Double Defense System

Double Defense Systems

 Saint-Petersburg, Russia, +7 911 755 38 62
 November, 2009
 Svetlana Spivak, svetlana.spivak@gmail.com (Chief Marketing Manager)

1 - Business Model

 Double Defense system is a new cargo security solution with which one can determine with 100% accuracy if the box has been opened during transportation or not.
 Customer problem : one of the most costly problems for the freight forwarding industry is cargo theft during transportation. FBI estimates that cargo theft costs the US economy from $15 billion to $30 billion each year. These are only official numbers. More than 80% of the cases are not reported. Thus the true size of the problem is estimated at $125 billion. Nowadays, cargo insurance is the main means to secure transportation. However, a client of a logistics company has to prove that his freight was damaged during the transportation (the box has visual signs of opening, the weight of the box is much less than it was at the handing-over point). Today, such instruments as security seals and tamper evident labels/tape are used in order to protect the cargo from unapproved box opening. Nonetheless, it is very cheap and easy to make the tampering unnoticed by replacing the seal or tape. Another way to prove the freight damage – the box weight – could be easily falsified by replacing separate units inside the box with objects of the same weight.

 DD-system consists of two elements: DD-stickers, which are put on freight boxes, and DD-sensors, which detect if the box has been opened or not. The high-end technology is based on optical emission and plasmon resonance.
 Target customers:
1) Independent logistics operators (2PL, 3PL, freight brokers).
Motivation: DD-system enhances a competitive position of a freight forwarder and decreases the shipment checking time and increases the process efficiency.
2) Logistics departments of manufacturing companies
Motivation: DD-system is a control tool over the freight forwarders, which guarantees that the products are delivered in untampered boxes.

 The business model is to sell a high priced sensor one time that can be used to check the cargo boxes and to have a recurring revenue stream from low cost and high margin consumables – stickers that are placed on each box. Both DD-stickers and DD-sensors will be sold to one customer as a joint product. Average number of stickers sold in the USA per year is estimated at 8, 736 MM, while average number of sensors is 88,000. The DD-stickers’ price (25 cents) is nearly equal to the lowest price of the cheapest competing product. The gross profit margin for DD-stickers is 400%, while the gross profit margin for DD-sensors is 13%.
 Target market
According to IDTechEx, the global market for cargo security systems is growing 6%anually and has reached $8 billion last year. Market opportunities and market size for our cargo security system will rise with the increasing volume of container transportation and developing institute of outsourced logistics.

Primary competitors:
Nowadays, different technologies - starting from simple tamper evident tapes and seals to high-tech computerized systems such as RFID and E-seals - are used to protect cargo during transportation. All existing products which perform the function of cargo box-tampering detection are either (1) very costly, but accurate in detection of cargo conditions and difficult to forge, or (2) rather cheap, but unreliable in box-tampering detection and easy to forge. Double Defense breaks the usual paradigm by offering a low-cost product with high level of box-tampering detection and great difficulty to forge. In addition, the installation and usage procedures are much easier than those of high-priced competing products.

 Competitive advantages:
1. 100% box opening detection at a low price (sticker price is 6 cents);
2. The system is quick to install and easy-to-use;
3. The system decreases shipment checking time and excludes human factor in this process;
4. The system is mobile

2 - Financial Information

Double Defense is seeking total investments of $6 MM to complete the product development, cover start-up expenses and make product launch in Russia. During the second year, the company would reach the breakeven point. Within three years from the start of operations all investment will be recouped. By the fifth year the net profit will reach $465 MM: we expect revenues of $ 907.6 MM, including $11.56 MM from sensor’s sales and $896 MM from sticker’s sales, thus the net income will reach 51 % of revenues.

• Rahul Vohra wrote (11 months ago):

  Nice Idea!

  • Reply