In The Boardroom With...

Mr. Randy Koch
President and CEO
CommerceGuard
GE Security, Inc.
www.CommerceGuard.com
NYSE:GE

SecuritySolutionsWatch.com: Thank you for joining us today, Randy. We understand that prior to GE you led the cargo and port security consulting practice for Unisys. Please give us an overview of your background and your role with CommerceGuard.

Randy Koch: Thank you, Martin, for this opportunity to talk about CommerceGuard. It’s great to be here.

My current role as president and CEO of CommerceGuard is tightly linked to my supply chain tenure at Price Waterhouse and Unisys. My role at Unisys was to present the best supply chain security solution for each of my clients. This required me to know the pros and cons of existing supply chain security processes and solutions in order to make appropriate recommendations, and it led to my team’s participation in Operation Safe Commerce (OSC) where we were tasked to thoroughly test and evaluate all cargo security technologies. We ran pilot projects at three of our nation’s largest ports and, together with the ports and other pilot participants, gained detailed understanding of the strengths, weaknesses, and future potential of each technology. After these tests, we conducted supply chain security workshops with importers, ports, and ocean carriers in order to develop a supply chain security roadmap. www.securityunleashed.com/pdf/Secure%20Commerce%20RoadMap_.pdf

During this testing and stakeholder feedback process I became convinced that the benefits of container security devices (CSDs) far outweigh other in-transit security technologies. The CSD strikes just the right balance of significant security improvements, affordability, and logistics benefits.

Coming from Unisys to GE Security, I like to say, was simply a matter of voting with my feet. GE is thoroughly invested in applying innovative technology for protecting people, assets, and communities. GE entered the CSD market carefully, choosing the best technology after careful consideration of various CSD proposals. And GE’s commitment to CSD solutions was demonstrated by its undertaking a substantial re-engineering project to change the device’s sensor, improving the CSD’s accuracy rate and its ability to withstand unbelievably harsh maritime conditions.

Now, as president and CEO of CommerceGuard AB, I’m fortunate to work with GE and partner with other multinational corporations (Siemens, Samsung, and Mitsubishi Corporation) to ensure that this vital component of supply chain security can be rapidly deployed around the world. This is a once in a lifetime opportunity to impact global security and global commerce.

SecuritySolutionsWatch.com: One will read on www.CommerceGuard.com that, "CommerceGuard is the first global, cost-effective system that deters and detects theft, smuggling and international terrorism by integrating container security devices with a global information network." Please give our audience an overview of CommerceGuard solutions.

Randy Koch: First, let’s discuss the vulnerability and problem that we are solving…

CommerceGuard is a full security system that provides intrusion detection for cargo containers. Shippers who have taken measures to use trusted sources want to be sure their cargo remains secure along its journey, especially during the vulnerable leg of transport between the factory and the first seaport. CommerceGuard “fills a gap” in securing today’s maritime shipments by alerting officials and cargo owners if a container has been opened without authorization during its journey.

CommerceGuard’s CSD snaps onto a cargo container with a powerful magnet, in a location where the container itself protects the device from harsh conditions and from tamper attempts. It reports date, time, and security status at key locations along a trade route. Shippers use the reports to track a container’s progress, manage supply chain logistics, and compare performance of separate trade lanes. Data security is ensured with encrypted wireless communications and CommerceGuard authenticates both users and hardware so there’s no way to clone devices or readers.

The CommerceGuard network is installed in more than 20 seaports and customer locations on every major continent. Shippers using the system are enjoying advantages in addition to detecting attempts at smuggling and terrorism. They are focusing on analyzing trouble spots in their supply chains – pinpointing areas where theft occurs; identifying locations where shipping container progress has stalled; even understanding how often their containers are opened for legitimate reasons.

SecuritySolutionsWatch.com: What is your perspective on the market drivers for CommerceGuard solutions at this time?

Randy Koch: One market driver is the continued sense of urgency to bolster homeland security against a terrorist attack on our seaports. The volume of container traffic is high and growing; freight containers are poorly protected, if at all, from tamper attempts, especially when they are in-transit from the manufacturer to the overseas port; and the damage from a bomb at a major seaport would wreak havoc on human life, transportation infrastructure, and the global economy. The SAFE Port Act recognized that Container Security Devices can meaningfully improve container security, and US Customs and Border Protection Commissioner Basham has announced that performance requirements for container security devices will be issued soon.

Another driver is increasing supply chain complexity. Importers understand that they need to better monitor their cargo as it is transported to ensure product quality and to protect their assets and employees.

The advanced technologies that are the foundation of the CommerceGuard system allow it to be shaped by shippers for their individual needs. For example, customized e-alerts can help with compliance issues – imagine providing instructions to guide the response in the event that a container carrying hazardous materials is breached.

SecuritySolutionsWatch.com: Please tell us about CommerceGuard's strategic relationships in this market with Samsung, Siemens, and Mitsubishi.

Randy Koch: The CommerceGuard AB company was founded specifically to respond to the global nature of the supply chain and urgency of the security issue. It’s a partnership of multinational corporations that bring unique abilities and perspectives to the CommerceGuard table. Our customers gain regional expertise, extensive local customer support, and technological excellence in each region. The four CommerceGuard partners are GE Security in the Americas, Mitsubishi Corporation in Japan, Samsung Corporation in Asia, and Siemens Building Technologies in Europe.

SecuritySolutionsWatch.com: Congratulations on the recent "wins" for CommerceGuard at the Port Everglades Terminal in Florida and the Port of Portland in Oregon. Without disclosing any confidential or proprietary information, of course, can you tell us about the solutions CommerceGuard provided here?

Randy Koch: Both of these CommerceGuard deployments, in the Port of Portland and Port Everglades, were developed in response to demand from commercial shippers. The ports are committed to meeting their customers’ needs, and now each of them can choose to extend its customer services with CommerceGuard’s solution for supply chain security and visibility.

We are happy to see Everglades and Portland join the growing network of ports represented in the CommerceGuard network. The system is appealing to ports and terminal operators for several reasons – the readers have small footprints and are simple to deploy. They can be located almost anyplace and can cover several lanes of traffic, and the radio frequency does not interfere with other wireless communications. CommerceGuard’s regional business partners install and maintain the equipment and the ports may often begin, or extend, an existing business partnership with these corporations.

SecuritySolutionsWatch.com: We understand that CommerceGuard also has a niche in the commercial enterprise market with "wins" at companies such as Starbucks Coffee. Care to discuss the solution CommerceGuard provided the world's largest coffee retailer?

Randy Koch: Starbucks was CommerceGuard’s first commercial customer. Their extraordinary diligence in asset protection, and their model of enterprise security in which CSDs play an important role, are broadly admired.

CommerceGuard works exceptionally well for companies with remote factory locations, such as coffee plantations, because of its wireless communications, ease of use, and ability to operate without relying on sophisticated infrastructure arrangements such as PCs with Internet connections. Some benefits that shippers experience with CommerceGuard include: assurance that trusted containers have not been tampered after departing the factory, insight into every container opening along a journey – even the legitimate ones – and supply chain visibility, especially between the factory and port.

Along with the security benefits of CommerceGuard, future capabilities allow companies to monitor for quality control. For example, additional sensors can be plugged into the CSD and pilots are already running to test humidity and temperature sensors inside the container. This monitoring capability will help companies ensure that containers reach their destination without being tampered with and with the freshest product possible.

Stanford University and The Manufacturing Institute released research results showing that companies who invest in supply-chain security measures realize a financial return on investment, including reduction of customs inspections, reduction in transit times, increased automation of handling imports, and improved asset visibility in the supply chain. The results are available at www.nam.org/supplychainsecurity.

SecuritySolutionsWatch.com: What resources such as streaming video, webinars, webcasts, podcasts, "white papers" and "case studies" are available for end-users at www.CommerceGuard.com?

Randy Koch: Our website (www.commerceguard.com) is the main repository of information about CommerceGuard. Product literature, video demonstrations, and news can be found on the site. It leads back to regional business partners for local information and solutions packages. End-users can use the site to surf for information, send us an email, or get the numbers to call the team -- all the contact information is there.

SecuritySolutionsWatch.com: Care to comment on The 2007 Global Frost & Sullivan Market Leadership of the Year Award in the field of container security devices (CSD) which was presented to GE Security?

Randy Koch: It is an honor to receive the Frost and Sullivan award. Their recognition of CommerceGuard highlights our advanced technology, robust container security platform, and innovative business model.

SecuritySolutionsWatch.com: Thanks again for joining us today, Randy. Are there any other subjects you'd like to discuss?

Randy Koch: I’d just like to leave you with the sobering thought that drives me and my team every day. There is still enormous urgency to fill the large security gaps in the shipping industry and in cargo containers that make our ports vulnerable. We are seeing an increasing number of companies use CSDs to manage their risk and gain supply chain visibility. We want to encourage all industry players to support the steps these companies are taking and facilitate their efforts by deploying container security and port security solutions today.

Thank you, Martin, for this opportunity to talk about my favorite subject. It’s been a pleasure to meet with you.