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Strengthening the Weakest Link: Security

When you absolutely need an overnight shipment from overseas, it can be difficult to know when you'll actually get the ordered goods.

Recently, I needed some key components from an overseas OEM. I had products that were waiting for parts, and asked the overseas OEM to ship Federal Express P1 in order to meet our customer's requirement deadline. The OEM was willing to drop everything to package and ship the inventory, but there was no guarantee that Customs and paperwork wouldn't jam the gears and stop the package's forward progress.

On another order, I had to make an ocean shipment that needed to be on a particular transport ship leaving port on a particular day. The export operations were held up over paperwork errors that were out of my control.

As the supply chain has taken on global proportions, major changes have been incorporated to process both the volume and content of goods being transported every day. Information technology, along with instant, world-wide access to the Internet, has introduced many innovative concepts and practices that help make shipments faster and more traceable. However, because of the events of Sept. 11, 2001, anti-terrorism strategies have become essential. These strategies have led to a major shift in thinking about international trade.

As trade has become global, the security threats have also become global, and now require policies and procedures to keep the flow of goods secure. Security involves inspection, document verification, and originator authentication.

Because of these heightened safety and security concerns, businesses and governments need to work in a more integrated fashion; processing new data and auditing requirements, focusing more intensely on supply chains, and government-to-government collaboration.

Information technology, as well as the use of standards, have become key enablers for the international trade environment.

In addition to single-trader inspections, there are multiple actors and vectors in every supply chain. Goods travel through global supply chains and, at different moments in time, different parts of the supply chains have access to the goods and the information about the goods. One weak link is sufficient to disrupt the security of the whole chain.

A shift of control from a single trader to a whole supply chain is necessary. The trader is now seen as part of a global supply chain, and a green-lane situation can be achieved only if the whole supply chain is secure. As a result, supply chain management has become much more important.

I mentioned earlier the tremendous amount of goods moving through the supply chain. This puts huge demands on inspection authorities. For example, it's estimated that the planned increase from scanning 3 percent of US-bound containers at ports of origin to scanning 100 percent, as required by the government, would need a $150 billion investment by ports that ship to the United States. Eventually, consumers would have to pay for these extra transaction costs. The higher risk leads to more control, but becoming 100 percent safe is theoretically, as well as practically, impossible.

In a previous article, I introduced ITAIDE's innovations to accelerate the supply chain. The concept of trusted traders and trusted supply chains (trusted in both fiscal and security concerns), has been successfully piloted, tested, and proven by four major business-sector companies, including {complink 2470|IBM Corp.}, along with their information technology partners. Customs have preapproved the participating companies' entire supply chains and issued certifications of trust that expedite their shipments through the customs operations. (See: ITAIDE: Towards Safer, More Secure Supply Chains.)

Imagine the supply chain highway as Fast-Trak lanes, where the driver doesn't have to stop and pay a toll for every bridge crossing. The holder of the pass pays once per month, and arrives at their destination sooner as a result of not having to wait in line to pay the bridge toll. The driver's name and contact information is on file in a central database, and the time from point to point is accelerated because the bridge authority trusts that the driver is going to pay his monthly bill.

I know that businesses in the US resist more government regulation, but this isn't regulation in the classic sense. This is a two-way street where the business can earn a trusted status via internal control approvals that lead to the trusted certificate.

This approach moves away from the traditional antagonistic relationship based on distrust. A relationship in which governments are perceived as a source of administrative burden, eager to interrupt supply chains with frequent inspections at the border, and companies are seen as potential suspects. This new approach, a so-called Public-Private Partnership (PPP), relies on trust relationships between businesses and governments, and builds on the overlap between the societal interests of governments, and the business interests of companies.

This new perspective relies on delegation of control from government agencies to businesses, and inspection differentiation between trusted and non-trusted companies. This approach facilitates legitimate trade by considerably reducing the number of physical inspections, which in turn enables governments to focus their scarce resources on control of the non-trusted traders.

If the supplier I had ordered those parts from (the situation I mentioned at the beginning of this article) had been pre-approved and trusted, I would have received the components on time. As it turned out, I waited seven days for the parts to clear customs. Our customer took the equipment on time, but we had to promise to send a field team to install the late parts when they came in.

As I recall, we sent a technician all the way across the country, paid for a hotel and three meals, and cab fare to and from the airports. Needless to say, we did not make any money on that order.

15 comments on “Strengthening the Weakest Link: Security

  1. Barbara Jorgensen
    September 27, 2012

    Hi Douglas: Is there anything holding companies or entire industries back from widespread adoption of the ITAIDE process/tool? It seems to me that if you are a big enough OEM, you can require your downstream partners to participate.  Talk about expediting shipment….

  2. prabhakar_deosthali
    September 28, 2012

    The concept of Trusted  Vs Untrusted looks good .This looks like a form of ISO certification  for Supply chain trust. 

    Just want to know whether such initiative has been internationally recognized or is it just limited to good coming to USA.

     

    Many a countries have a lot of paper work and clearances required for export also., which means a possible uncertainty in supply chain.

    If there is an international treaty on this matter then the international supply chains can have predictable delivery times.

  3. SP
    September 28, 2012

    When the shipment gets delayed due to genuine reasons like security processes its understood and well respected. But when its purely because of unnecessary tax issues or paper work it really kills the project delivery time.

  4. ahdand
    September 28, 2012

    Yes strengthening the weakest is the 1st thing which should be done. Then try to strengthen the best ones so no loop holes between those two will be created. That way you will ultimately restrict or atleast minimize upto a greater extent the gap. 

  5. dalexander
    September 28, 2012

    @Barbara, Right now this has been just a very highly coordiated experiment with just 4 industries represented along with the government and educational participants. There were actually 5 business sectors, two of which were pharma compaies. The results indicate a very accelerated supply chain with much more security and protections agains fraud or counterfeit, but I think there will be the typical knee-jerk reaction of companies in the US who will interpret this as too much government in their business. The concept of government and other agencies pulling IT data relevant to every shipment, instead of the company have to push the data to multiple organizations, multiple times is an obvious win for speed concerns, but just how open the books need to be will be another prolonged battle that may see an organized, well-funded resistance. The thing about the EU that strikes me over and over again, is that they have the ability to recognize a problem, and the determination and mind-set to investigate solutions ASAP. Wth all of the REACH, RoHS, WEEE implementation, it can be seen as government overreaching, however, the benefits to the consumers of goods and services more than justify the aggressive mandates. Will the US individual companies secure their supply chains by allowing access to key partners? Yes. They already do with EDI, but will they bring the government onboard to the same extent? I think that is a loooong wait and see.

  6. dalexander
    September 28, 2012

    @Prabhakar, I think the US has no will to address this as aggressively as required. It will have to begin at the referendum level and work up the chain with a lot of political jockeying back and forth. The EU will lead again, but IBM was the IT company behind this experiment so they have some clout in DC and may be the pioneering entity that brings this to the fore. Citing the success if this multi-year experiment will help put some credible flesh on these bones.

  7. dalexander
    September 28, 2012

    @nimantha.d, What a concept! Doing a thorough job at both ends of the effort. Who do you think should do this? What players in industry could best effect this in your supply chain family?

  8. dalexander
    September 28, 2012

    @SP. That is correct. I think you have hit upon something that is both fundamental and often times overlooked. If we could re-examine our paperwork phenomena and determine what paper is redundant, unnecessary, or excessive, and reduce the administrative workload significantly by minimizing the paperwork, we might discover economies of improvement that alone wold be well worth the effort. However, because multiple agencies are involved and often duplicates and triplicates of the same documents have to pass through these agencies, which agency is going to cut back their budget by indicating that they really don't need to see the same documents another agency has already looked at and certified.

  9. Barbara Jorgensen
    September 28, 2012

    Douglas: I see why industries would be cautious. I would argue that the government is already involved in all this stuff anyway and it's better to be proactive than reactive. If we wait too long, we might end up with a much more intrusive plan.

  10. Taimoor Zubar
    September 28, 2012

    @SP: I completely agree. And then after this happens, it doesn't make sense if you still wonder why countries like China are far more superior in innovation and have much smoother supply chains.

  11. Houngbo_Hospice
    September 28, 2012

    @Taimoorz,

    “it doesn't make sense if you still wonder why countries like China are far more superior in innovation “

    I didn't know that. But I don't think China is that innovative. They do excel in copyning others, though. But that is hardly innovation.

  12. Taimoor Zubar
    September 29, 2012

    Hospice: Innovation isn't always about new products. It's also about finding newer and cheaper ways of doing existing things. China has been fairly successful with it over the recent years.

  13. hash.era
    September 29, 2012

    Taimoor yes true but it has something NEW included so basically its a new thing after all isnt it ?

  14. ahdand
    September 30, 2012

    Taimoor true china is innovative but they cannot implement it without moving with technology which is not happening with chains right now sadly.

  15. _hm
    September 30, 2012

    What were lessons learned? What was the cause of this exigency and was it not planned?

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