Safeguarding the Supply Chain

Whoever said getting parts from Point A to Point B was an easy task was probably born in the electronics industry's pre-Internet, pre-just-in-time days.

While software, mobile applications, and high-speed global connectivity have certainly made it easier to process orders, track parts, manage exceptions and ensure on-time delivery, all of these things have also added new complexity to the supply chain -- not the least of which involves managing multiple levels of company-specific, regional, national, and international security checks.

Safeguarding the supply chain has become a top risk-assessment consideration among high-tech executives, and its importance shouldn't be underestimated. As noted earlier this year, more than 90 percent of those surveyed by the World Economic Forum and Accenture indicated that supply chain and transport risk management has become a greater priority in their organizations over the past five years.

Security breaches run the gamut from digital information fraud and product theft to counterfeiting components and using technology devices in acts of terrorism. Left unchecked, supply chain infractions could cost companies millions of dollars.

More frequently, too, governments are taking on a hard line on determining who's responsible for such infringements. They have established new customs protocols and programs and passed legislation meant to curb these activities. As a result, companies are shifting their own long-standing supplier requirements and more carefully selecting partners, opting for ones who have demonstrated compliance with these new standards.

C-TPAT is one such example. The Custom Trade Partnership Against Terrorism program was started 10 years ago by the US Customs and Border Protection a couple of months after the 9/11 terrorists attacks. The program, which aims to improve the overall supply chain and increase security along the US borders, is voluntary. However, the ripple effect of "I will do business only with companies that have C-TPAT certification" has influenced more than 10,000 companies to join.

A similar thing is now happening in the aerospace and defense industries. Since the US government last year passed the anti-counterfeiting National Defense Authorization Act (NDAA), many OEMs serving this sector are reevaluating their supply chain practices and on-boarding suppliers that have proven track records for secure and safe products.

Take Lockheed Martin Corp. , for instance. The giant aerospace company recently signed a new strategic enterprise agreement with top-tier distributor Arrow Electronics Inc. (NYSE: ARW), which will cover procurement of more than 22,000 electronic components used in advanced technology systems such as missiles, satellites, radar systems, tactical fighter aircraft, and unmanned surveillance systems, according to the company in a statement.

Although Lockheed officials said the agreement allows the company to improve product delivery performance, standardize parts selection, and increase internal efficiency and productivity, Arrow officials cited the industry changes as an influencing factor.

"The changes in the aerospace and defense industry are accelerating, and this agreement illustrates our value proposition," said Michael J. Long, chairman, president and chief executive officer of Arrow Electronics in the statement.

It's likely that the value proposition will only increase as more companies prioritize security. That means the job of moving products from one place to another will only get more complicated. Are you ready for that?