Enterra Insights

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 4, What Lies Ahead?

To get a glimpse of what lies ahead for smart cities, one need only to look to Singapore. As Mark Fischetti reported last year, "LIVE Singapore uses real-time data recorded by myriad communications devices, microcontrollers and sensors to analyze the pulse of the city, telling residents how they can reach their homes fastest, reduce their neighborhood’s energy consumption and find a taxi when a rainstorm hits." ["The Smartest Cities Will Use People as Their Sensors," Scientific American, 17 April 2011] The following short video, created by MIT's SENSEable City lab, gives you a glimpse of the future.

Looking to the future, Jemima Kiss, writes, "From transport to entertainment, work to education, our lives are already being transformed by high-speed internet that will help create the fully wired city. Within 10 years, faster, comprehensive, wired and wireless networks will not only become the norm, they will become free, says Gerd Leonhard, chief executive of the business thinktank The Futures Agency. The reason? The enormous benefits to government and education." ["City design: A digital revolution," The Guardian, 2012] While I agree that networks will continue to grow in importance, especially in urban environments, I'm not as sanguine as Kiss that ubiquitous connectivity will be free a decade from now. As connectivity increases, concerns over privacy issues will also rise, but Leonhard told Kiss, "While the debate about appropriate use of our personal data will continue, consensual services could be to our benefit." Among the benefits referred to by Leonhard is targeted marketing. "You'll walk past a department store and the window will show a personalised display with your size and preferences," says Leonhard.

Most smart city initiatives are not primarily focused on shopping experiences. Carlo Ratti and Anthony Townsend report that a number of countries are trying to create utopian urban environments. The furthest along is "Masdar in the United Arab Emirates, a walled community intended for 50,000 residents in the desert outside of Abu Dhabi, in which every building, streetlight and personal electric 'pod' vehicle has been preplanned and preloaded with high-tech gear, largely to maximize energy efficiency." ["Harnessing Residents' Electronic Devices Will Yield Truly Smart Cities," Scientific American, 17 April 2011] To learn a bit more about Masdar, read my posts entitled Abu Dhabi's Masdar Plan and Update on Masdar City. Ratti and Townsend continue:

"At Masdar, as well as New Songdo City in South Korea and PlanIT Valley in Portugal, real estate developers, global information-technology companies and governments are attempting to build urban centers from scratch that are filled with technologically enhanced infrastructure and services. The designers say their grand conceptions will determine how future cities will be built. But as models, these top-down projects pale in comparison to the emergent form of intelligence that is bubbling up from millions of newly cyber-connected residents. Truly smart—and real—cities are not like an army regiment marching in lockstep to the commander's orders; they are more like a shifting flock of birds or school of fish, in which individuals respond to subtle social and behavioral cues from their neighbors about which way to move forward."

Ratti and Townsend claim that this bottom-up view of smart city evolution represents "an immensely powerful, democratic and organic alternative vision of the smart city." They explain:

"Rather than focusing on the installation and control of network hardware, city governments, technology companies and their urban-planning advisers can exploit a more ground-up approach to creating even smarter cities in which people become the agents of change. With proper technical-support structures, the populace can tackle problems such as energy use, traffic congestion, health care and education more effectively than centralized dictates. And residents of wired cities can use their distributed intelligence to fashion new community activities, as well as a new kind of citizen activism."

Ratti and Townsend call this effort "going beyond urban efficiency." They note that "over the past decade digital technologies have begun to blanket our cities, forming the backbone of a large, intelligent infrastructure." They believe that this backbone holds the key to the future for all cities, not just planned developments like Masdar. They explain:

"Broadband fiber-optic and wireless telecommunications grids are supporting mobile phones, smartphones and tablets that are increasingly affordable. At the same time, open databases—especially from the government—that people can read and add to are revealing all kinds of information, and public kiosks and displays are helping literate and illiterate people access it. Add to this foundation a relentlessly growing network of sensors and digital-control technologies, all tied together by cheap, powerful computers, and our cities are quickly becoming like 'computers in open air.'"

Rather than embedding sensors in infrastructure, for many daily activities, Ratti and Townsend believe that mobile devices and cooperative owners will drive smart applications. They write:

"An ideal beginning is to leverage the growing array of smart personal devices we all wield and recruit people as the sensors of a city rather than relying only on formal systems embedded into infrastructure. The traffic function on Google Maps is a good example. Instead of building a costly network of dedicated vehicle sensors along roadways, Google constantly polls a large network of anonymous volunteers whose mobile devices report their up-to-the-minute status, which reveals where traffic is flowing, slowed or stopped. The information is delivered to drivers via mobile mapping applications in various ways—as colored overlays indicating traffic speeds, as estimated driving times that account for delays or as a factor in determining alternative routes. ... Bottom-up approaches to sensing can also provide rapid, cheap deployment of new kinds of sensors that measure and record data about people's activities, movements, surroundings and health."

Michael Durham claims that "Smart cities have always existed in people's heads." ["City design innovation," The Guardian, 2012] He asserts, that from the time that Plato wrote his Republic, "people have dreamed of the perfect community, where citizens live in harmony, life is good, technology is harnessed and everything works. Today, big ideas about improving city life continue to pour forth from futurologists, academics and thinktanks." Terry Kirby provides his own view of a future smart city. He writes:

"Imagine life for the citizen of the smart city: you awake in your sustainably built home, and take your morning shower in recycled industrial waste water, cost-efficiently heated overnight. Eating breakfast, you scan the flat screen, fed by maximum bandwidth internet, where the special, easy click local neighbourhood menu allows you to compare your daily energy use with other houses in the area, confirm your webcam appointment with your doctor, top up the balance of your all-purpose travelcard, order your groceries and leave messages for your child's teacher. You can even watch television on it. Outside, your electric car is waiting. On the edge of the central congestion zone, you park in a charging area and, paying with your travelcard, get into a three-wheeled utility vehicle which, via a network of special lanes and sensor-controlled pedestrianised areas, delivers you to another parking dock at your workplace." ["City design: Transforming tomorrow," The Guardian, 2012]

To me that sounds a bit like something out of The Jetsons cartoon show; but Kirby claims that "this is not some Dan Dare meets Minority Report fantasy of life in the future, where we all walk around in metallic jumpsuits. Smart thinking is here already." The problem, of course, is that cities aren't going to start over. London, for example, has had the same basic street layout (and some of the same buildings) for hundreds of years. We need to make sure that smart city initiatives help real people, living in existing dwellings, and carrying on with normal daily activities. Fortunately, Kirby is correct that smart thinking is already here and thinking about those challenges as well. He admits that smart city initiatives are "not simply about integrated transport or sustainable housing." He writes:

"The accumulation of electronic data online, digitally accessible and searchable, creates other opportunities for the consumer to know more about their neighbourhoods and the wider world we live in, and to use that information on a daily basis. It also allows local government, architects, transport bodies and utility companies to work together in partnerships to make the most of these technologies."

Simply accumulating and accessing data doesn't provide the answers or insights needed to make smart city initiatives successful. Big data analytics and other cognitive reasoning technologies are required to make sense of mountains of data being generated every minute of every day. Michael Durham claims, "In 40 years' time cities will not just be smart, they will be so brainy it hurts." ["Forty years from now ...," The Guardian, 2012] Most of that brainpower will be supplied by artificial intelligence. Among the smart people contemplating how to create smart cities are scientists at the Massachusetts Institute of Technology. MIT's City Science website notes:

"The world is experiencing a period of extreme urbanization. In China alone, 300 million rural inhabitants will move to urban areas over the next 15 years. This will require building an infrastructure equivalent to the one housing the entire population of the United States in a matter of a few decades. In the future, cities will account for nearly 90% of global population growth, 80% of wealth creation, and 60% of total energy consumption. Developing better strategies for the creation of new cities, is therefore, a global imperative. Our need to improve our understanding of cities, however, is pressed not only by the social relevance of urban environments, but also by the availability of new strategies for city-scale interventions that are enabled by emerging technologies. Leveraging advances in data analysis, sensor technologies, and urban experiments, City Science will provide new insights into creating a data-driven approach to urban design and planning. To build the cities that the world needs, we need a scientific understanding of cities that considers our built environments and the people who inhabit them. Our future cities will desperately need such understanding."

The following video discusses some of the interesting and exciting things that are being developed at MIT.

Achieving the objectives of smart city initiatives won't be easy (and probably won't be cheap). That is why public/private partnerships will be required. Smart city initiatives begin with people because their goal is to make cities more livable for people. If smart people fail to get the fundamentals right, technologies and processes that support smart city initiatives won't be able to overcome that shortfall.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 3, Where Things Stand

"What makes a city?" That is a question asked on IBM's Smarter City website. The company believes that a city is "an interconnected system of systems" that rests on three pillars: infrastructure, operations, and people. The site goes on to state that a city is "a dynamic work in progress, with progress as its watchword. A tripod that relies on strong support for and among each of its pillars, to become a smarter city for all." That definition may be a bit too cheery for some because they know that for years many inner cities have not progressed but languished or deteriorated. That entropic trend must change, because the world is becoming more urbanized every day. If tomorrow's cities are not going to become vast areas of poverty and decay, we have to be smarter about how they are planned, managed, and maintained. In a special issue about smart cities, the editors of Scientific American wrote:

"Many otherwise lucid thinkers, from Tho­mas Jefferson to Frank Lloyd Wright to President Gerald Ford, tended to think of cities as centers of poverty, crime, pollution, con­gestion and poor health. In recent years, though, the thinking has shifted along with the demographics. Many experts have come to realize that people are better off when they live in a city. This is not to dismiss the problems of urban life; cities, particularly fast-growing ones in the poorer parts of Asia and Africa, can be places of great human suffering. But even a city slum has benefits that you won't find on the farm or in the village. The move from the country leads, for instance, to dramatic changes for many women. As Kavita N. Ramdas of the Global Fund for Women notes in Stewart Brand's Whole Earth Discipline (Penguin, 2010), 'In the village, all there is for a woman is to obey her husband and relatives, pound millet, and sing. If she moves to town, she can get a job, start a business, and get education for her children.' Indeed, the city has come to look less like a source of problems than as an opportunity to fix them. Investments in sanitation and water have turned many cities in the developed world from places of disease and pestilence into bastions of health. City folk are at lower risk of death from motor vehicle accidents and suicide by firearms (although they are overstressed). From the stand­point of the metropolis, climate change also seems less intractable. Because city residents rely less on cars and live in more compact dwellings than suburbanites, they tend to leave smaller carbon footprints. The challenge is to extend the efficiency of the urban center to the wider conurbation, embracing the city center, suburbs and satellite towns. Although climate is bigger than any one fix, how we build our cities, and how efficiently we live in them, is going to factor large in our response." ["Street-Savvy," 17 April 2011]

In Part 1 of this series, I discussed suggestions from experts on how to begin smart city initiatives. One of those experts, Dr. Boyd Cohen, created a model he calls the Smarter Cities Wheel. IBM has also developed a model that is reminiscent of Dr. Cohen's Wheel. The IBM model shows how it believes the three pillars of a city discussed above are interconnected.

Like most organizations involved in smart city initiatives, IBM believes that data collection and analysis is the undergirding that makes such initiatives useful. IBM's site states:

"As demands grow and budgets tighten, solutions also have to be smarter, and address the city as a whole. By collecting and analyzing the extensive data generated every second of every day, tools such as the IBM Intelligent Operations Center coordinate and share data in a single view creating the big picture for the decision makers and responders who support the smarter city."

In Part 2 of this series, I noted that participants in a study published by the Institute for the Future expressed some concern that companies like IBM are trying to establish data monopolies that could be used to hold cities hostage in the decades ahead. IBM obviously sees itself as providing a much-needed service that cities can't provide for themselves. The company offers a nifty interactive Smarter Cities experience that can be explored at your leisure. Of course, IBM isn't the only global company that sees business opportunities in helping cities operate more efficiently. Oracle has its own interactive website that highlights its solutions for smart cities. The launch page for that interactive site also shows how Oracle sees connectivity within an urban setting (with business and citizens being the focal point).

Although the site explains that "Oracle offers a complete, integrated set of solutions to meet the complex needs of local government," some people, like Greg Lindsay, believe that companies like Oracle, IBM, and Cisco are "offering 'smart city in a box' solutions" that don't take into account the nuanced complexities that make each city unique. ["The Battle for Control of Smart Cities," Fast Company, 16 December 2012] See Part 2 of this series to learn more about Lindsay's concerns. Cisco's offering is called Smart+Connected Communities. Cisco's Shane Mitchell explains, that "the main barrier to adopting [smart city] solutions is the complexity of how cities are operated, financed, regulated, and planned." ["Smart City Frameworks: A Systematic Process for Enabling Smart+Connected Communities," Cisco Blog, 10 October 2012] Rather than offering a set of solutions, Cisco begins with "a 'Smart City Framework' designed to move the Smart City debate from merely an academic or esoteric discussion to a call for action." The framework is shown below.

Mitchell explains, "The Smart City Framework ... describes a potential process that will help key stakeholders and city/community participants 1) understand how cities operate, 2) define city objectives and stakeholder roles, and 3) understand the role of ICT within physical city assets." I agree with Mitchell that all stakeholders must be involved in smart city initiatives. As I wrote in Part 2 of this series, the only way to move forward is to embrace public/private partnerships that benefit both sectors." Terry Kirby agrees with that position. He writes, "When it comes to achieving the high-tech, sustainable, and smart cities of the future, there is one word that sums up the pathway to success: partnership." ["Getting smart cities connected," The Guardian, 2012] He continues:

"Imaginative and collaborative partnerships between local authorities, utilities, universities and the private sector – whether it is bus companies or software providers – are the defining characteristics of 'smart thinking', according to leading figures in cities around UK and Europe. All agree that so-called 'smartness' – which at its most basic level is about using new technology to improve lives – is necessary to adapt to the demands of urban growth. ... These kind of partnerships can range from multi-agency infrastructure ventures aimed at transforming the lives of millions, to simple projects improving digital access for everyday users of public services. They include new ways of using mobile phones and smartcards to pay for a wide range of goods and services, to schemes designed to recycle waste water for heating."

The editors at Scientific American conclude:

"The most hopeful impact of city life may be its effect on the mind. Humans are social animals; we draw stimulation from other minds close at hand. Plato and Socrates both lived in fifth-century b.c. Athens, a city-state. Galileo and Michelangelo lived in Renaissance Florence. Steve Jobs and Steve Wozniak grew up in a western U.S. conurbation that includes Silicon Valley. The young, agile minds at work on the next Big Thing are probably tweeting—they live, as author William Gibson points out, ... in a kind of digital meta city. Chances are, they are living in a physical city, too. Technology is reshaping city life and making it more intellectually productive, but it will not soon replace the easy interchange of ideas that comes from casual proximity, the cornerstone of city life."

While some pundits believe that smart city initiatives may drain city centers of their vitality, I agree with the editors at Scientific American that making cities more livable will actually increase the vitality of cities and make urbanization a boon rather than a bane to mankind. Gerd Leonhard, chief executive of the business thinktank The Futures Agency, agrees. He told Jemima Kiss, that "the more digitised our lives become, the more we will value real experiences. 'The landscape of the cities of the future will be a huge place to do the things that don't work in digital form – food, culture, contemplation. Digital tools drive us to want to have the actual experience much more than before.'" ["City design: A digital revolution," The Guardian, 2012] The thing I appreciate most about the smart cities movement is its optimism. There are enough Cassandras in the world warning us of impending doom. Optimists bring about progress and, as the IBM website states, progress is the watchword.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 2, Moving Forward

In Part 1 of this series, I discussed recommendations about how urban areas can begin efforts to make their cities smarter and more efficient. In this post, I discuss why moving forward is more controversial than one might think and how some of the concerns can be addressed. Greg Lindsay asks, "Who will own the brains of smart cities--citizens or corporations?" ["The Battle for Control of Smart Cities," Fast Company, 16 December 2012] My first reaction is, "Does it matter?" Lindsay believes it does. He writes:

"At stake is an impending massive trove of data, not to mention issues of privacy, services, and inclusion. The battle may be fought in the streets between bands of Jane Jacobs-inspired hacktivists pushing for self-serve governance and a latter-day Robert Moses carving out monopolies for IBM or Cisco instead of the Triborough Bridge Authority. Without a delicate balance between the scale of big companies and the DIY spirit of 'gov 2.0' champions, the urban poor could be the biggest losers. Achieving that balance falls to smarter cities' mayors, who must keep the tech heavyweights in check and 'frame an agenda of openness, transparency and inclusiveness.'"

Those are not just his conclusions, but conclusions of a Rockefeller Foundation-sponsored study entitled "The Future of Cities, Information, and Inclusion" that was published by the Institute for the Future. Lindsay reports that authors of the study conclude, "Without this catalyst for cooperation, we may repeat the devastating urban conflicts of the 20th century that pitted central planners like Robert Moses against community activists like Jane Jacobs." Lindsay continues:

"Befitting the Foundation's focus on the world's poorest and what it calls 'smart globalization,' the report's emphasis is on smartening up cities in the developing world--cities that lack both data about their swelling populations and the tools needed to make sense of it. The roster of expert contributors comprises a who's who of ubiquitous computing and gov 2.0 types, including MIT Senseable City Lab director Carlo Ratti, Everyware author Adam Greenfield, the Santa Fe Institute’s Nathan Eagle, Intel Labs Director Genevieve Bell, Microsoft Research’s Jonathan Donner, and San Francisco CIO Chris Vein. Together, they highlight five 'technologies that matter' for cities in 2020: mobile broadband; smart personal devices, whether they're dirt-cheap phones or tablets; government-sponsored cloud computing (modeled on the U.K.'s national 'G-cloud' initiative); open-source public databases to promote grassroots innovation, and 'public interfaces.' Instead of Internet cafés, imagine an outdoor LED screen and hacked Kinect box allowing literally anyone to access the Net using only gestures."

I admit the list of participants is impressive and their concerns certainly deserve consideration. The fact of the matter is, however, that not all data that could benefit smart cities is publicly owned or available. The World Economic Forum has declared data to be a new asset class, like gold or oil, and organizations that own that data are counting on benefiting from it. Does that somehow make them evil or uncompassionate? Of course not. The current global economic morass also demonstrates that reliance on public programs can result in national debts that inevitably hurt the poor more than the rich. The only way to move forward is to embrace public/private partnerships that benefit both sectors.

In first segment of this series, I noted that even when governments are offered programs created by civic-minded activists that have an obvious benefit for their citizens, politicians have often been hesitant to implement them. It's hard to imagine that something as important as smart city initiatives should be placed solely in the hands of government or ceded to unstructured populist movements. Both structure and broad-based support are required. Everyone seems to agree that the sine qua non for good smart city initiatives is the availability of data (BIG data). But you can't raise the subject of big data without also raising privacy concerns. Anthony Townsend, director of technology development at IFTF and the report's lead author, told Lindsay, that "those tensions come up in every discussion, whether it's privacy versus the public good, collecting data versus parsing it, and guaranteeing access to all citizens versus carving out virtual gated communities and corporate enclaves." Townsend pointed out how the same data could be used to promote good initiatives or could be used to obstruct initiatives. "There are ways," he told Lindsay, "all of these can play out as either dystopia or utopia."

Lindsay states that the report "is the highest-profile critique to date of the bright green rhetoric from companies like IBM, Siemens or Cisco, which have seized the chance to pad their top lines with government sales while corporate IT customers stockpile mountains of cash." Lindsay obviously has strong feelings on this subject. He could have written something like this: "The report is critique of smart city initiatives from companies, like IBM, Siemens, or Cisco, that see an opportunity to grow their businesses while helping cities become more efficient and effective." But that sentence wouldn't have raised your hackles nor have presented large corporations in a negative light -- an impression that Lindsay obviously wants to impart. Lindsay continues with a discussion of arguments presented in the report:

"Global technology companies are offering 'smart city in a box' solutions. Governments are responding to their pitch: a smarter, cleaner, safer city. But there is no guarantee that technology solutions developed in one city can be transplanted elsewhere. As firms compete to corner the government market, cities will benefit from innovation. But if one company comes out on top, cities could see infrastructure end up in the control of a monopoly whose interests are not aligned with the city or its residents."

Those concerns are certainly valid, but they are also addressable. They certainly shouldn't be used as arguments to prevent smart city initiatives from moving forward. Lindsay admits that cities need global technology companies to help them achieve more efficient operations; but, he writes: "Government officials just need to avoid being sold a bill of goods." Of course, they should. Townsend, too, admits that grassroots efforts aren't "scalable or sustainable yet, and that's what these corporate campaigns bring to the table." Smart city initiatives need to get all stakeholders involved.

Usman Haque, founder of Pachube.com, agrees that we need to move forward with smart cities initiatives but he believes that the current offerings of global technology companies haven't gone far enough. "For almost a decade, corporate giants like IBM and Cisco have been banging the smart city drum and," he writes, "frankly, the beat is getting a little boring. We've long been promised great things: more energy efficient power grids, an end to traffic jams and even rubbish bins that let you know when they're full." ["Surely there's a smarter approach to smart cities?" Wired, 17 April 2012] He continues:

"The truth is, all of these 'smart city" initiatives actually only reflect the most basic functionalities of the Internet of Things (IoT). The true potential for smart cities is so much greater, so much more interesting, and so much more important."

I couldn't agree more. With the world becoming more urbanized every day, pursuing smart city initiatives is important. Haque agrees with Lindsay that it also represents big bucks, which is why "every major IT company is looking for its slice of the smart city pie." He lists a few of those corporate initiatives, like IBM's Smarter Planet and Cisco's Smart+Connected Communities. He writes, "Despite the subtle differences in these approaches, in both IBM and Cisco's eyes, smart cities predict the convergence of smart information and communication technologies to improve the efficiency and effectiveness of urban systems and services." Haque doesn't quibble about the goals of smart city initiatives, but, like Lindsay, he rejects one-size-fit-all approaches. He believes such initiatives approach "the evolution of smart cities from fundamentally the wrong direction. "Their strategies focus on the city as a single entity, rather than the people -- citizens -- that bring it to life."

I agree with Haque that cities are too complex to be seen as a homogeneous entity. An approach to smart city planning that uses something like Enterra Solutions' Sense, Think/Learn, Act™ technology and advanced analytics could differentiate the needs of individual neighborhoods. Haque states, "Any adequate model for the smart city must focus on the smartness of its citizens and encourage the processes that make cities important: those that sustain very different -- sometimes conflicting -- activities." The very complexity of cities requires that technology be used, but used more effectively. Haque continues:

"Cities are, by definition, engines of diversity so focusing solely on streamlining utilities, transport, construction and unseen government processes can be massively counter-productive, in much the same way that the 1960s idealistic fondness for social-housing tower block economic efficiency was found, ultimately, to be socially and culturally unsustainable. We, citizens, create and recreate our cities with every step we take, every conversation we have, every nod to a neighbour, every space we inhabit, every structure we erect, every transaction we make. A smart city should help us increase these serendipitous connections. It should actively and consciously enable us to contribute to data-making (rather than being mere consumers of it), and encourage us to make far better use of data that's already around us."

That is very well argued. In first segment of this series, I referred to Dr. Boyd Cohen's Smart City Wheel. At the hub of the wheel, you find smart people, smart government, smart economy, smart environment, smart mobility, and smart living. I believe that Cohen's Wheel, and its associated indicators, take into account the concerns and recommendations expressed by Lindsay and Haque. Haque believes it all starts with (and will move forward because of) smart people. He writes:

"The 'smartness' of smart cities will not be driven by orders coming from the unseen central government computers of science fiction, dictating the population's actions from afar. Rather, smart cities will be smart because their citizens have found new ways to craft, interlink and make sense of their own data. Smart cities cannot be defined by one application, or central organising body, that sets pre-programmed limits. They will be defined by individual citizens, who are anxious to collaborate with each other -- to create devices and applications that solve specific local problems. Smart cities will be places that foster creativity, where citizens are generators of ideas, services and solutions, rather than subservient and passive recipients of them."

Haque says that we should abandon the dream of ubiquitous sensors and extraordinary networks because for most of the world such initiatives will be unaffordable for a long, long time. "Even if [cities] could find funding for the sensor hardware and installation costs, the on-going maintenance would be enormous," he writes. "The sheer volume of accessible data being transmitted would force huge investment in data centres and other IT infrastructure." So what should we concentrate on? He says that companies like IBM and Cisco should concentrate on developing "a flexible system that can dynamically adjust to changes, one that responds to unpredictable phenomena in a way that is not planned, and that harnesses the creative capacity of inhabitants." Rather than a one-size-fits-all solution, "citizens should be able to adjust and rewire the smart city as needed to solve problems and overcome obstacles in their own lives."

Haque agrees that both "corporations and governments ... have a major role to play in the smart city." But his belief is that they should make "data openly available for coders to build upon." Frankly, that's not likely to happen for a lot of data. Proprietary data remains too valuable an asset. I do, however, agree with his suggestion that corporations and governments should "make it easy for citizens themselves to create and contribute their own data." Haque concludes:

"The entry of pervasive computing into the city cannot be seen as a 'one-stop-shop' that will solve all of our problems from pollution to traffic management. Despite the best intentions of Cisco and IBM, connecting systems and bridging data will not by itself solve tough issues. At best, such systems will likely just provide greater visibility of urban problems. However, empowering citizens to find and build their own solutions dynamically may yet allow the full potential of smart cities to be realised."

I agree with Haque that all stakeholders must be engaged and stay engaged. That means that they must see tangible benefits from the initiatives that are implemented; especially if we expect them to continue to create and contribute their own data.

A Thought Probe Series on Tomorrow's Population, Big Data, and Personalized Predictive Analytics: Part 1, Getting Started

On Friday, for the next several weeks, I'll be posting a series of articles examining how the world is becoming more urbanized and how governments, businesses, and citizens must adapt to ensure that urban growth is done intelligently. I'll discuss how big data can help influence city planning and operations as well as help manufacturers and retailers ensure that their products and services are available to urbanites. These topics are generally grouped together under the topic of smart cities.

In the post entitled Hurricane Sandy and the Resilience of Cities, I indicated that I had more to say about cities and how to make them more resilient. I believe that resilient cities are smart cities. Dr. Boyd Cohen, a climate strategist, believes "the smart-cities movement is being held back by a lack of clarity and consensus around what a smart city is and what the components of a smart city actually are." ["What Exactly Is A Smart City?, Fast Company, 21 September 2012] He continues:

"While some people continue to take a narrow view of smart cities by seeing them as places that make better use of information and communication technology (ICT), the cities I work with ... all view smart cities as a broad, integrated approach to improving the efficiency of city operations, the quality of life for its citizens, and growing the local economy."

Although I'm a technology guy, I agree with Cohen that a broad definition of what constitutes a smart city is better than a narrow one. To show how various city sectors come together to make a smart city, Cohen has developed what he calls the Smart City Wheel. At the hub of the wheel, you find smart people, smart government, smart economy, smart environment, smart mobility, and smart living.

Cohen admits that his "model has been inspired by the work of many others." The fact that many others are working to make cities smarter should be encouraging, especially in the light of the fact that urbanization is occurring at an historical rate. Cohen indicates that "there are over 100 indicators to help cities track their performance with specific actions developed for specific needs" behind the model. He says that efforts to create a smart city should begin with three steps. They are: 1) Create a vision with citizen engagement; 2) Develop baselines, sets targets, and choose indicators; and, 3) Go lean.

Rick Robinson, an Executive Architect at IBM specializing in emerging technologies and Smarter Cities and a self-labeled Urban Technologist, has his own ideas about to get a smart cities program started. ["How Smarter Cities Get Started," The Urban Technologist, 26 July 2012] He writes:

"Many of the environmental, social and economic forces behind the transition to Smarter Cities are common everywhere; however, the capabilities that enable cities to act in response to them are usually very specific to individual cities. They depend on factors such as geographic location, the structure and performance of the local economy, the character of local communities, and the approach of leaders and stakeholders across the city. The relationships between those stakeholders and communities are crucial. Cities may aspire to encourage economic growth amongst small, high-technology businesses; or to stimulate innovation in service delivery by social enterprises; or to switch to more sustainable patterns of travel and energy usage. To act successfully to achieve any of these aims, long and complex chains of connections between individuals need to work effectively, from city leaders, through their organisations, to community and business associations such as small business forums, neighbourhood communities, and faith groups, to individual companies, their employees and citizens across the city."

Robinson makes an important point about the uniqueness of each urban area's situation. The only way to discover that uniqueness, and the connections that are critical for improving society, is through analysis of big data. As Robinson notes in his article, a "complex web of city systems" must be woven into a cohesiveness system working together towards the same objectives. He doesn't claim to have all of the answers about how this can be done, but he writes that there are observable "patterns in the behaviour of the cities who have made the most progress." He states it all starts with a plan.

"Cities already have plans, of course. In fact, often they have lots of plans – for the economy, for housing, for public service transformation, for marketing and for many other aspects of urban systems. What is really required in a Smarter City context, though, is a single plan that captures the vision and means for transformation; and that is collectively defined and owned by stakeholders across the city; not by any single organisation acting alone. It needs to be consistent with existing plans within individual domains of the city; and in time needs to influence those plans to develop and change."

While working in the risk management area several years ago, we noticed that, because large organizations have departmental silos, each department usually maintains its own mitigation and recovery plan. Because those plans aren't coordinated, actions necessary to make one plan work (like shutting down a system) could negatively impact the mitigation plans of other departments. Only through effective coordination could the overall objective of protecting the organization be realized. The same thing holds true when developing a plan for a smart city; plans must be coordinated (if not integrated) so that various groups aren't working at cross purposes. Technology, like the Sense, Think/Learn, Act™ system being developed at Enterra Solutions, can be used to code natural language plans and then analyze them to discover conflicts, redundancies, non-obvious connections (inferences) and so forth. The same technology can be used to discover the unique qualities of neighborhoods and the important connections between stakeholders that are often not easy, or obvious, to understand. Robinson continues:

"A Smarter City plan needs to set out a vision that is clear and succinct, often expressed in a single sentence capturing the future that the city aspires to. That vision is usually supported by a handful of statements that summarise its impact on key aspects of the city – such as wealth creation, inclusivity and sustainability. Together these statements are something that everyone involved in the city can understand, agree to and promote. ... To make the vision deliverable, a set of quantified objectives against which progress can be measured are vital. In IBM as we work with cities to establish these measures, we're learning that social, financial, environmental, strategic and brand values are all important and related. They could include improvements in education attainment; creation of jobs; increase in the GDP contribution by small businesses in specific sectors; reduction in carbon impact in specific systems or across the city as a whole; improvements in measures of health and well-being; and may include some qualitative as well as quantifiable criteria. It is against such objectives that specific programmes and initiatives can be designed in order to make real progress towards the city’s vision.

In other words, Robinson agrees with Cohen that creating a vision is a critical first step towards a smarter city. Robinson believes that the vision is also critical for aligning stakeholder actions for achieving success. To ensure that stakeholders stay engaged and motivated, Robinson recommends "a mixture of long and short-term projects across city domains; and in particular that [the plan] includes some 'quick wins' – in attempting to work in new partnerships to achieve new objectives, nothing builds confidence and trust like early success." Like Cohen, Robinson believes that everyone must be engaged for a plan to succeed. He writes:

"Once stakeholders from a city ecosystem have come together to define a vision and a plan to achieve it, it's vital that they maintain a regular and empowered decision-making forum to drive progress. The delivery of a Smarter City plan relies on many separate investments and activities being undertaken by many independent individuals and organisations, justified on an ongoing basis against their various short-term financial obligations. Keeping such a complex programme on track to achieve cohesive city-level outcomes is an enormous challenge. Such forums are often chaired by the city's local authority; and they often involve representatives from local universities who act as trusted advisors on topics such as urban systems, sustainability and technology. They can include representatives from local employers, faith and community groups, institutions such as sports and retail centres, and trusted partners in domains such as technology, transport, city planning, architecture and energy. The broader the forum, the more completely the city is represented; but these are 'coalitions of the willing', and each city begins with its own unique mix. In fact, a formative event or workshop that brings such city stakeholders together for the first time, is often the catalyst for the development of a Smarter City plan in the first place."

Like many projects, initial excitement for smart city initiatives can be high and then taper off over time. Keeping people engaged is absolutely essential. That won't happen if the smart cities movement is viewed as a passing trend. Ben Rooney writes, "In the pantheon of Next Big Thing trends, the concept of 'smart cities' is one of the trendiest." ["'Smart City' Planning Needs the Right Balance," Wall Street Journal, 27 September 2012] Rooney's fear is that smart cities initiatives will be driven by well-meaning, but clueless, governments and that "there is a fear that such top-down programs may threaten the very vitality that attracts people to cities in the first place." Done correctly, smart cities should increase the vitality of cities not diminish it. That's why Cohen and Robinson are so insistent that all stakeholders need to be engaged.

Rooney agrees that smart cities initiatives are generally based on data analysis. He claims, however, that doing so is nothing new. He explains:

"One of the first uses of data to drive civic policy was more than 150 years ago when during the 1854 London cholera outbreak surgeon John Snow plotted cases on a map. He traced the outbreak to a water pump in Broad—now Broadwick—Street. When the pump handle was taken off, the number of cases immediately began to decline."

Imagine that kind of analysis being applied to urban challenges based on enormous amounts of data and using today's massive computer power. Health and safety are very important areas where connectivity and analysis can play a vital role. This value was recently demonstrated during the investigation that followed the terrorist bombings in Boston. Video and photographic evidence were critical in catching the perpetrators. Enterra Solutions has helped install a system at the Port of Philadelphia that has been recognized for helping make the port more secure. Holt Logistics' Chief of Security, Kurt Ferry, praises the system as "an example of a successful collaboration between private and public sector organizations using grant funds to enhance regional maritime security." ["Security Grants Help Improve Domain Awareness: A Success Story," The Beacon, Winter 2011] According to Rooney, cities of the future (like one being built in Portugal) will be even more connected. He writes:

"PlanIT is a €10 billion, four-year project to build a new smart city in Portugal to house some 225,000 people. With sensors built into every building it presents itself as an urban utopia where smart buildings can sense our presence and anticipate our needs. But behind this drive for efficiency is a fear that optimizing for data will drive out the inefficiencies that imbue cities with their humanity; cinematic history is littered with cautionary urban dystopias, from Fritz Lang's 'Metropolis' to the Wachowski brothers' 'The Matrix.' As Ben Hammersley, the U.K. prime minister's ambassador to Tech City, told the audience at the recent WSJ Tech Cafe event, optimizing is a dangerous thing unless you are quite clear on what exactly you are optimizing."

You recall that one of Cohen's first steps was to "go lean." Rooney is warning that you can go too lean. I agree. Hammersley an adviser to the Danish city of Aarhus, gave the Tech Cafe audience a specific example of what he was talking about. He told him:

"'Most smart-city initiatives are about optimizing the route for commuters getting to the office,' he told the audience. 'But Aarhus, which has the highest number of pavement cafés in the country—it is essentially one huge café—doesn't want to optimize that. The lesson is be careful what you measure because you may end up optimizing on the wrong thing.'"

That's where big data analysis and relationship discovery technology can play a major role in helping cities become the best they can be. Rooney labels the use of big data as "a bottom-up" approach to smart city planning. He writes:

"A very different kind of smart-city initiative has had success in cities as diverse culturally and geographically as San Francisco and Singapore, and is coming to Europe. Called Urban Prototyping, the movement approaches cities from a bottom-up—not top-down—viewpoint. Peter Hirshberg, who lives in San Francisco, is the man behind the drive, which aims to bring together programmers, planners, activists, and even artists to use data and technology to solve problems in cities. 'There needed to be a dialog between people doing interesting things and the folks running the city,' he said. 'San Francisco is awash with data, but it turned out that inside the bus system the guys use Walkie Talkies and clipboards to track busses that break down.' Over one weekend in July 2011 ... developers built an iPad app to solve this problem. 'Everyone wants the busses to run properly. This was a case of citizens getting together and solving a problem.' He cites dozens of other examples. 'We had a festival called "The Summer of Smart". The head of public works for San Francisco came along with a proposal. "Where I see public art I don’t see graffiti," he told us. "Where I see graffiti, I don’t see public art."' The result was a project called Art Here that brings together the two."

Although it sounds great, Rooney admits that even the best-intentioned efforts need champions who can make things happen. He reports that nine months after the bus app had been developed for the city, it still hadn't been implemented. That kind of underwhelming response can trigger both anger and ambivalence. As Rooney put it, "City Hall has proved to be the movement’s biggest challenge." He concludes, "If this movement is to make a real impact on the lives of city dwellers it will take more than some well-intentioned hackers and a lot of pizza."

I'm speculating that is why one of the main sectors on Cohen's Smart Cities Wheel is Smart People. Based on advertisements run during the last political season, it's clear that we could use a lot more smart people in government. Robinson agrees that "it’s impossible to understate the importance of individual people in making cities Smarter. The functioning of a city is the combined effect of the behaviour of all of the people within it; and Smarter City systems will not change anything unless they engage with and meet the needs of those individuals." Fortunately, I'm an optimist. I believe that technology can be used to create a better future and smarter cities.

Water, Water, Every Where -- What Can We do About It? -- Part 1

In the Part Two of Samuel Taylor Coleridge's "The Rime of the Ancient Mariner," the bard discusses the distress of mariners floating upon a windless ocean under a withering sun and running out of supplies (including water). One of the most famous stanzas from that poem is:

Water, water, every where,
And all the boards did shrink;
Water, water, every where,
Nor any drop to drink.

More than one analyst has used that poetic imagery to portray the plight of the world's population in the years ahead. We sit on planet covered by water and yet the predictions about the availability of useful water are dire. Water is one of the rare topics that touches almost every category covered by this blog: globalization, innovation, supply chain, risk management, resilience, manufacturing, big data, smart cities, food and drink, and so forth.

In this first segment of this series, I'll discuss the general future of water and how it is likely to affect the world in general. In the second segment, I'll discuss how water (or lack of it) can affect supply chains. In the final segment, I'll discuss some of the innovations that are being made to mitigate the dire predictions of water shortages.

First, and foremost, the world needs potable water. "If water has the capacity to enhance life," writes The Economist, "its absence has the capacity to make it miserable." ["Enough is not enough," 20 May 2010] The article goes on to note that the sanitary habits of many developing nations add to current problems by polluting potentially drinkable water. As a result, disease increases, mortality decreases, and development is stifled. The article explains:

"Clean water is crucial for children with diarrhoea; they need rehydration and electrolytes to survive. Even then, they may still be at risk of malnutrition if they continue to suffer from diarrhoea, which will prevent them from absorbing their food properly. This usually has long-term consequences. Malnutrition in the womb and during the first two years of life is now seen as causing irreversible changes that lead to lifelong poor health. Poor health, bad in itself, translates into poor economic output. ... The problem is not strictly a matter of water scarcity. Indeed, expanding the availability of water may actually increase disease, since it may lead to stagnant pools in which mosquitoes breed, and then spread malaria or dengue fever; or perhaps excess water will run through human or toxic waste and thus contaminate the ground or a nearby stream. So hygiene and protected storage are essential. Yet there is a shortage of safe water for drinking and sanitation in many places, not least in the cities to which so many people are now flocking."

Water is so crucial to life and good health that the article notes, "One of the development goals set by the United Nations at the millennium was to halve the proportion of people without basic sanitation and a decent source of fresh water by 2015." That goal is unlikely to be met. "Progress is slow," the article states, "especially for sanitation, and particularly in Africa, and increasingly policymakers are finding that heavily subsidised projects are failing." Water is still predicted to be a scarce commodity and thus a valuable commodity. In fact, it is predicted to become so valuable that Bloomberg BusinessWeek asks, "Is water the new oil?" ["How the Experts Would Fix the Water Supply," 21 March 2013] The BusinessWeek article continues:

"Population growth and agricultural demand, combined with aging infrastructure and waste, have produced water scarcity in many countries. Prices are rising, and the lack of a dependable water supply is a massive health and economic issue."

Climate change has always played a role in the water picture. If you have too much water, you get flooding. If you have too little water, you get drought. Both situations can wipe out crops and create a cascading effect felt around the globe. Alan Berjga notes, "When rain doesn’t fall in Iowa, it's not just Des Moines that starts fretting. Food buyers from Addis Ababa to Beijing all are touched by the fate of the corn crop in the U.S., the world's breadbasket in an era when crop shortages mean riots." ["Drought Stalks the Global Food Supply," Bloomberg BusinessWeek, 5 July 2012] Berjga added:

"In 2010 a drought that withered Russia's wheat crop sent consumer prices in North Africa and the Middle East skyward, contributing to unrest that fed the Arab Spring. More than 60 food riots occurred worldwide between 2007 and 2009, when rapidly rising commodity prices wreaked havoc on family budgets, especially in poorer countries, where 70 percent of a household's income may go to food. An extended U.S. drought would have a 'tremendous' impact on world food prices, as a higher cost for one dollar-denominated export crop cascaded into others, [Abdolreza Abbassian, a senior economist with the United Nations’ Food & Agriculture Organization in Rome,] says. 'The world looks to the U.S. as the safest source of supply,' he says. 'Everyone watches the U.S. because they can rely on it. Without it, the world would starve.'"

This is not the first time that I've addressed the subject of water. Back in 2007 I wrote post entitled The Coming Water Wars? In that post, I cited several experts who noted that climate change will bring more rain to some areas (maybe too much rain) and less rain to other others. It is the very unpredictability of these rainfall totals that create such concern. As I wrote back then, "The trick, as it has always been, is getting the right amount of water to the right place at the right time." One of the articles I cited in that blog post was written by Doug Struck. ["Warming Will Exacerbate Global Water Conflicts," Washington Post, 20 August 2007]. Struck reported that such attempts to redistribute water have not always been successful or welcomed. He wrote:

"Humans have long attempted to reconcile nature's inconstancies with giant plumbing: reservoirs and dams that hold back floodwaters for more gradual release; dikes and other barriers to protect developed areas; canals and pipelines to take water from wet areas to dry. But that kind of infrastructure is expensive, especially for Third World governments. Environmentalists decry the impact on wildlife. And building dams in earthquake zones tempts disaster."

In a more recent three-part series on water (Let's Talk Water, Part 1, Part 2, and Part 3), I discussed many of the issues raised above. In Part 1, I noted some of the reasons that experts are fairly confident in their predictions that there are going to be water shortages. First, they note that glacial ice, which many parts of the world depend on as a source of fresh water, is not being replenished. Second, an equally important source of fresh water, water found under the ground, is also being depleted faster than it can be replenished. Both of those sources of water take years, if not decades or centuries, to replenish. In other words, mitigating water shortages in areas dependent on glacial or underground sources of water won't be easy or quick.

All of this, I admit, sounds pretty gloomy. The picture won't look too much brighter in the next segment of this series which will discuss the impact of water shortages on the supply chain. Hopefully, however, the future will look a little brighter after you read the final segment that discusses some of the breakthroughs that are being made and strategies being discussed to address the water challenge. In my 2007 post, I concluded, "Like other global problems, dealing with water control, collection, and distribution is going to take global leadership, global vision, and global solutions." That certainly hasn't changed.

Secure Information Sharing Has Never Been More Important

If you are concerned about cybersecurity, you probably read the New York Times' article about the Chinese military carrying out hacking operations. ["Chinese Army Unit Is Seen as Tied to Hacking Against U.S.," by David E. Sanger, David Barboza, and Nicole Perlroth, 19 February 2013]. Sanger, Barboza, and Perlroth report:

"Mandiant, an American computer security firm, [has tracked] for the first time individual members of the most sophisticated of the Chinese hacking groups — known to many of its victims in the United States as 'Comment Crew' or 'Shanghai Group' — to the doorstep of the military unit's headquarters. The firm was not able to place the hackers inside the 12-story building, but makes a case there is no other plausible explanation for why so many attacks come out of one comparatively small area. ' Either they are coming from inside Unit 61398,' said Kevin Mandia, the founder and chief executive of Mandiant, in an interview last week, 'or the people who run the most-controlled, most-monitored Internet networks in the world are clueless about thousands of people generating attacks from this one neighborhood.' Other security firms that have tracked 'Comment Crew' say they also believe the group is state-sponsored, and a recent classified National Intelligence Estimate issued as a consensus document for all 16 of the United States intelligence agencies, makes a strong case that many of these hacking groups are either run by army officers or are contractors working for commands like Unit 61398, according to officials with knowledge of its classified content."

If you assume that the Chinese military is only going after government and military secrets, you would be wrong. The writers report that the "Comment Crew has drained terabytes of data from companies like Coca-Cola." Of even greater concern is the fact that the Comment Crew and other such groups are increasingly focused "on companies involved in the critical infrastructure of the United States — its electrical power grid, gas lines and waterworks." They note that "one target was a company with remote access to more than 60 percent of oil and gas pipelines in North America." More on that story below.

Not surprisingly, Chinese government spokesmen deny that China is engaged in cyber espionage. The truth, of course, is that China and many other governments (including the U.S.) have active cybersecurity units. To make that point, Sanger, Barboza, and Perlroth report, "Working with Israel, the United States has used malicious software called Stuxnet to disrupt Iran’s uranium enrichment program. But government officials insist they operate under strict, if classified, rules that bar using offensive weapons for nonmilitary purposes or stealing corporate data." Plausible deniability has always been an important tool in any government's kit. The Mandiant report makes such deniability a lot harder for the Chinese government to sell. The article reads like a best-selling "whodunit" novel whose prime suspects are named UglyGorilla and DOTA. The tale takes readers down dark cyber alleyways that lead to the streets of Shanghai and the murky ties with Chinese military.

As noted above, however, military and state secrets are not the only targets of Chinese hackers. Coca-Cola databases were attacked as its "executives were negotiating what would have been the largest foreign purchase of a Chinese company." During that time, the "Comment Crew was busy rummaging through [the company's] computers in an apparent effort to learn more about Coca-Cola’s negotiation strategy." The tale continues:

"The attack on Coca-Cola began, like hundreds before it, with a seemingly innocuous e-mail to an executive that was, in fact, a spearphishing attack. When the executive clicked on a malicious link in the e-mail, it gave the attackers a foothold inside Coca-Cola’s network. From inside, they sent confidential company files through a maze of computers back to Shanghai, on a weekly basis, unnoticed."

As a result of all of this activity, "Obama administration officials say they are planning to tell China’s new leaders in coming weeks that the volume and sophistication of the attacks have become so intense that they threaten the fundamental relationship between Washington and Beijing." That's not a good thing. When the world's two largest trade elephants start charging one another, the earth is going to shake. As Sanger, Barboza, and Perlroth write, "Mr. Obama faces a vexing choice: In a sprawling, vital relationship with China, is it worth a major confrontation between the world's largest and second largest economy over computer hacking?" The answer is likely to be in the affirmative given that Comment Crew has attacked organizations holding vital information about critical infrastructure. Sanger, Barboza, and Perlroth explain:

"The most troubling attack to date, security experts say, was a successful invasion of the Canadian arm of Telvent. The company, now owned by Schneider Electric, designs software that gives oil and gas pipeline companies and power grid operators remote access to valves, switches and security systems. Telvent keeps detailed blueprints on more than half of all the oil and gas pipelines in North and South America, and has access to their systems. In September [2012], Telvent Canada told customers that attackers had broken into its systems and taken project files. That access was immediately cut, so that the intruders could not take command of the systems. ... Security researchers who studied the malware used in the attack ... confirmed that the perpetrators were the Comment Crew. 'This is terrifying because — forget about the country — if someone hired me and told me they wanted to have the offensive capability to take out as many critical systems as possible, I would be going after the vendors and do things like what happened to Telvent,' [Dale]. Peterson of Digital Bond said. 'It's the holy grail.'"

The New York Times is not the only media outlet that been writing about Chinese hackers. Bloomberg Business published an interesting video and article on the subject as well. That's really the point of this post: No organization is completely safe from serious hacking efforts. "In an ever-increasingly digital world," writes John Casaretto, "many have become immune to the news of ongoing threats that persist on the internet, breaches, privacy, attacks happen every day and once in a while one of them is significant enough to hit the news." ["One World Labs Takes on Data Leaks in the Dark Web," SiliconANGLE, 18 February 2013] He continues:

"Sadly, even organizations fall under this false sense of security, feeling their risk and their security is solid, that all that is going on with their information is known and secured. The bare truth is that the breaches and data leaks we hear about form only the tip of the iceberg of what is really going on out there. The 'Dark Web' is probably the best way to describe this, the places where search engines do not go and things you can only find if you are looking for it; it includes botnets, anonymous networking, C&C networks - in places all over the world, including the U.S."

Casaretto warns that "once your data is out there, you are at risk." He explains:

"For anyone that thinks that their four-walls are secure, think again. No amount of egress security, DLP, predictive security models if you were even that far ahead of the pack can account for everything given so many variables for data leakage. Among the many vectors are smartphones, web browsing, social engineering, the risk of leaked information may even come from your own IT staff. As it turns out that time and time again, information is accidentally exposed even in the most innocent of circumstances."

Technology can help. Casaretto reports that "One World Labs (OWL) has developed a one-of-a-kind software engine that seeks, indexes and collects information on a platform called Open Source Intelligence Gathering (OSINT)." He continues:

"With 1% of the deep web accessible to the common person, it goes where no one else can, indexing deep into the nether reaches of the net. These are the kind of places where information is incoming, largely never even seen, much less shared by Google and typically unbeknownst to the company whose information has leaked. From countless forums, file-sharing sites, listservs, IRC channels, ftp servers and more there is a constant, nefarious publishing and sharing of information that could have your name on it. ... OSINT is a fascinating engine, comprised of analytics, semantics, and Big Data elements. The platform is built on a distributed clustered framework. As you can imagine, the index itself is distributed, encrypted and built with the utmost security layers throughout. Access to the system is tight. Network design comes into play as many, many sites are not appreciative of an index that could be scraping their information. The operation engages its tasks through a complicated and non-static web of anonymous networking and thousands of running proxy configurations designed to avoid detection and maintain access to sometimes super-secretive environments. If a company were to assign a human to engage in this type of discovery, they could quickly after some training, find and discover at a rate of about 1 page per minute. The OSINT engine scrapes 75 pages per second and is tuned to detect across the semantics of the most prevalent languages, complete with variations."

Another technology that can help involves Secure Information Sharing (SIS). Enterra’s Secure Information Sharing technology can be utilized to facilitate the sharing of information across partner communities. This framework is founded on an automated rules management process that monitors source policies and the environment where they are applied (i.e., situational awareness) and an Attribute Based Access Control (ABAC) model that coordinates information/data sharing across a federated group environment. The SIS framework applies policy-driven automated rules to ensure individuals are able to quickly and securely access their data resources to effectively perform their missions. It strengthens existing layered security solutions that are often not enough protection from cyber attacks, especially when orchestrated and/or aided by foreign governments like Russia and China.

Infrastructure, the Supply Chain, and Economic Growth

"Deficiency in transport and communications infrastructure is one of several supply chain barriers that act as obstacles for speeding up global economic growth." At least that is one of the conclusions of a report released by the World Economic Forum (WEF) at last month's meeting in Davos, Switzerland. ["Lack of Transport Infrastructure – Obstacle to Economic Growth (Switzerland)," Dredging Today, 24 January 2013] The report, which is entitled "Enabling Trade: Valuing Growth Opportunities," was prepared by the WEF "in collaboration with the World Bank, and Bain & Company, a Boston-based global management consulting firm."

To be frank, the report's assessment of the importance of infrastructure for a growing economy only confirms what supply chain professionals around the world have been saying for some time. Pundits in the U.S. normally make that point while lamenting the sad state of America's infrastructure. A year ago the editorial staff at SupplyChainBrain asked, "Can the impact of poor US logistics and other infrastructure be quantified?" ["Economic Impact of Poor Infrastructure," 18 January 2012] They call this "the multi-trillion question." To answer this question, the staff turned to the American Society of Civil Engineers (ASCE), which issues a quadrennial "report grading US infrastructure across a number of areas." Last January the staff noted that the ASCE was on tap to issue a new report this year (which it has done -- more on that below); but, "as a prelude to that [report], ... the ASCE ... developed a series of smaller reports under the headline of 'Failure to Act.' The latest one focused on the economic impact of US infrastructure problems, some of which is summarized in the infographic below."

The infographic highlights the fact that there is an anticipated "$1.1 trillion gap in funding for infrastructure between what the ASCE believes is needed in investment against the projected funding levels on the current path through 2020." ASCE analysts believe that failure to close this gap "will have a number of dire economic consequences." Those consequences include: "a $3 trillion loss of GDP growth, average loss of $3000 in disposable income per family, etc." The conclusions of the most recent ASCE report (issued last month) are consistent with its earlier reports. "Increasing annual infrastructure spending in the U.S. by $157 billion over the next eight years would save $3.1 trillion in gross domestic product, $1.1 trillion in trade and 3.5 million jobs, according to [the] new report. Current U.S. policies will underfund surface transportation, aviation, waterways, the electrical grid and sewers by about $1.1 trillion through 2020." ["Road, Power Gaps May Cost U.S. GDP $3.1 Trillion, Group Says," by Jeff Plungis, Bloomberg, 15 January 2013]

At a press conference, Gregory E. DiLoreto, president of ASCE, stated, "Infrastructure is the lifeblood of our economy and provides the foundation for assuring a high quality of life for all Americans. If we don't invest now, all Americans will pay more in the long run." Plungis reports that the U.S. Chamber of Commerce agrees with both ASCE's assessment and conclusion. Janet Kavinoky, the Chamber's executive director for transportation and infrastructure, told Plungis, "Public and private investment and new, innovative strategies are needed to repair, rebuild and revitalize the nation’s transportation systems."

When most of us think about transportation infrastructure, what generally comes to mind are roads, bridges, railway systems, harbors & ports, and airfields. One transportation network that receives less attention involves America's coastal and inland waterways. Plungis reports that, due to last year's severe weather, the inland waterways are receiving more attention. He explains:

"Low Mississippi River water levels that have restricted barge traffic have put a spotlight on a fragile waterways system, said Rick Calhoun, president of Cargo Carriers, Minneapolis-based Cargill Inc.'s transportation subsidiary. About $2.8 billion of commodities was at risk when it looked like barge traffic was going to stop, according to American Waterways Operators, a trade group based in Arlington, Virginia. I fear the near closure of the river is simply a preview of what will happen when we have a catastrophic failure of a lock or dam' on the upper Mississippi, Calhoun said."

Transportation infrastructure is not the only infrastructure that plays a critical economic role. Utility and communication infrastructure must also be discussed. When Pacific Gas and Electric Company's CEO, Tony Earley, was asked to identify "the most serious issue facing the nation's giant utilities in the next 20 years," he stated that the answer to that question "was easy." The greatest challenge involves "the huge need for investment in basic infrastructure, from pipes and power lines to poles, transformers and more." ["Sandy highlights fragile infrastructure," San Francisco Chronicle, by Andrew S. Ross, 1 November 2012] In the aftermath of Superstorm Sandy, Edward Luce, wrote, "At some point in the next 12 months, we will discover whether the US has the will to bring its infrastructure into the 21st century." ["Washington must stop the creeping rust," Financial Times, 25 November 2012] He continues:

"The hope, as the Brookings Institution Metropolitan Center puts it, is that Congress will 'cut to invest' rather than doing so crudely across the board. There are three reasons to worry. First, there is remarkably little public outrage over the dilapidation in the power grid, public roads, domestic airports and waterways. This means that lawmakers will be feeling stronger pressures in other directions. ... Second, most Americans are unaware of how far behind the rest of the world their country has fallen. According to the World Economic Forum's competitiveness report, US infrastructure ranks below 20th in most of the nine categories, and below 30 for quality of air transport and electricity supply. The US gave birth to the internet – the kind of decentralised network that the US power grid desperately needs. Yet according to the OECD club of mostly rich nations, average US internet speeds are barely a 10th of those in countries such as South Korea and Germany. In an age where the global IT superhighway is no longer a slogan, this is no joke. The budding US entrepreneur can survive gridlocked traffic. But a slow internet can be crippling. Third, it may be asking too much of Washington in its present state of polarisation to give the green light to an ambitious infrastructure plan."

Luce reports that Asian countries are doing a much better job of upgrading their infrastructure than the United States. That's another reason that Asia is rising while America is falling on the global economic stage. Susan Crawford, a professor at the Benjamin N. Cardozo School of Law, notes that President Barack Obama gave a nod to infrastructure improvements during his second inaugural speech. "[He] said that during his second term, Americans would act together to 'build the roads and networks and research labs that will bring new jobs and businesses to our shores' and that 'we cannot cede to other nations the technology that will power new jobs and new industries — we must claim its promise.'" ["How to Get America Online," New York Times, 23 January 2013] She continues:

"The president is right that digital communication networks — especially high-capacity fiber networks reaching American homes and businesses — can be a powerful economic engine. But we are far away from being able to realize that vision, even as we cede the advantage such technology offers to other countries."

Crawford asserts that everyone seems to recognize the importance of highspeed communications networks but the leadership required to actually bring them about is lacking. She underscores the fact that America needs "the leadership necessary to enact pro-growth, pro-innovation and competition-enabling rules." She claims that "a few powerful companies" have strong economic reasons to maintain the status quo and that they have bullied policymakers into seeing things their way. As a result, she claims it is not surprising that "America lags behind almost every other industrialized country in high-speed access — even France, the bête noir of American free-marketeers, has better and cheaper Internet access." She offers a few recommendations that she believes will help get America better connected.

"First, it must remove barriers to investment in local fiber networks. Republican and Democratic mayors around the country are rightly jealous of the new, Google-built fiber network in Kansas City, Mo., which is luring start-ups from across the country. And yet in nearly 20 states, laws sponsored by incumbent network operators have raised barriers for cities wanting to foster competitive networks. ... Second, the F.C.C. must make reasonably priced high-speed access available to everyone. In the 20th century, we made a commitment to provide universal telephone service to every American and to subsidize that utility service for our poor and rural neighbors. High-speed Internet access is now undisputedly the dominant communications technology of our era. We need to make sure that subsidies are available for competitive companies willing to extend world-class service to more Americans. ... Finally, the F.C.C. must foster more competition by changing the rules that keep the status quo in place. "

She concludes, "With a truly pro-competition agenda at the F.C.C., we could discover great reservoirs of increased productivity and new forms of making a living. ... It unleashes human ingenuity." Unfortunately, Washington remains a quagmire of political party bickering and posturing. As a result, there is not much good news on the horizon concerning America's infrastructure. The only bright spot is the railway sector (see my post entitled U.S. Railroads on the Move) because the railroads have self-invested in their infrastructure. Until the average American gets excited about the topic, politicians aren't going to tackle this enormous challenge.

Hurricane Sandy and the Resilience of Cities

"New Yorkers are known for their resilience," writes Deborah L. Jacobs. "But Hurricane Sandy was a whack on the side of the head." ["How Do You Spell Resilience?" Forbes, 30 October 2012] Nevertheless Jacobs is optimistic. "No doubt New Yorkers all over the Metro area will improvise other ways to cope," she writes. From his home in Vermont, environmentalist Bill McKibben watched in awe and horror as the devastating effects of Sandy rolled over the eastern U.S. coastline. In an interview with Amy Goodman, McKibben stated:

"The storm was completely amazing—the lowest barometric pressures ever recorded north of Cape Hatteras. The storm surge in New York City broke all the records, and the records go back to 1821. It broke them by large margins. [It was] just [an] astonishing storm in size. As it came over all that warm water up the East Coast, it just kept growing and deepening. And, of course, by now, everyone has seen the images of what happened in the city, a kind of — kind of horrible sort of vulnerability watching the water pour into subway tunnels, watching the Lower East Side turn into a kind of extension of the East River, and, of course, the great joy in watching resilient New Yorkers coping, as well as could possibly be imagined, with a truly amazing situation." ["Bill McKibben on Resilience of New York City Residents Amidst Worst Storm Since 1821," Democracy Now, 30 October 2012]

Sadhbh Walshe writes, "Although [New York] is no stranger to catastrophe, both natural and man-made, the wreckage left in Sandy's wake is testing the city's resilience." ["Wreckage left in Sandy's wake tests city's famous resilience," Irish Times, 2 November 2012] Walshe reports on current conditions:

"As of [November 1st], lower Manhattan was still without power, creating a surreal situation reminiscent of cold war Berlin where half of the city was overloading on business as usual, while the other, by force of circumstances, was taking a break from it all in the dark. On the east side, 40th street is separating those with power and those without. On the west side 25th street is the demarcation line. For those living south of this artificial border, the novelty of trying to survive modern life without modern appliances is starting to wear off. ... The biggest challenge for New Yorkers at the moment is getting to work. You can try to imagine what the traffic is like in an already grid-locked city when many of the 5.2 million daily subway users are forced to commute by car or bus. Some intermittent subway service had resumed on Wednesday night but the lines for buses to take commuters over the bridges in Brooklyn and Queens were stretching hundreds of yards yesterday morning. Even those lucky enough to have trains running all the way to their offices were emerging ashen and defeated after their commute. In a few days' time, hopefully, the lights will be back on, the subway will be running again and New York will be back to business as usual. It’s going to take a little longer, however, for the memory of Sandy's wrath to truly fade."

My company, Enterra Solutions, is based in Pennsylvania and our headquarters suffered power outages as well as disruptions in both phone and internet services as a result of Hurricane Sandy. However, the devastation experienced along the coast surpassed anything we had to deal with and our thoughts and prayers go out to those affected by the storm; especially, those who were injured or lost loved ones. The news reports of the damage and the efforts to deal with it started me thinking about cities and their resiliency. In two recent posts (Will Cities Save Us? and Tapping the Economic Power of Mega-Cities), I discussed how important cities are to the future of the planet and how big data is going to help improve the quality of urban life. Since many of the world's largest and most dynamic cities lie near to the coast, they are subject to kind of natural disaster represented by Hurricane Sandy. That means that governments and businesses must be prepared to deal with disruptions in services as well as do all they can to mitigate the consequences of natural disasters. I believe that big data will play an increasingly important role in helping government officials and business executives to do just that.

There are bound to be a lot of lessons learned in the aftermath of Sandy. For example, one New York hospital had back-up generators located on the 13th floor well out of harm's way of the flooding that affected the city. Surprisingly, however, the pumps that provided lubricating oil for the generators were located in the flooded basement and, as a result, the hospital had to be evacuated. The telecommunications sector also discovered some new things about its disaster plans. Anton Troianovski and Sarah Portlockat reported that following Sandy's landfall "some of America's most densely populated neighborhoods remained without wireless service, highlighting new risks as more people drop landline phones." ["Outages Expose Wireless Carriers' Backup Plans," Wall Street Journal, 1 November 2012]

One sector that did respond quickly (and could do so because it had made preparations) was the retail sector. The sector was motivated both by opportunity and humanitarianism. Shelly Banjo reported:

"Retail chains seized on the selling opportunity created by Sandy this week as consumers with flooded homes and damaged roofs flocked to stores to begin what will likely be weeks of cleanup in the aftermath of the powerful storm. Shoppers lined up at some Home Depot Inc., Wal-Mart Stores Inc. and Lowe's Cos. stores, ... snagging necessities such as chain saws for clearing fallen trees and sump pumps to remove water or sewage from basements. Demand was particularly strong for generators, which can run as much as $1,500, from hundreds of thousands of people who are expected to remain without power through the weekend and perhaps longer. Big-box retailers are accustomed to leveraging their transportation and supply-chain networks to respond quickly to natural disasters. They said they were ready after Sandy to serve the swaths of people looking to rebuild their homes and return to everyday life." ["Big-Box Retailers Spring Into Action," Wall Street Journal, 31 October 2012]

Banjo reports that even though many store shelves had been stripped bare prior to the storm's arrival, retailers worked feverishly to resupply stores so that supplies would be available in storm's aftermath. That kind of planning and movement of goods is aided by supply chain visibility and close collaboration. Banjo reports, for example, that "Home Depot this year for the first time pre-loaded trucks of supplies and asked truck drivers to spend the night in rest stops, parking lots, and hotels inside the storm's path." All concerned deserve a pat on the back for their efforts. The military, which is also accustomed to responding to disasters, reacted quickly and effectively.

Despite some excellent efforts there is still more that can be done. Tom Teixeira, a London-based Life Sciences Practice Leader in Willis Global Markets International, writes:

"There is still not enough alignment between the procurement function and group risk. The silo mentality – driven by localised Profit & Loss (P&L) accounts – has created opposing objectives, such as procurement trying to significantly reduce inventory and group risk and operations trying to reduce the level of business interruption should disasters occur." ["Hurricane Sandy Will Reveal the Cost of Poor Supply Chain Management," WillisWire, 30 October 2012]

In the midst of recovery, there have been stories of heroism, sacrifice, and hard work. Picking themselves from amidst the rubble, New Yorkers have struggled mightily to get back to work. In higher areas, stores opened almost immediately. In Manhattan and Staten Island, where most of the flooding occurred, it was a different story. New York's Mayor Michael Bloomberg told reporters, "People are transitioning from shock to real-world problems of how do you get water and how do you get food." ["New York struggles back to working life," by Shannon Bond, Financial Times, 1 November 2012] In the aftermath of Sandy, the editorial staff at the Financial Times wrote:

"[The] landfall of hurricane Sandy in New York and surrounding areas is a reminder of nature's awesome power. ... As one might expect from a country with America's can-do spirit, the response has been impressive. Not only have the emergency services performed heroics, the clean-up has proceeded apace. Only days after much of New York’s subway system was submerged under feet of water, large parts have returned to service. But even this burst of resolve cannot disguise a bigger inconvenient truth: that New York and much of the eastern seaboard lie increasingly at nature's mercy." ["Superstorm Sandy sounds a warning," 1 November 2012]

John Gapper writes, "Rivals may spy opportunity in the city's travails – some will drop hints to employers and exchanges that they ought to move somewhere safer and dryer. But New York is not the only large metropolis perched by the coast or a tidal harbour. We are witnessing the future." ["New York's ascent meets the rising ocean," Financial Times, 31 October 2012] The United Nations Office for Disaster Risk Reduction (UNISDR) agrees with Gapper and other analysts that "cities and local governments need to get ready, reduce the risks and become resilient to disasters." ["Making Cities Resilient"] Its website states:

"National governments, local government associations, international, regional and civil society organizations, donors, the private sector, academia and professional associations as well as every citizen need to be engaged in reducing their risk to disasters. All these stakeholders need to be on board, take on their role and contribute to building disaster resilient cities."

Although cities like New York have shown remarkable resiliency, I agree that there is more that can be done. The answers begin with data and the analytics that provide actionable insight for private and governmental leaders. In the days ahead, I intend to write more about what can be done to make cities more resilient.

Accurate Container Weights Remain a Safety Concern

Everyone involved in the maritime container shipping industry understands that declaring accurate container weights improves "the safety of container ships, their crews, shoreside personnel involved in the handling and transport of containers, and other cargo aboard the ship." That's why back "in December 2010, the World Shipping Council (WSC) and the International Chamber of Shipping (ICS) jointly urged the IMO to establish an international legal requirement that all loaded containers be weighed at the marine port facility before stowage aboard a vessel for export." ["Global Shipping Organizations Commend the IMO for Agreeing to Solve the Problem of Misdeclared Container Weights," The Maritime Executive, 31 May 2011] As a result, the "Maritime Safety Committee of the IMO (MSC 89) agreed to a proposal made by the Netherlands, Denmark and Australia to establish a new work item to address the issue of incorrectly declared containerized cargo shipments and to undertake other measures to improve the safety of container stowage and ship operations." As the headline of The Maritime Executive article declares, most stakeholders in the shipping industry hailed the IMO decision and looked forward to the future. The article continued:

"WSC and ICS, along with many IMO Member States and representative bodies for seafarers, dockworkers and masters, support this initiative that demonstrates the compelling need to address the problem. Verification of actual container weight before vessel loading and the availability of the actual container weights for proper and safe stowage planning will mark a long overdue and important improvement in industry safety. WSC and ICS look forward to assisting the IMO to institute a new set of requirements to accomplish this as soon as possible."

The paper submitted to MSC 89 by the WSC and ICS laid out the following arguments about why accurate weights are critical for the safe handling and transportation of containers:

"Containers that are 'overweight', i.e. that weigh more than the declared weight provided by the shipper, can create safety concerns for the ship, its crew, other cargo on board, and the workers in the port facilities handling the container. Incorrectly declared weights, both over and significantly below the limits declared, also lead to incorrect stowage planning and implementation, and operational problems. Less frequently, containers can be loaded beyond the maximum gross weight indicated on the Safety Approval Plate. All of these situations present safety and operational concerns. There is no available data that reliably indicates how many containers have an incorrectly declared weight; however, the problem is significant, and arises in almost every trade to some extent. In some geographic trade lanes, the problem is common and, at times, rampant. The problems resulting from mis-declared container weights include the following:

1. incorrect vessel stowage decisions;
2. re-stowage of containers (and resulting delays and costs), if the overweight condition is ascertained;
3. collapsed container stacks;
4. containers lost overboard (both those overweight and containers that were not overweight);
5. cargo liability claims;
6. chassis damage;
7. damage to ships;
8. stability and stress risks for ships;
9. risk of personal injury or death to seafarers and shoreside workers;
10. impairment of service schedule integrity;
11. supply chain service delays for shippers of properly declared containers;
12. last minute shut-outs of confirmed, booked and available loads when the actual weight on board exceeds what is declared, and the total cargo weight exceeds the vessel limit or port draft limit;
13. lost revenue and earnings;
14. liability for accidents and fines for overweight containers on roads, and resulting time and administrative efforts and costs to seek reimbursement from responsible parties;
15. impairment of vessels' optimal trim and draft, thus causing impaired vessel efficiency, suboptimal fuel usage, and greater vessel air emissions; and
16. mis-declared weights can also deprive Customs authorities of revenues in cases where duties or tariffs are applied by weight measurement of a commodity.

"In short, such containers present a risk to industry workers, to ships, to equipment, to operational reliability and to accurately declared shipments."

Those arguments should have been sufficient to convince anyone of the need for accurately weighing and reporting container weights. Unfortunately, in September 2012, "two countries providing flags of convenience (FOC) to merchant vessels, Panama and Cyprus, threw up roadblocks to the safe carriage of containerized cargo." ["Flags of Convenience: Making Cargo Safety Inconvenient," by Richard Madden, The Maritime Executive, 28 September 2012] Madden reports:

"With over 80% of world cargo being moved on container ships and those ships getting ever larger, any measure that can make these shipments safer must be considered. Sadly, these countries find that some proposed measures are inconvenient. The International Maritime Organization's (IMO) Sub-Committee on Dangerous Goods, Solid Cargoes and Containers wrapped up its most recent meeting on 21 September 2012. Among the items on the agenda were measures to prevent the loss of containers at sea. Two proposals were submitted to the Sub-Committee requiring accurate container weights – one from a coalition of the World Shipping Council (WSC) and numerous industry advocacy groups and countries, and the other from Germany. ... The two proposals differed in that the WSC proposal required the actual weighing of the stuffed container whereas the German proposal would also allow the calculation of the container weight by the shipper based on the tare weight of the container and the weight of the contents. While neither proposal received overwhelming support, member state delegations agreed that amendments to SOLAS were required to increase the responsibility of the shipper in regard to the declaration of container weights."

Madden writes that, in order to underscore its case, the WSC had published a paper in December 2011 in which it reported that "serious maritime casualties, including the capsizing of one vessel and structural failure of another, as well as significant cargo and vessel damage, can be directly attributed to misdeclared container weights. In some instances, the actual weight of containers was up to 350% higher than declared." The delay in requiring accurate container weights is going be significant (if it is ever enacted). Madden reports:

"Due to 'technical objections' by the delegations from Panama, Cyprus and Greece, further discussion on this matter has been pushed to a correspondence group with another report due in September 2013. At this point, the earliest a SOLAS amendment requiring the accurate weighing or declaration of weight of a container might come into effect is 2017."

Those countries should feel nothing but shame for their actions. The TT Club, a London-based mutual insurance association, has "urged all participants at the International Maritime Organization’s session on Dangerous Goods, Solid Cargoes and Containers to redouble their efforts to come up with a global regulation to verify the weights of containers." ["TT Club Urges Container Weight Verification," by HButler, JOC Sailings, 2 October 2012] The insurer insists that "such a regulation is crucial to the safety of container ships in view of the fact that the erroneous declaration of container weights has been identified in a number of recent high-profile maritime disasters such as those involving the MSC Napoli, Riverdance and Husky Racer." Peregrine Storrs-Fox, TT Club’s risk management director, told meeting participants, "The Club is in a unique position to speak on this issue, insuring not only something in excess of 80 percent of all maritime containers but also with an insurable interest in ports handling around 50 percent of the world's containerized freight. While the immediate debate is only part of an overall cargo integrity matrix that demands our attention, the Club has noted numerous accidents both at sea and on land, where weight misdeclaration is a material root cause." Storrs-Fox went on to say, "Further delay in this modest legal change is frustrating, particularly since there was substantial consensus concerning acceptable ways to ensure that weight declarations are accurate." Butler continues:

"The TT Club said it believes valuable progress was made leading to the recommendation to amend SOLAS (the International Convention for the Safety of Life at Sea) to require that freight containers should not be loaded on board a ship without a verified weight."

Although this problem has not been widely reported in the press, it deserves more attention. Higher insurance rates, loss of inventory, and other associated costs are all passed on to consumers. But the non-monetary benefits (i.e., the saving of life and limb), is even more important. You really can't put a price on the value of someone's life. Public outcry might help persuade recalcitrant nations to get on board with the regulation. Storrs-Fox is optimistic and believes "the delay will be insubstantial"; so he is encouraging "shippers, forwarders, freight consolidators and terminals to start planning for this reality" right away.

Coming to Grips with the Shortage of Trucking Capacity

Yesterday's post entitled Trucker Shortage Continues to Garner Headlines, focused on what most analysts consider an acute problem -- a growing shortage of truck drivers. But the driver shortage is only half of what is causing the capacity crunch. There is also a shortage of equipment (i.e., tractors and trailers). This shortage must also be addressed. To address the driver shortage, trucking company executives believe that driver pay must be increased some 30 percent in order to attract new drivers into the sector. Such an increase would likely mean an 11 percent increase in freight rates. To address the capacity shortage, companies need to buy more trucks. But it doesn't make sense to buy trucks if there are no drivers for them. Nevertheless, let's look at the capacity challenges.

An article in American Shipper notes, "Almost all new truck purchases are to swap out old equipment, according to trucking executives. A recent survey of 125 motor carrier officers conducted by Transport Capital Partners, a strategic advisory firm specializing in trucking, found that 73 percent expected to add between zero and less than 5 percent capacity in the next 12 months, compared to only 60 percent who responded that way in May. And there was a 90 percent drop since May, from roughly 28 percent to 3 percent, in the number of companies that planned to augment their fleets by 16 percent or more." ["Where did all the trucks go?, 24 October 2011] Obviously, capacity can't grow if the only equipment being bought is to replace older equipment.

The current economic situation is probably the main reason that trucking firms are hesitating to buy new equipment. The article reports, "Modern Class 8 tractors are 30 percent more expensive than ones being replaced ($125,000 compared to $85,000 10 years ago)." As a result, "Investment in new vehicles remains difficult for many companies because of the high initial cost for trucks that carry clean emissions technology, higher maintenance costs and tight credit from banks." The challenges don't stop there. Even if companies were ready to buy new vehicles to expand their fleets, the vehicles really aren't available. The article reports:

"About 12,000 trucks need to be produced each month just to maintain the industry's fleet at its current size and there [were] only ... four months [in 2011], as of August, in which truck production ... exceeded that level. 'And the reality of it is that it's not a shortage that you can get over tomorrow. The equipment manufacturers are running flat out just to do replacements but they're really reluctant to open any new facilities because of the cyclical nature of the industry,' [Lana Batts, President of Transport Capital Partners], said. 'So it’s going to take a long time to work our way through five years of not producing 12,000 trucks a month,' which means rates, accessorial charges and driver wages will go up in the near future, she added."

One indication that capacity is unlikely to improve over the short-term is the report that "Sweden-based global truck and bus maker Scania is cutting its production rates back a further 15% and plans to lay off some 1,000 workers as it said demand for heavy vehicles continues to decline in Europe, Latin America, and elsewhere." ["Scania to cut truck production levels," by Sean Kilcarr, Fleet Owner, 21 December 2011] The importance of having new equipment should not be underestimated. The article notes, "Having a modern fleet helps with recruiting because drivers don't want trucks that break down and prevent them from hitting the mileage targets upon which their pay is based, he said." The article goes on to note that shippers are starting take notice and action. It reports:

"Astute shippers have been strengthening their relationships with core carriers the past couple of years in anticipation of capacity problems. The idea is to give consistent business to certain carriers, accept fair rates and reduce dock-wait times so that a shipper is rewarded when decisions have to be made about which customer to serve first during busy times. Creating more regular routes reduces ambiguity for carriers and lets them plan how to use their assets more effectively."

Lora Cecere also believes that something has to give and she believes companies should ask, "So what do I do about it?" Doing something now is important because she believes that "power in the supply chain is shifting to the logistics providers." ["Keep on Truckin?" Supply Chain Shaman, 28 April 2011] She recommends that companies pursue five tactics that are in line with those recommended above by America Shipper. The first tactic involves being a company with which providers find it easy to do business. She writes:

"#1. It is going to get worse not better. Act now. Be easy to do business with. The old saying, 'when the going gets tough, the tough get going', has never been truer. Companies that understand the true nature of the transportation issues are investing in building long-term relationships with carriers. This includes the use of transportation planning systems to speed tendering, building continuous loops and managing empty miles, driving improvements in supply chain execution at the dock, in drop yards and in continuous shipping operations. They are making it easier for the carriers to get the loads, move trucks more easily in and out of the warehouse facilities and making their operations easier to do business with. Seven-day shipping operations are becoming the norm."

Being easy to do business with doesn't happen with the wave of wand, it takes planning and effort. Improving planning is the second tactic recommended by Cecere. She writes:

"#2. Improve planning. The early bird gets the worm. Companies are speeding time to tender by 30% through the use of advanced planning tools and business-to-business connectivity. This includes the use of transportation forecasting applications, direct integration of transportation planning systems to inbound and outbound manufacturing planning systems, and quicker processing of orders. In January 2011, the Supply Chain Leaders Association polled 45 supply chain leaders, 46% responded that improving supply chain optimization was the most important factor to improve to drive growth. ... The use of transportation forecasting improves carrier visibility of an order by a day. The need to forecast transportation is obvious."

The three things that all companies need to concentrate on are processes, technology, and people. Cecere has already addressed the first two. She turns next to people.

"#3. Educate, forecast and build a guiding coalition. Educate your management team quickly on the new reality because the paradigm has changed. To do this, look outside in. I recommend the use outside benchmarking to help your team quickly see that freight costs, availability, and increasing variability are the new reality."

The next tactic recommended by Cecere addresses the speed at which things happen in today's business environment.

"#4. Improve decision velocity. Freight is no longer the tail that wags the dog. Times are tough for the carriers. Remove the barriers. Improve time to decision for freight payments, fuel charge adjustments, and accessorial charge. Invest in analytics to get at the data in Enterprise Resource Planning and Supply Chain Planning Systems that is largely untapped. Make decisions quicker. Make decisions better. Improve the working capital in the transportation supply chain."

Cecere's final recommended tactic involves taking a broader, holistic view of supply chain networks and taking responsibility for it.

"#5. Take responsibility for your ENTIRE network. Today, 33% of companies have central teams that plan and execute freight contracts. This consolidation of freight requirements enables a company to take control of THEIR entire network and gain economies of scale. Even though you have outsourced manufacturing, leaders still take responsibility for their network and the movement of the freight."

American Shipper indicates that some shippers are turning to private fleets and dedicated contract carriage to ensure that disruptions don't occur. It reports:

"Retailers and manufacturers, in an effort to create more transportation stability, are also expanding their use of private fleets and dedicated contract carriage in which a carrier sets aside a certain number of vehicles and drivers to transport cargo for a customer on a regular route. Most dedicated contracts have surge protection for the shipper to accommodate spikes in volume, Larry Menaker, who heads his own eponymous consulting firm, said. ... Some private fleets have created extra capacity in recent years by selling empty space in their trailers on return trips to others needing transportation to the same general destination. ... Shippers can further redesign their supply chains to reduce their transportation costs and attract carriers by adjusting production schedules to produce loads when motor carriers have room and shipping in off-peak months when trucks are more plentiful, [freight industry economist Noël Perry] said. There is about a 15 percent swing in available capacity between the highest and lowest volume months of the year, he noted."

Clearly, there are no silver bullet solutions to the looming trucking capacity shortfall. The solution, however, appears to begin with attracting more drivers into the business. Inevitably, that means that shipping rates must rise (even if diesel prices stabilize or alternative fuels finally come into vogue). Shipping companies are pushing for permission to carry heavier loads as one way of increasing capacity, but that effort is facing some opposition. For on that topic, read the Trucking Sector portion of my post entitled The Supersized Supply Chain. Shippers need to begin to take actions now to avoid potentially devastating consequences of not being able to ship goods in a timely and affordable way.