of the world's largest business consulting and systems integration firms, announced today the results of a demonstration program, which found that using Radio Frequency Identification (RFID) sensors to improve cargo security also resulted in dramatic savings for importers.

The program involved containers shipped from the port of Laem Chabang, Thailand to Seattle, Washington during September and October of 2003. BearingPoint's cost-benefit analysis of the demonstration found that companies importing goods into the United States could realize impressive financial benefits by utilizing RFID technology to secure, track, and manage their supply chains. According to the report, benefits include:

* Improved visibility resulting in better predictability and timeliness of cargo shipments;

* Reduced costs related to emerging U.S. Custom's trade security measures;

* Reduced safety stock and inventory carrying costs from improvements in trade compliance and in-transit visibility;

* Improved customer service to sales channels and re-sellers;

* Increased profits from improved in-stock product rates; and

* Reduced incidences and direct costs of theft and pilferage.

In addition, the report found that the financial benefits from the added security were dependent on the value of the goods being shipped. Adjusted conservatively for uncertainty and risk, there is an 80 percent probability that the benefits cited above will exceed $220 per container, according to the report. The report also predicted that these benefits would increase dramatically as system utilization grows and additional trade routes are added.

BearingPoint's Global Trade Management Practice conducted the analysis on behalf of the U.S. Trade and Development Agency, which funded the project. In response to the growing concern that terrorists might use cargo containers in an attack, the Asia-Pacific Economic Cooperation (APEC) launched a program in early 2002 to focus on Secure Trade in the APEC Region (STAR) and promote the efficient and secure movement of goods across borders. The first STAR initiative, STAR-BEST (Bangkok Laem Chabang Efficient and Secure Trade), served as a demonstration project that tested concepts and technologies for implementing a supply chain security system.

To demonstrate the trans-Pacific shipping program, the ports of Laem Chabang, Thailand and Seattle, Washington, served as the origin and destination points. The project affixed RFID sensor seals, also known as e-seals, to conventional bolt locks on standard 40-foot containers at the point of origin. The containers were then transported by truck or rail to Laem Chabang and loaded on ships destined for the United States. The containers were tracked throughout their route from Laem Chabang, through ports in Taiwan and Korea, and on to the Port of Seattle, using a real-time, Web-enabled software application developed by Savi Technology, the project's prime contractor.

After arriving at the Port of Seattle terminals, the containers were discharged from the ships and the e-seals checked before the containers left the premises. Next, they were sent to their final destination point where operators with hand-held computers verified the containers' origin and contents. Once verified, receivers used the hand-held computers to unlock the seals so the container contents could be removed.

"The Port of Seattle is optimistic about the findings of the report," said M. R. Dinsmore, Port of Seattle Chief Executive Officer. "We're familiar with RFID technology through our involvement with similar initiatives, such as Smart and Secure Tradelanes and Operation Safe Commerce. We think 'smart container' technologies can improve homeland security while enhancing the efficiency of global trade."

"This report helps to validate that real-time visibility solutions within a global network provide a direct link between improved supply chain security and economic value for shippers and importers," said Mark Weidick, vice president of Collaborative Network Services for Savi Technology, the solution provider for the STAR-BEST project. "The results found by BearingPoint also reinforce findings made by Stanford University in their recent analysis of a similar and even larger initiative with which Savi is involved, called Smart and Secure Tradelanes. Both reports indicate that advances in cargo security through smart containers simply make good business sense."

BearingPoint analyzed both empirical and anecdotal data pertaining to 30 cargo containers transported last summer, as well as additional data collected during prior testing involving more than 1,000 shipments. The containers held products shipped by two major manufacturers and a freight consolidator and included canned and frozen tuna, electronics, and other consumer goods.

Each year about 20,000 containers are shipped between the Laem Chabang and Seattle trade lane. Located southeast of Bangkok, Laem Chabang is Thailand's primary international port, handling more than three million outgoing containers per year, approximately 20 percent of which are exported to U.S. ports.

BearingPoint, Inc. (NYSE:BE) is one of the world's largest business consulting, systems integration and managed services firms serving Global 2000 companies, medium-sized businesses, government agencies and other organizations. For more information, visit the Company's website at .