Electronic Supply Chain Manifest
Benefit Calculations - Revised December 2005

Prepared by

Science Applications International Corporation

December 14, 2005

Overview
The benefits presented in this paper represent updates of the operational benefit calculations presented in the ATA Foundation final report: Phase II: Developing and Testing an Electronic Supply Chain Manifest. These revised benefit calculations include:

• Additional observations of automated Electronic Supply Chain Manifest (ESCM) transactions collected during the Electronic Supply Chain Manifest Phase III effort that included additional participants in the LAX and Toronto International airport service areas.
• Additional observations of manual processes collected in the Chicago O'Hare service area.

The revised time-on-task comparisons continue to demonstrate significant performance improvements using the ESCM of:

• Reduced manifest preparation time.
• Reduced paperwork handling time.
• Reduced time in communicating with up- and down-stream intermodal partners.
• Reduced load transference times between intermodal partners.

Based on the differences in mean time on task using manual or legacy processes versus ESCM, monetized using 2003 labor wages rates and benefit levels (31% of wage rate) from the U.S. Bureau of Labor Statistics, the potential operational labor cost savings per shipment for companies using the ESCM for (outbound only) shipments could reach $11.77 per shipment using the ESCM.  The savings to manufacturers, motor carriers and airlines represent 84, 94 and 98 percent cost savings for the administrative and cargo transfer activities observed during the Phase II operational test, respectively; and overall, 92 percent cost savings for the observed activities for the outbound air cargo shipping leg.[1] The process costs and savings are summarized in Table 1. The estimated time on task observations, costs and savings calculations are detailed in Tables 2 through 7.

Table 1 - ESCM Versus Manual Process Costs and Savings

Table 2 - ESCM Versus Manual Process Times and
Estimated Cost Savings Per Shipment For Manufacturers

Table 3 - ESCM Versus Manual Process Costs and
Estimated Cost Savings Per Shipment For Manufacturers

Table 4 - ESCM Versus Manual Process Times and
Estimated Cost Savings Per Shipment For Trucking Companies

Table 5 - ESCM Versus Manual Process Costs and
Estimated Cost Savings Per Shipment For Trucking Companies

Table 6 - ESCM Versus Manual Process Times and
Estimated Cost Savings Per Shipment For Airlines

Table 7 - ESCM Versus Manual Process Costs and
Estimated Cost Savings Per Shipment For Airlines

Extrapolation of Observed Operational Benefits to Industry

According to industry sources (footnoted below), industry levels of domestic air cargo shipping are estimated at:

• All Domestic Air Freight Shipments                   2.62 billion shipments[2]
• Estimated Domestic Air Express Shipments       2.45 billion shipments[3]
• Total Potential  Domestic ESCM Shipments           0.17 billion shipments[4]

Based on the figures from Table 4, the estimated potential number of domestic air cargo shipments are 0.17 billion annually. This estimate assumes that of the 2.62 billion domestic air cargo shipments annually, 2.45 billion are carried express shipment entities that are highly automated and would not likely represent a significant initial market for ESCM.

Given the remainder of the domestic air cargo shipments, the potential annual savings to industry through the use of ESCM can be expressed as:

0.17 billion shipments annually x $11.77 ESCM savings per shipment (outbound) =

$2.0  billion potential annual ESCM savings to industry.

This figure is considered a mathematical potential. There are many factors that would impact ESCM's ability to penetrate the market such as robustness and cost effectiveness of legacy and COTS systems that are currently being used by various segments of air cargo transportation industry and ESCM's ability to integrate or successfully replace any of these systems.  Current published research does not provide enough information to adequately assess to what degree the potential $2.0 billion of potential savings may already be realized through the use of integrated logistics tracking systems (ESCM-like systems) or remain as untapped potential supply chain savings.

A detailed operations and market analysis would be required to assess potential levels of ESCM market penetration, what would be required from a systems and market development perspective to realize the potential market penetration, and what system-wide benefits could be achieved.

Other Public and Private sector Benefits

The benefits of the ESCM were defined initially within a limited operational framework. This framework examined the potential benefits for shippers and transportation providers (i.e., trucking companies and air cargo carriers). Subsequent to the operational testing, assessment of benefits, and promulgation of results for the ESCM operational test, input from other stakeholders identified other potential benefits of the ESCM concept.

Within the private sector, freight forwarders and third party logistics providers acknowledge that the ESCM concept could potentially improve logistics service through the enhanced access to freight data, thus improving operations by providing information to assist pre-planning for cargo handling and the ability to service customers more effectively with more accurate and timely handling of tracking and tracing requests. The ability to track shipment status from origin to destination can enable tighter planning for intermodal exchanges, which in turn could narrow pick-up and delivery (P&D) windows (appointments for P&D) and thus reduce waiting times and congestion at intermodal facilities.

From a public-sector perspective, there are security-related benefits that could be derived from enhanced freight information systems. Both Public and private stakeholders agree that up to date and accurate information about the contents of shipments and the chain of custody of the shipments is important an important aspect of risk assessment/screening of the shipments for inspection and clearance of shipments for further transfer along the supply chain. The capability to determine a low-risk status for shipments can enable expedited handling of shipments through private entity and governmental security protocols.

[1] The percent cost savings represent the labor savings for specific administrative and cargo transfer activities and not the percent savings relative to the total cost of an outbound air cargo shipment (including shipping fees).

[2] Colography Group projections for 2003. The Colography Group is a market research firm who each year surveys and interviews tens of thousands of transportation users to determine the trends in shipping activity.

[3] Air Cargo Management Group-based on 4^th quarter 2001 Domestic air express traffic volumes (FedEx, UPS, Airborne Express, USPS, DHL, and other-including BAX Global and Emery)- These are reduced from total shipment potential due to the existing high level of automated exhibited in these operations.   Air Cargo Management Group (ACMG) is a specialized aviation consulting firm specializing in matters relating to the worldwide air freight and express industry.    ACMG publishes an annual US Domestic Air Cargo Performance Analysis and a monthly newsletter-Cargo Facts.

[4] Estimated domestic air shipments without express freight service companies listed in 2.