The global supply chain is indeed a chain, a chain made up of manufacturers, distribution centers, carriers, terminal operators, and other entities, each of which is a critical link in the chain. Although we can deploy technical solutions that improve the strength and efficiency of each link in the chain, it is far harder to create and deploy an end-to-end supply chain solution. Why? Because no one controls the entire supply chain. No one controls the entire intermodal delivery system from a manufacturer in Asia to a retailer in Arkansas. While there have been attempts to create an end-to-end solution, these solutions have come up short because there are far too many distinct, disconnected nodes on the supply chain network for a single entity to manage. Attempts to command an overall solution are destined for failure as surely as the last century’s Soviet modeled command economies failed to keep up with the growth in the open capitalist societies of the West.

So what can succeed in this environment? What has already proven successful: solutions that improve individual links in the supply chain. Through the course of natural evolution, the efficient links will connect, thus providing the best and most cost-efficient service for the end customer.

Some ventures have proposed business models in which the shipper is asked to pay shipment status fees to the supply chain visibility supplier. While the improved visibility may be beneficial, this model places a new entity between the shipper and the carrier. Carriers are highly unlikely to welcome the presence of an intermediary between them and their customer. On the other hand, they will welcome the opportunity to route their goods through low-cost, efficient terminals and logistics facilities. We can predict which facilities the carriers will choose simply by looking at which ones are embracing open business models using open technology standards.

Open models, open opportunities

To predict the future winners in today’s intermodal business, a brief look at the past is instructive. The ISO intermodal shipping container, with its standard dimensions and standard corner castings, is the most visible manifestation of the benefits of an open model. It has engendered an entire ecosystem involving more efficient container-handling systems at marine terminals, larger and more efficient container ships, and double-stack trains-and this shipping ecosystem developed without a government entity or large multinational corporation commanding its creation.

The emergence of this container routing, switching, and transport system has often been compared with the more ethereal world of the Internet, with its efficient routers, switches, and high-capacity fiber spanning the globe. No one commanded the Internet’s creation. Yes, the Defense Advanced Research Projects Agency (DARPA) created the underlying technologies and architecture, but DARPA was in no position to forcibly deploy its creations. DARPA didn’t found Cisco Systems or Google; and Malcom McLean, creator of the intermodal container, didn’t create Hutchisons’ global port network or Wal-Mart’s highly efficient distribution business that cleverly disguises itself as a retailer. Cisco, Google, Hutchisons, and Wal-Mart are evolutionary steps in their respective industries.

Technological developments in the shipping industry on the U.S. West Coast offer a glimpse at the recent evolution of the supply chain. One technology, active radio frequency identification (RFID), is rapidly being adopted by marine terminal operators, transload operators, and distribution centers.

RFID reaps rewards

The California Truckers Association recently named global container shipping line APL’s Global Gateway South terminal the fastest and best overall marine terminal at the ports of Los Angeles and Long Beach-the nation’s busiest ocean terminal for global trade. Transferring freight to the trucker as quickly as possible clearly improves supply chain operations. APL improved its freight-transfer velocity by deploying WhereNet’s active RFID real-time tracking and management system in its Global Gateway South terminal. The automated system replaced an error-prone manual system that had an inherent delay of 4 to 12 hours before a container’s location was spotted at the terminal. The real-time tracking system reduced spotting time by a factor of roughly 100 and produced a commensurate increase in the terminal’s freight-transfer velocity and capacity. The increased capacity has enabled APL to meet the increased container demand without building new berths or installing new container-handling equipment.

Another terminal, APM Terminal’s Pier 400 in Los Angeles, is in the process of implementing APS Technology’s optical character recognition (OCR) system to automatically capture the container ID; a GPS system from Sattel to monitor the stacking of the containers in the yard; and WhereNet’s active RFID tag system to accelerate the process of transporting containers traveling to and from the terminal gates via trucks. Pier 400 was able to meet the demands of last year’s peak season without congestion, and is implementing this new hybrid system to comfortably meet this year’s peak season.

In the middle of the landside supply chain, NYK Logistics’ transload operation in Long Beach, California, has deployed WhereNet’s active RFID solution to manage its yard operations. Previously, NYK Logistics had dispatch operators decide where to park trailers and containers in the yard and at the loading docks; although instructions would be dispatched, there was no validation of the resulting move or any real-time measurement of current location status. With its active RFID tracking solution, NYK Logistics increased daily throughput by 30 percent, and gate personnel and yard truck productivity by 50 percent. Like APL, NYK Logistics also reduced the amount of time drivers spend on site.

Doing what comes naturally

These improvements at APL, APM Terminals, and NYK Logistics were the result of individual companies, each operating separate nodes on the supply chain, independently taking steps to improve their efficiency. The natural next step is linking these nodes together.

At the beginning of 2006, active RFID tags from WhereNet were installed on the drayage trucks moving freight between these nodes. PierPASS, a not-for-profit organization created by the marine terminal operators to reduce congestion and improve air quality around the Ports of Los Angeles and Long Beach, instituted a night gate operation to spread out the truck traffic that was clogging the public roads during the day. As part of this transition to night gate operations, PierPASS decided to install active RFID tags from WhereNet on up to 10,000 drayage trucks. eModal, a software firm that provides a Web-based truck visibility service linking multiple container terminals, was chosen to implement the gate appointment system for PierPASS. Using an active RFID tag for each truck was a natural selection since the tags require no manual intervention by the trucker or by the gate operator. Additionally, the active RFID tags can be tracked by the terminals and transload operations that had previously deployed the tracking infrastructure from WhereNet.

APL, APM Terminals, and NYK Logistics are just three examples of companies at the leading edge of what is evolving into a sophisticated supply chain network. This evolution is proceeding without any central command and control: Adam Smith would be proud to see such a large “invisible hand” guiding today’s global supply chain.

The recent integration of supply chain solutions in the Los Angeles basin is just the start of a global integration driven by market forces. The influence of these market forces is far larger than the power of the largest multinational corporation, the largest ocean carrier, and even the largest defense contractor. In the end, the question is: Will the global supply chain evolve into its optimal configuration or will it be intelligently designed? I’m betting on Darwin.