In November, my company received a phone call from a law firm asking about my availability as an expert witness. The case involved cargo security—a loss of both trailer and contents. The issue was quite simple. If container security systems were available at the time of the loss, and none was used, was there a liability issue? In other words, does the concept of “a reasonable standard of care” mean that negligence could be proven if container systems were reasonably available but not employed, especially for high-valued shipments? In the private sector, a negligence judgment could send shivers up the spines of carriers and shippers alike. It could imperil the promise of greater supply chain efficiencies.

These days, there are more and more of what are called “smart containers” —the electronic tracking and reporting systems and infrastructure, and of course the boxes themselves. The Homeland Security Research Group has estimated that revenues in the overall container security market will increase from less than $1 billion in 2007 to more than $4 billion in 2012.

Most supply chain executives understand that smart containers can detect something, but little more is known or appreciated. In fact, not all smart containers have the same levels of intelligence. Basically, a smart box senses and reports. The smartest type tells who supervised its stuffing: what's in it, where it's leaving from and where it's going, who's carrying it, where it is at any given time, where it is but shouldn't be, and whether an authorized person opens it at destination. It will also signal any unauthorized access en-route and say where that access took place. The dumbest container usually can tell you if its doors were opened en route.

So far, there are varying claims of benefits to the private sector for using smart containers and their associated technologies and systems. A recent study from Stanford University points to quantifiable benefits such as a 50 percent increase in access to supply chain data, a 38 percent drop in theft and similar losses, a 14 percent cut in excess inventory, and 29 percent reductions in overall transit times.¹ Consulting firm BearingPoint has calculated benefits of up to $700 per container per move while the U.S. Congressional Budget Office has noted savings of 0.8 percent of the value of a smart container's contents.

But the business benefits are only part of what smart containers can do. They also offer enormous potential to improve national security worldwide. Although sensing and reporting technologies can do a fine job of tracking a container's physical location and whether it has been broken into or not, they cannot reliably determine whether, for example, the cargo includes enriched uranium or biochemical weapons.

The challenge for supply chain managers is to divide the two objectives—supply chain efficiency and national security—and to set expectations accordingly. In this article, I certainly want to add to the understanding of what a smart container is by explaining what it detects, how it detects, what it does with what it detects, and how it “knows” when to begin and end working. But I also want to demonstrate why the U.S. government must provide more tangible incentives if the private sector is to be expected to fund smart container investments that will yield more than greater supply chain visibility and faster shipment transit times.

Register to download this article (PDF).