Thinking Inside the Box: Shipping Containers Get 'Smart'

Daniel Machalaba Jan 15, 2004

GEORGE MIELING typically knows little about the status of his cargo shipments during their three-week transit to the U.S. from Europe. But a "smart" cargo container could change that.

In a demonstration of such a container, Mr. Mieling, president of the U.S. division of Jungbunzlauer Inc., a Swiss maker of food additives, learned that his shipment of citric acid was sitting in the port of Montreal -- and hadn't moved in three days. With that information, derived from a satellite tracking and communications device on the container, he called his shipping broker to get the cargo moving to its final destination in New Jersey.

A smart container "gives the owner of the cargo a lot more leverage to expedite the shipment if it runs late," Mr. Mieling says.

The demonstration was put on by NaviTag Technologies Inc., a technology start-up in North Quincy, Mass., and was part of an effort that could lead to the most radical change in the common cargo container since its invention more than 40 years ago. Since then, cargo containers -- now 17 million world- wide -- have become the workhorse of international trade, carrying toys, electronics and apparel made in the U.S. and overseas. But the metal boxes themselves have largely remained just that: low-tech, metal boxes.

That's beginning to change as technology companies such as NaviTag design cargo containers capable of knowing and communicating their location, content and condition.

In its simplest form, a smart container would include the means of detecting whether someone has broken into a sealed container and would have the ability to communicate that information to a shipper or receiver, via satellite or radio. Some advocates of the technology also envision equipping cargo boxes with an array of sensors to monitor temperature, air pressure, motion, chemicals, biological agents or radiation.

A smart container "could say, 'Hey, someone has taken me to a place off my route, and I was there for two days. Is that OK?' " says Blair LaCorte, an executive vice president of Savi Technology Inc. The Sunnyvale, Calif., company has already set up a system using radio- frequency identification technology to track about 25,000 containers a day for the Department of Defense. Such systems include a radio transmitter and receiver on the container, which is linked to a central data system. Now Savi is bringing that approach to commercial cargo.

Driving the development of such containers is the fear that terrorists may turn any one of the 12 million cargo boxes entering the U.S. each year into a delivery system for explosives, chemicals or nuclear bombs. This possibility was highlighted by the government's decision last month raising the national threat alert level.

Much of the public attention focused on cargo airplanes, but containers on ships or trucks represent a much larger potential terrorist threat, according to security experts, because of the sheer volume of goods they carry.

Whatever the conveyance, not everyone thinks smart boxes are a clever idea. John Hyde, security director of the U.S. unit of A.P. Moller-Maersk Group in Copenhagen, the largest container-shipping company in the world, says the devices could send out false alerts, leading to costly shutdowns of terminals.

"It could mean a lot of expense to us and not being able to get the cargo to customers on a timely basis," he says.

There is also the cost of the technology itself. Chelsea White III, executive director of the Logistics Institute at Georgia Institute of Technology in Atlanta, says basic smart features, such as intrusion alerts and communications capabilities, could add $50 to $150 to the $1,800 cost of a 40-foot container made in China; a more sophisticated setup, including an array of sensors, could add $600 to $800 to the cost.

Robert Bonner, commissioner of the U.S. Bureau of Customs and Border Protection, says government officials are calling for minimum standards in smart-box technology. Among them: a high-strength bolt to secure a container's doors (some doors currently are sealed with flimsy plastic strips) and a device to detect if the box has been opened by unauthorized people. "We're not asking it to have genius IQ, but we want it smart and secure enough," Mr. Bonner says.

For shippers, the carrot would be that containers with internal systems would be able to move through a "green lane" at customs, avoiding further checks.

Advocates say smart containers could lead to more timely and reliable movement of goods. That, in turn, could allow manufacturers and retailers to reduce inventory levels and related carrying costs.

Andrew Webster, European loss-prevention manager for the TT Club, the mutual-insurance provider for the international container industry, says that as many as 5% of container movements in the world develop problems during transit. They are misrouted, stolen, damaged or excessively delayed, and most of the problems stem from human error or crime. "People make mistakes, don't care or are devious," Mr. Webster says.

Boeing Co., the Chicago-based aerospace giant, is opting for motion- detection sensors inside containers and developing radio-frequency identification tags embedded in paper strips to track them. "It's a major effort for us," says Ron Maehl, vice president of homeland security for Boeing's space and defense unit.

SkyBitz Inc., a small technology company in Dulles, Va., proposes using satellite for most of its communications. But it also is experimenting with radio communications for times when containers don't have a clear line of sight to a satellite.

If smart containers move ahead, most likely their costs would be shared by participants in the shipping chain and passed on to consumers. In any case, smart-box advocates think potential benefits could outweigh higher costs. Tom Reinebach, a former senior vice president of Toys "R" Us, says smart containers could update their whereabouts and avoid delays.

"The dumbest thing that happens to retailers is the container comes three or four thousand miles, and now it is sitting two or three miles from the distribution center," Mr. Reinebach says. The people at the distribution center "don't yet realize it is there. A smart container is going to send a signal showing the network it is there."