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March 29, 2007 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Curing Transportation Infrastructure Woes Revisited

In a few weeks I’ll be joining Dr. John Langley again at the Georgia Tech Supply Chain Executive Forum, and the theme for the Spring gathering of this always excellent event is “Capacity and Infrastructure Issues Impacting Supply Chain Managers.”

That got me thinking about a piece we did back in 2005, which took a look at a promising new technology for increasing current transportation capacity and throughput (see Technologies to Watch: A Cure for Freight/Port Congestion?).

I thought an update of this story was in order. In summary, there has been limited real progress but some hopeful signs of late, and all told this is one of the more interesting supply chain stories I have run across.

To briefly recap, a company called SkyTech Transportation proposes use of a technology based on something called linear induction motors – vaguely like magnetic levitation, but with many advantages – to move containers and even entire trucks (yes, entire trucks) both above and below a set of rails, using the power of magnets to move the containers and vehicles along. You can get a more detailed view on this technology here: Linear-Induction Motor Technology for the Transportation industry.

The inventors claim the approach has a number of huge advantages for dealing with the transportation infrastructure problem. It primarily would use existing right-of-way by building the new tracks above existing rail lines. Once the infrastructure is built, the cost to operate and move containers is very inexpensive, just pennies per container-mile. It is very eco-friendly, which may in the end be the key (more on that below). It can provide an end-to-end solution, from the ship to any number of potential end points, and significantly improve container ship unloading times as a result. It gets trucks off the road. 

In following up on this story, I learned a few things I didn’t pick up back in 2005. It turns out that the original driver for this idea was none other than Malcolm McLean, the legendary founder of Sealand, and the man who “Reinvented Shipping.” For those who don’t know, McLean (who died in 2001) invented the shipping container and the modern container ship. As one book recently called it, the shipping container was “The Box that Changed the World.”

McLean understood he only made money when ships were moving, and he was frustrated by the time it took to load and unload ships even after his innovations in containerization. He somehow found a man by the name of George Scelzo, who was an expert in linear induction motor technology. With Scelzo’s engineering and McLean’s vision, they actually built a huge (room sized), working model in the 1970s of how this automation technology could work to move containers off the ships and all the way to the rail yards. It was computer controlled, and operated in SeaLand’s headquarters lobby for many years. It was designed for the port of in Elizabeth, NJ, at the time the busiest port in the U.S. and Sealand’s main base.

Scelzo says McLean was working with the port authority there, and is convinced that this type of automation, using this technology, would have happened in New York more than two decades ago. However, to raise capital McLean had earlier had sold Sealand to an arm of Reynolds Tobacco. He grew frustrated by the resulting bureaucracy, however, and left the company in 1977. Without him, the vision died. The model was crated up, and is believed to have been sent to Temple University, where if it isn’t in a landfill it is at least still in the crate.

Decades later, a man named Bruce Dahnke, who had run several trucking companies, was looking to solve the same infrastructure issues. He found Scelzo through his research on McLean’s idea, and then formed SkyTech (Scelzo continues separately to do linear induction motor work, including plans for initially launching the Space Shuttle or it successor using LIM technology, as well as launching planes off aircraft carriers.) Dahnke is lobbying in Washington DC, Sacramento and the Port of Long Beach some days, making presentations to high level groups on others, but after exhausting most of his savings from his management career chasing this dream, he also drives a truck at night to keep paying the bills.

So what’s the latest?

SkyTech went down some dead ends. They had hoped, as we wrote in 2005, to build a prototype of the technology moving a truck at the transportation center in Pueblo, CO, and had some of the funding required to do so. But they found that states and ports that might put some money up would only do so for projects in their own states, not in Colorado. SkyTech also had hopes for a pilot project from the rail terminals to the truck yards in Chicago, but that hasn’t gone very far, for a variety of reasons.

SkyTech is optimistic that California at least is going to do something relatively soon. There are 60,000 trucks per day and growing coming out of the port of Long Beach. Traffic congestion and pollution are huge concerns of residents, and while the delays seen in 2005 abated a bit last year, the long terms projections are still dire, so importers are also pressuring for a solution. California has been losing some container business to other ports.

As a result, California voters approved a $22 billion infrastructure bill last November. As always, that money will be spread around, and often on political considerations, but a lot also likely on merit. There are competing ideas and technologies, but the SkyTech approach seems to have the right stuff to me. What’s really helping now is the increasing emphasis on the environmental impact, which has grown even in just the last two years. Here, SkyTech has a very strong story, in addition to other advantages.

There are a number of studies going on in California. Something will happen, maybe even before the end of 2007. Dahnke says, as just one example, that using this technology, ships could be unloaded at a rate of less than one minute per container, versus about 6 minutes now with current crane technology.

Is Malcolm McLean’s vision of 30 years ago the answer to today’s infrastructure challenges? Maybe so.

What are your thoughts on transportation infrastructure generally, and the SkyTech approach specifically? Do any readers have experience with McLean’s original vision and model? What do you expect to happen in California? Let us know your thoughts.

Let us know your thoughts.


Dan Gilmore


Supply Chain 

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The RFID-Enabled WMS

How Warehouse Management Technology Must Change to Leverage the Potential of RFID in Distribution

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It was a great week on Wall Street last week for our supply chain and logistics stocks, as 20 of the 22 companies in our index were winners, with some booking substantial gains.

Oracle was especially hot, up 10%, followed by JB Hunt (7.6%) and Descartes Systems (7.5%).

See stock report.


This Week’s Supply Chain News Bites – Only from SCDigest

March 29 , 2007
RFID Suppliers Frustrated by Slow Growth of EPC Market, According to Bear Stearns

March 28 , 2007

Recent Spike in Oil Shows How Sensitive Prices are to Unpredictable Geo-Political Events

March 28 , 2007

Supply Chain Executives on the Move at SYSCO, CustomVault, and Chromcraft Revington

March 27 , 2007
Wal-Mart Evaluating Options in Possible Bid for the UK's J Sainsbury Chain


RFID News: How Low Can Chip Prices Go?

Will today's RFID chip makers want to be in a commodity market for basic EPC tags?

Wal-Mart Classifies Customers for Growth

In a move to spur growth, Wal-Mart segments its customers into three primary groups based on purchasing patterns


by Mike Loughrin

Let's Get Lean in 2007

New SCDigest Lean Expert Columnist Presents Lean Supply Chain Model, Asks for Reader Feedback for On-Going Program


by Dr. John Gattorna

The People Impact on Supply Chain Performance

Are We In Denial, or Just Don't Know?


Have a supply chain or logistics related questions you need answered?

Ask our panel of experts.

See our list of questions and answers - share your insight.

Featured Question and Answer: When does carton sortation in distribution make sense?


Q. What happened to Macolm McLean's SeaLand company?

A. Click to find the answer below


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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

We're now reallyl behind - be patient if your letter has not yet been published

We've had several people ask about letters stemming from our piece a few weeks ago on "Supply Chain Best Practice." We will be running a whole column on that in the next 1-2 weeks.

We received a huge amount of feedback from our various pieces in recent weeks on RFID, to some extent triggered by the negative story in the Wall Street Journal on Wal-Mart's RFID program, which in turn set of a number of re.sponses and counter responses. See RFID-EPC Success Requirements Revisited for a summary.

Many of the letters were of the short and sweet variety, basically saying our perspectives were correct. Everyone of these letters from consumer goods companies requested anonymity for the writers, which we accept. That actually includes our feedback of the week, from a supply chain manager at an apparel company, who says it's not until you get to item level that EPC can deliver value. We have several more good letterrs below.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week – EPC/RFID

I believe you fail to appreciate the difference between the current Wal-Mart RFID program and EPC. The current program is a pallet level WMS label and not true item level EPC. It is item level EPC where true gains will be seen and this is a long way in the future for many of the same reasons noted in your article.

My point is that it is not until EPC is item level that significant gains should be expected. It's really a slightly optimized bar code at the pallet/case level. We are shipping RFID to Wal-Mart, made the capital expenditures in printers and readers and are struggling to find ways to generate a return from our internal processes. ROI is insignificant - it's a compliance issue.

Only when EPC is at the item level will significant gains be made. Imagine rolling your cart through a reader and having your transaction completed - the labor savings and service improvementswould be very significant. Reduced stock outs from faster replenishment at the shelf level will increase sales. Perhaps overlooked, the shrinkage reductions alone could justify the investment. Rolling your cart through that reader would also register that CD inside your jacket. I have heard shrinkage estimates in the range of 5-10%. Factor that into Wal-Mart's numbers and the savings are quickly into the billions.

However much Wal-Mart is struggling at the moment, their initiative is the primary reason that RFID has progressed to the stage that it has - a stage we must get through to reach the ultimate goal.

Hope you understand our desire to remain anonymous.

Supply Chain Manager
Apparel Company
Name withheld by request

More on RFID :

I don’t know where some of these consumer goods manufacturers, like Campbell’s, claim to be finding all this ROI. It’s interesting, isn’t it, that no one wants to ever provide any real details?

If this is going to be ubiquitous, the value, if there really is some, is going to come out. What do the RFID supporters have to gain, a couple of months advantage?

The whole approach of Wal-Mart and the companies they line up to support their plans is just too shrouded in secrecy and obviously too political.

I don’t know if the Wal-Mart RFID story in the Wall Street Journal was totally right, but it sure seems more right than wrong from where we are sitting.

Supply Chain Manager
Consumer Goods Company
Name withheld by request

In large part, I'd concur with the Wall Street Journal article, particularly the quote from Mr. Donnan - "go slower".   There has been a perceptible slowdown in the market, accompanied by an equal slowdown in the hype.  While there's no scientific research on my part to back it up, I suspect the firms that have dabbled in the technology have primarily gotten out of the process and are on the bench waiting.  Those who dove head first into the technology have typically seen successful implementations, but the ROI for many of them is questionable. 

For many of those, it's not about supply chain savings, it's just about doing business.  One disconcerting trend we have seen are failed RFID implementations, which in the long run hurts the adoption of the technology.  In pretty much every failed case, there was no excuse, it was due to fundamental oversights made in the specification and implementation of the hardware, software and/or tags.

In the meantime, however, we are still seeing robust implementation and growth of RFID in the pharmaceutical and manufacturing arenas.  In those, the ROI is tangible, but is in the patient safety and product quality areas.

Bob Carver
HK Systems

I am not surprised and agree with the Wall Street article. As a solutions provider, I am finding it VERY difficult to provide anything more than “slap and ship” solutions to the Wal-Mart mandated suppliers. My company continues to implement traditional data capture technologies utilizing barcodes that represent more than 90% of our business. Of the RFID projects we currently take on, we have concentrated on the “closed loop” systems where we can show positive return on investment for asset tracking and internal inventory control applications. While we still believe that RFID will someday be the technology of choice….it’s not paying any bills right now.

Dick Factor
Director, RFID Sales & Business Development
Quest Solution, Inc/


Q.  What happened to Macolm McLean's SeaLand company?

A.  It was sold to Maersk in 1999. For awhile, the company was called Maersk Sealand, but dropped the Sealand part a few years later.

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