Monthly Archives: July 2015

Go for Innovation in Distribution! A Story about Costco’s Innovation in Distribution.

Go for Innovation in Distribution! A Story about Costco’s Innovation in Distribution.

There is a store that admits only those with annual membership. Customers must pay with cash while just one brand of credit card is accepted. The description of the store makes it sound like anything but a successful business, but it has built the largest distributor in the world. That’s Costco. Today, we’re going to talk about the distribution innovation achieved by Costco.

costco

Costco

 

1. No more than a 2% margin ― Costco’s golden rule for its operating income

Costco is racking up annual sales of 88.9 billion dollars with 64 million members served by 128,000 employees managing or working in 627 stores located in 9 countries including the United States. Compared to 1992 when it was first listed at New York Stock Exchange, the company’s stock price has hiked 800% and sales has risen 700%. The formula that specifies an operating income to sales ratio of 2% lies behind the success that Costco has achieved in distribution, one of the oldest business models. An operating income to sales ratio of 2% has nothing special about it in the distribution industry. But, combining operating income to sales ratio of 2% with paid membership, the key feature of its business model, came up with interesting results.

Costco_Walmart_Operating income

Trends in the operating income and membership fee revenue of Costco and Walmart

We have observed trends in the operating income and membership fee revenue for Walmart, a rival of Costco. While Walmart’s operating income shows unrelated to its membership fee revenue, Costco’s operating income nearly shadows its membership fee revenue. If we compare the two companies in the 2017 figures, Costco had up to 74% of its operating income from its membership fee revenue. Altogether, the figures lead us to think that the business model of Costco is perhaps distribution not based on fees but based on paid membership. Specifically, the business structure of Costco is designed to make sure that the company gains profits by increasing the number of paid members while providing greater benefits for customers by minimizing its sales margin.
 

2. The alpha and omega of Costco ― paid membership

As we said earlier, paid membership is ensconced in the kernel of Costco business model. But from the perspective of customers, insisting on paid membership only causes discomfort in their shopping experience. Customers’ membership cards are checked not only on their entry but also for payment. And as a customer exits a store, his or her receipt issued for payment must be shown to staff. If over 90% of its first-time members get their membership renewed despite such inconveniences, it would be because of the unique membership model of Costco that ensures that ‘the more products customers buy, the greater benefit they collect’.
 

3. Absolutely cheap ― customer trust in prices

Costco can keep prices low with its cheap fee, small number of SKUs (stock keeping units), and private-label products. Its small number of SKUs adds to Costco’s big advantages. Costco runs 4,000 or so SKUs, which accounts for about 3% of the number for Walmart. A smaller number of SKUs means that the company takes advantage of its great bargaining power in negotiating with manufacturers to obtain benefits, which it delivers to its customers.

Comparison of prices of a product between Costco and Superstore

Comparison of prices of a product between Costco and Superstore

This leads to enhanced customer recognition. And it amounts to the branding to the effect that people won’t fail to find stuffs cheap at Costco. In fact, if competing distributors like Walmart sell them at the same price, Costco makes sure to offer at a lower price products like Levi’s jeans through negotiations with the supplier. Although such a strategy may generate noises through supply chain, it works to get Costco’s business model robust. Thus, customers can trustfully get their fill of buying. Even if they get into overspending, it’s OK since it should be cheaper than from any other outlets. You can cope by just stocking up in your own storage. It goes without saying that it is a paradise for wholesalers.
Moreover, the company maximizes customer satisfaction with Kirkland Signature, its private label that keeps prices as low as possible through a contract for great quantities of excellent products that arrive through strict quality control.

Kirkland Signature, a private label for Costco

Kirkland Signature, a private label for Costco

Since it started business, Costco has stuck to its fee of 15%. By comparing it with the fees charged by other distributors, you can see that a 15% fee is actually pretty modest. Discount stores charge 25 to 35% and department stores charge 30 to 40%, while online malls without offline stores charge about 15% fee, which Costco charges. Thus, Costco makes sure that greater benefits are enjoyed by its customers by reducing selling fees for products.
‘A 15% margin is appropriate as it ensures that we make money while our customers are satisfied. If we make more profit, corporate discipline will get lost and we will get lost in greed. Moreover, customers will leave and the company will fall behind. (Jim Sinegal, Costco founder)
‘Traditional distributors like Walmart try to figure out how they can increase their profits by keeping prices as high as possible. But Costco has succeeded by thinking backwards, that is, how it can minimize its profits by further lowering prices.’ (John Mullins, London Business School)
 

4. We accept only one ― one credit card for a country

At Costco, payment can be made in cash or with just one brand of card. This represents Costco’s policy to lower product prices by reducing credit card processing fee. The company holds a bidding where credit card companies compete in lowering their processing fees. We will accept only one brand of card. And we will give all our sales to you. Only under one condition: you give us a credit card processing fee so low that you can never imagine.

Costco US accepts only Citi and Visa

Costco US accepts only Citi and Visa

Coming into this year, American Express Card failed to renew its 16-year exclusive contract while Costco concluded an exclusive credit card program agreement with Citi and Visa. The agreement was so extraordinary that Citigroup’s stock price rose 2.04% and Visa’s rose 2.57% at New York Stock Exchange on the day they reported the two companies’ partnership with Costco.
 

5. Jim Sinegal, founder of Costco

Jim Sinegal created Costco at age 47

Jim Sinegal created Costco at age 47

Behind all this stands Jim Sinegal, the founder of Costco, who has taken 33 years to raise his company to 24th place among Fortune 500 companies. He is usually called Steve Jobs in the distribution industry. However, Steve Jobs started Apple from his father’s garage when he was 18, whereas Jim Sinegal began his career as a part-time worker downloading mattresses at a discount store when he was 18. For some 30 years, Jim Sinegal had worked in the distribution industry and served as an executive vice president for Price Club. He was 47 when he started Costco with an investor in downtown Seattle. So, we should say that he is a veteran sailor more than a pirate like Steve Jobs.
 

Today, we have checked on the innovation that has transpired with Costco, the global distributor. Its innovation can be summarized as a product of thinking out of box. The company identified their source of profit in membership sales instead of product sales. Therefore, its pricing strategy is designed to give big benefits to its members instead of setting consumer prices solely to increase margin as emphasized by existing distributors and conventional practice in business management. Hence its profit margin smaller than with its competitors and the policy for signing with one credit card company in a country.

We often witness such out-of-box thinking in shipping or logistics industry. It is practiced by those companies that establish their strategy through transferring their profit source for their transport service from transport charges to the price for space available for sale from transport equipment such as ships and trucks. Likewise, we frequently find the same basis for innovation not only within an industry but also in related or entirely unrelated industries. In our next piece, we will
check the idea of IKEA, another company that has staged innovation in logistics.

 
 
 
 
 
 
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(Infographics) Comparison between Five of the Longest Ships of Their Type

(Infographics) Comparison between Five of the Longest Ships of Their Type

 

Infogoraphics_Comparison between Five of the Longest Ships of Their Type

Infogoraphics_Comparison between Five of the Longest Ships of Their Type

 

Ships are classified by their respective types, such as oil tanker, container ship, bulk carrier, passenger ship, and aircraft carrier.

And each of the different categories has the largest ship in the world. Let us use this occasion to learn the world’s largest ships as presented in infographics.

 

The king of oil tankers is Knock Nevis.

Launched in 1979, Knock Nevis was constructed by a Japanese company named Sumitomo Heavy Industries and was operated by Prayati Shipping. The ship could carry nearly 3 million drums of oil, and when the ship was loaded to the full, it could not pass through Panama Canal or Suez Canal because it went too deep in the water. The gigantic 458m oil tanker was run with a 33-men crew including its captain. What a surprise!

 

No. 1 container ship is CSCL Globe.

Owned by CSCL (China Shipping Container Lines), the ship was launched by Hyundai Heavy Industries of Korea. Equipped with the largest ever engine, the ship registers an engine efficiency 20% higher when compared to other container ships. Its length of 400m equals four football stadiums combined and the ship can carry about 19,000 containers. The volume can accommodate 1.43 billion iPhones, 1.34 billion units of Samsung Galaxy S6, and 120,000 units of Ferrari 458.

 

The largest bulk carrier is Vale Brasil.

Ordered to Daewoo Shipbuilding & Marine Engineering by Vale Shipping Holdings and completed in 2010, Vale Brasil wasn’t allowed into Chinese ports. In fact, its size is enormous enough to carry an amount of steel for building three Gold Gate Bridges.

 

Launched in 2009 at STX Turku Shipyard in Finland and operated by Caribbean International, Allure of the Seas is the world’s largest cruise ship.

It includes 24 elevators for its guests and offers 25 dining options including Starbucks. It has as many as 2,704 staterooms, which add up to ten 16-story buildings. The ship can accommodate minimum 6,000 guests with a 2,300-person crew serving them.

 

When it comes to ships that stay afloat at sea, you shouldn’t leave out aircraft carrier. The largest aircraft carrier that has ever been made is USS Enterprise, now decommissioned.

Built in 1962 by Newport News Shipbuilding, the carrier served in the United States Navy. The carrier name was taken from the Star Trek starship Enterprise. Appearing in several films including Top Gun starring Tom Cruise, USS Enterprise could travel at the speed of 60km/h with up to 90 aircrafts on board.

 

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Do you Know that there is Marine Day in Japan?

You Know What, Japan Has Marine Day

 

Do you know that Japan has Marine Day? Marine Day (海の日 umi no hi in Japanese) is one of Japan’s fifteen national holidays. It was designated a national holiday in 1995 and it was first observed in 1996. Earlier on, Marine Day was observed on July 20, but the modifications to the public holidays in 2003 (Heisei 15), collectively called Happy Monday System, moved the holiday to the third Monday of July, starting in 2004. The Happy Monday System legislation was designed to ensure that a public holiday does not fall on Sunday. In 2015, Marine Day comes on July 20.

Marine Day_a national holiday of Japan

Marine Day_a national holiday of Japan

The National Holidays Act explicitly states its purpose of ‘appreciating the blessings of the sea and wishing for prosperity of Japan as a maritime nation’. As its neighbor, Korea has Marine Day on May 31, and the US designated its Marine Day as May 22. As stated in a document provided by Japan’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Japan is the only country in the world that has designated Marine Day as a national holiday.


1. Marine Day in Japan

Google Logo_Marineday

Google Logo for Marineday in Japan

There was Marine Memorial Day (海の記念日 in Japanese) until they came up with Marine Day as a national holiday. Marine Memorial Day dated back to the Meiji period. Communications Minister Shozo Murata designated the day in 1941 to commemorate the Meiji Emperor’s 1876 voyage in the Meiji-Maru, an iron steamship constructed in Scotland in 1874. The voyage included a trip around the Tohoku region, embarking on the lighthouse boat and returning to Yokohama on July 20 of that year.

The Meiji-Maru was later used as a training ship by Tokyo Nautical School (currently, Tokyo University of Marine Science and Technology), and is currently preserved on the Etchujima Campus of the University.

 
2. Events commemorating Marine Day now legally designated

japan-marine-day-festa

japan-marine-day-festa

In addition to the afore-mentioned National Holidays Act, Basic Act of Ocean Policy, which was enacted in 2007 (Heisei 19), stipulates in its Article 13 that “The State and the local governments shall endeavor, on the Ocean Day as stipulated in Article 2 of the National Holidays Act (Act No. 178 of 1948), to hold the events that enable the citizens to have better understanding and deeper interests of the oceans.”

Since 1996 that saw the enactment of Marine Day, the twelve days from July 20 through 31 has been designated as Fortnight of Sea. During the period, Maritime Bureau of MLIT has worked with local governments etc. to promote ideas related to oceans.

Starting in 2003 (Heisei 15), the twelve days in commemoration of Marine Day was increased to one whole month. In order to enlighten the national people on the importance of oceans and bring wider publicity to Marine Day, one entire month including Marine Day and stretching from July 1 through 31 was designated as Marine Month.

In the efforts led by Maritime Bureau of MLIT in partnership with related government ministries, local governments, and organizations related to maritime affairs, Sea Festa spearheads a variety of nationwide events related to oceans. Traditional events, previously presented, are no longer available, but major ports and marine facilities around the country offer special events, water sports, water shows, and cultural activities related to oceans.

 
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The Need for Demand-Based Adoption of e-Navigation

The Need for Demand-Based Adoption of e-Navigation

 

 

One of the emerging agendas regarding maritime safety is e-Navigation (hereafter “e-Nav”).

 

Since its introduction was first proposed as a shared agenda by countries including the UK, the US, Japan, and Norway at the 81st conference of IMO MSC (International Maritime Organization, Maritime Safety Committee) held in December 2005, it has been continuously discussed mainly by international organizations such as IMO and IALA (International Association of Lighthouse Authorities). With its Strategy Implementation Plan finally approved at the 94th conference of MSC in November 2014, it will start its operation in 2019 following the establishment of a detailed implementation plan including its standardization.

This e-Nav is defined as “collecting, integrating, expressing, analyzing, and exchanging the marine data between ships and the land in harmony through the electronic method for promoting navigation from a port (of departure) and a port (of arrival) as well as related services, protecting marine environment, keeping safe navigation, and maintaining marine safety and security”.
As the definition suggests, e-Nav aims to ensure that ships are provided with communications to obtain data needed for safe navigation and upgrade an integrated system on the land for maritime transport and marine safety based on location information for ships, so the adoption of e-Nav necessarily taps into ICT (Information and Communications Technologies).
 

Since e-Nav is expected to not only create growth engines through convergence among industries but also serve as the catalyst that spearheads a paradigm shift in maritime safety and marine logistics, different countries and companies of the world are now working to create response strategies by boosting the competitiveness of different industrial sectors and take the lead in developing related technologies and preempting global markets.

To provide innovative services that exploit e-Nav and take advantage of them, a ship has to be equipped with next-generation electronic nautical chart, AIS (Auto Identification System), integrated navigation system, and wired & wireless communications network on the ship. Also, on the land, one has to get real-time processing of various maritime data, the processing of big data related to navigation, and technology for remotely managing ships, while for ship-to-ship and ship-to-land data exchange, there has to be stable data transmission technology, which includes not only coastal communications but also satellite communications. 

Container Shipping Trend

Container Shipping Industry Trend

With international support and consensus behind it, e-Nav will be phased in through technical review, standardization, and on-site testing. But, as there exists not a little dissent on the date, speed, and scope of its adoption and people interpret the concept and definition of e-Nav differently, it is crucial to get feedback from interested parties and make a demand-based approach to it.
 

Heralding a paradigm shift in maritime transport, marine safety, and shipbuilding market, e-Nav is expected to usher in a fierce competition as countries jostle for a superior strategic position and interests clash among parties that try to preempt related business opportunities. The e-Nav strategies, which are being implemented by international organizations including IMO and the governments of different countries, must consider the following factors. Of course, since those plans that are being drawn up incorporate review and analysis of the factors, we expect, solutions for related issues will come along before the final implementation of e-Nav.
 

Actual operators that may adopt e-Nav are shipping companies, which are concerned about acquiring a new system. Currently, the portion that ICT equipment takes up in a newly constructed ship is estimated at roughly 8%, which is expected to more than double in 10 years. And that’s why shipowners hope that they will be able to realize functions through upgrade of their current equipment or realize e-Nav with minimum investment.
 

People need to face the fact that marine accidents do not occur simply because ships have no advanced technology and equipment with them. And since over 80% of marine accidents are caused by human factors, e-Nav should be designed and applied so that it may reduce crew’s work load and contribute to accident prevention. Also, we need to come up with measures for those small ships and fishing boats which are generally called Non-SOLAS (International Convention for the Safety of Life at Sea) ships. This is because most of marine accidents occur with small ships. For example, about 70% of marine accidents in Korea occur with small ships that are below 100 tons.

Moreover, as e-Nav increases not only ship-to-ship data exchange but also ship-to-land data sharing and use, investment in on-land infrastructure should proceed harmoniously in step with investment in ships. One should brace for security issues and side effects generated by the sharing of data among various operators. Furthermore, because introducing and implementing e-Nav presupposes a complicated international consensus, which requires not a little time, patience must be exercised to create a regime that ensures systematic and sustainable development and management through specialist groups.
 

Most important of all, however, the system must be suited to demand from users and related parties. We need to get users to voluntarily use and adopt it even before it is applied as a mandatory element, by convincing people that e-Nav is helpful in preventing accidents and reducing costs.
 

To summarize, with an eye to safe ship operation, e-Nav will continue to expand, and to face up to what is coming, shipping companies should go ahead with step-by-step preparation. Especially because one currently sees no related regulations, no clear guidelines in different countries, and no related infrastructure, deliberation on the adoption of e-Nav should focus on accident prevention and cost reduction, and additional investment in ships and on land will have to direct its focus toward the human factors that cause marine disasters.
 

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Posted by Sooyeob Kim who is a director of Maritime Safety Department from Korea Maritime Institute.

Methods for Tracking CHE in Port Terminals and Future Prospects for Technologies

terminal equipment

terminal equipment

Methods for Tracking CHE in Port Terminals and Future Prospects for Technologies

As we mentioned it in our article on 4 Stages of Big Data Exploitation in Container Terminals, the most rudimentary infrastructure required for data transmission and reception in a terminal is network technology and equipment positioning. In this piece, we are going to describe the method for tracking the location of the equipment (ITV, forklift, empty container handler, and reach stacker) that registers a high level of free mobility among container handling equipment (CHE) found in terminals.

Unlike cranes (such as RMG, RTG, and STS), such equipment has access to various spaces of the yard, and for this reason, they are harder to locate accurately, compared to cranes that move along specified paths.

Then, we will take a look at representative methods for positioning the above-mentioned equipment in port terminals.
 

RFID-based positioning

RFID (Radio Frequency Identification) is composed of tag and reader antenna. When the RFID tag attached to CHE enters an area where a specific antenna is installed, the antenna reads the tag. By calculating the distance to the tag thus read, the two-dimensional position of CHE in the terminal is calculated.
Location-determining algorithms include various methods of TOA, TDOA, AOA, and RSS, of which TOA par exemple calculates the location by using the distance between a tag and three or more antennas.

TOA method

TOA method

The performance of this RFID-based RTLS (Real-Time Location Service) varies according to its used tag, antenna, and reader, and generally registers a 3-5m accuracy.

However, the RFID-based positioning has various limitations. To ensure real-time RFID-based positioning, antenna and reader must be installed to cover a wide port terminal, which is bound to add to costs. Moreover, even if enough coverage is secured by installing more antennas, interference won’t be easy to get rid of.

Despite such technical limitations, there have been various attempts to apply it to ports until recently, while for example, YANICT conducted research on some other method for installing antenna and reader in ITV (Ting et al., 2012).

 

GPS positioning

With its large equipment and high price, it used to be employed in certain industries only, but lately, distribution of smartphones and widespread use of vehicle navigators have made it a technology that is highly accessible to ordinary people. A number of ports are also using GPS technology to locate cranes and ITV.
GPS as we know it is the US-operated GNSS (Global Navigation Satellite System), and more systems are available, including Russia-operated GLONASS, Beidou of China, and Galileo of EU.
As the name suggests, satellites are on the move along a specified orbit around the earth. And triangulation is employed to calculate locations by simultaneously receiving a plural number of (minimum 4) satellite signals for a specific location at the current point of time.
      
In a notable case, GPS has been adopted by PNC Terminal in Busan, where low-priced GPS equipment is installed in ITV, R/S, and ECH to perform real-time 

PNC Visualizer (GPS-based)

PNC Visualizer (GPS-based)

Even such a low-priced GPS receiver can define a location as accurately as about 2m in an open field presenting no signal blockage.

However, in a yard under an STS crane where containers are piled high, an error may run up to several tens of meters. To minimize such errors, PNC is operating map matching, which compares to a map through post-processing.

That is a brief description of RFID/RTLS and GPS, the leading methods for positioning CHE in port terminals. The presence of a great number of containers in a terminal affects positioning with radio-frequency interference, and there is no method that can completely perform positioning without incurring a great cost in such adverse conditions.

I think that the best policy under such circumstances is to choose the best available performance instead of the best possible performance while accepting limitations of different technologies and focusing their good sides.
 

Difficulty involved in positioning in port terminals

Various positioning solutions have long been developed and advanced in academia and in the industry, but no solution has been established for port terminals.

Most solutions for positioning in a large space are based on RF communications. RFID and GPS, which we discussed earlier, are both RF-based methods, and their biggest drawback is multi-path error.

The error occurs when the antenna which receives signals catches the signals bouncing off those various substances around. The multi-path error is known to become serious, especially when metal is involved (Yi et al., 2012).

Photo of multipath error test

Photo of multipath error test

Standard deviation according to distance and materials for observed value in west.east direction

Standard deviation according to distance and materials for observed value in west.east direction

Mixing & combination of multiple technologies for improving terminal positioning

Thus, the method for determining location through wireless communications in the specific environment of a port is not doing its job properly because of deterring factors. Then, what is an optimized positioning solution?

An alternative that is drawing spotlight is the positioning method that merges two or more technologies and thereby makes up for one another’s shortcomings, which is up and coming over positioning with one single technology. For example, GPS/INS positioning integrates navigation satellite system, which calculates absolute position, and INS (Inertial Navigation System), which calculates movements based on relative positioning.

CyberLogitec BANDI-200

CyberLogitec BANDI-200

CyberLogitec is also working to find a solution in the integrated positioning. In other words, while overall positioning is performed in GPS, INS technology kicks in and starts positioning operation when satellite signal is unstable, has its quality lowered, and doesn’t have enough visible satellites. In locations like tunnels where satellite signal is completely kept out, satellite navigation system can’t calculate positions. Here, by using INS, which combines gyroscope and acceleration sensor, one can guess at the subsequent positions by identifying direction and speed.

Concept of GPS.INS

Concept of GPS/INS

Previously used mainly for military systems or to research purpose, INS reached its commercialization when the latest development of MEMS technology promoted its application in cell phone and drone, the unmanned helicopter. While price gap between high-end and low-end products is huge, effective positioning accuracy could be ensured by using low-priced MENS IMU to overcome the limitations and drawbacks of GPS only. CyberLogitec is operating such GPS/INS equipment in Jebel Ali &3, which is operated by NCT and DP World in Saudi Arabia. Positions are 100% calculated on a specific project site with 1.5m accuracy.

terminal truck

truck @ terminal

 

Directions for future advancement

Currently used positioning algorithm integrates GPS and INS only. GPS/INS is no perfect solution, however, because INS has the technical disadvantage that increasing duration from its default value adds to its errors.

Considering the characteristically poor conditions of a port terminal, we think that additional integrated navigation method is necessary to ensure maximum accuracy. For example, if one uses vision technology to recognize a specific reference point in an area where satellite signal is blocked and GPS positioning is difficult and then uses it as a value to renew the default value of INS, a more reliable positioning will be possible.

Basic concept of stereo vision

Basic concept of stereo vision

 
 
 
 
 
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References
T.-H. Yi, H.-N. Li, M. Gu (2012), “Effect of different construction materials on propagation of GPS monitoring signals”, Measurement 45, p1126-1139.
http://www.furuno.com/en/gnss/technical/tec_dead

http://www.sage.unsw.edu.au/currentstudents/ug/projects/Panya/thesis.html

Joo-sang, Park (2010), “Active RFID-based Real-Time Location Systems”,  Korea Internet conference 2010.

Calin, G. and Roda, V (2007), “Real-time disparity map extraction in a dual head stereo vision system”, Latin America Applied Research 37, 21-24.

Things to Consider in Applying Industrial Network Technology in Ports and Terminals

Things to Consider in Applying Industrial Network Technology in Ports and Terminals

In our earlier article 4 Stages of Big Data Exploitation in Container Terminals, we had a look at the needs for automated terminals and saw how big data could be applied in a terminal. In this piece, we are going to describe things that must be considered when creating network infrastructure, the basic and essential element of various equipment and data transmission and reception in an automated terminal that uses big data.

 

Three basic attributes of network creation for industrial sites

There are things that one must take note of for developing a network for an industrial site. Basically, a network must have reliability, real-time responsiveness, and stability.

Reliability is about making sure that data or a signal sent to a device has properly reached it. If data sent to industrial equipment gets lost, something unexpected can result from the specific operation.
 
Real-time responsiveness implies that in conducting control or real-time monitoring between devices, response to data is delivered within a specified period of time. Since equipment used on industrial sites has huge size and weight, its status check and safety cannot be assured without real-time performance.
 
Stability implies that in case network infrastructure runs into problems, it must have a way to bypass them. If an industrial site suffers its IT service to stop for some reason, it will immediately lead to loss for a company and furthermore, the afore-mentioned reliability and real-time responsiveness cannot be guaranteed, either.
 

Considering such potential issues, the industry is developing standard protocols such as Ethernet/IP, Profinet, and Modbus. In order to realize automation in ports and terminals, it is required to apply these protocols to the wired network for parts related to control and monitoring.

Standard protocols_EthernetIP_Profinet_Modbus

Standard protocols_EthernetIP_Profinet_Modbus

 

Reason that Wi-Fi is most frequently used in creating a wireless network in ports and terminals

Port and terminal environment cannot be created with the above wired network alone. It’s because a yard characteristically covers a large area and has its various equipment move freely. While it is required to introduce a wireless network in a terminal, it is not easy to successfully apply a wireless network. Currently, various wireless network services such as 3G, Wide Band, Narrow band, and Wi-Fi are available, but consideration of traffic volume and financial cost finds Wi-Fi network the most frequently used. If not for financial consideration, using a licensed bandwidth provides the best service quality, but it comes with continued financial burden. Among unlicensed bandwidths, Wide Band and Narrow Band technologies are available, but with narrow bandwidth available for transmission, they have difficulty in transmitting needed traffic. So, Wi-Fi network should be the most suitable under current circumstances with its economy and technology.

 

Things to consider when applying Wi-Fi to ports

When we apply such Wi-Fi network to a port, there are things that we must consider in addition to the characteristics of wired network mentioned earlier.

First, it’s coverage. While this is a basic thing about using wireless network, it is the first thing that has to be considered for ports that are composed of iron such as equipment and containers, because of the characteristics of radio wave (which does not travel through but bounces off iron). So, a network design must anticipate various situations while considering the stacking and movement of containers. Using recently developed Wireless Mesh network technology can further boost Wi-Fi coverage.

Wireless Mesh network Coverage

Wireless Mesh network Coverage

Second, it’s interference. Using unlicensed bandwidth cannot do away with the issue. It’s because one cannot assert one’s exclusive area in a bandwidth that anyone can use. Interference is the issue that is the most difficult to overcome in a Wi-Fi environment. It’s because you don’t know who is using which bandwidth of frequency, which is invisible. It is also because customs, national agencies, and outside companies, which a terminal cannot manage, may use the same bandwidth. A problem like that cannot be easily discovered with an ordinary type of Wi-Fi tool and its occurrence is unpredictable. To solve such a problem, consultation with neighboring organizations must precede the creation of a Wi-Fi network, and if a problem has occurred, it can be checked using a Wi-Fi spectrum analyzer.

Wi-fi interference using unlicensed bandwidth

Wi-fi interference using unlicensed bandwidth

Third, it is roaming. When ITV, which has wireless clients, roams a wide area, it is out of the question for a single access point (AP) to cover a radius of minimum 100m. So, a number of APs are installed, considering its coverage. As they move between access points, clients repeatedly experience connection, disconnection, and reconnection. And in case roaming does not work properly, network disconnection will repeat continuously. Indeed, when this problem occurred, people had to stop their work occasionally, which adversely influenced the operation. The problem should be solved by testing the compatibility between AP infrastructure and wireless LAN client module, which must be considered before one decides to get the network. Or, it is important to see whether wireless LAN infrastructure supports fast roaming technology, which is provided by each wireless LAN vendor.

Turbo roaming for seamless connection

Turbo roaming for seamless connection

We have so far reviewed the characteristics of network which are required in a terminal environment. We believe that considering the above-mentioned basic characteristics could reduce problems that occur in a terminal network environment.

 

In addition, a document on applying wireless LAN on industrial sites, created by Cisco and Rockwell, is available at the URL below.

http://www.cisco.com/c/en/us/td/docs/solutions/Verticals/CPwE/NovCVD/CPwE_WLAN_CVD.pdf

 

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