A call to action for supply chain security

For those of us in logistics, supply chain security is a part of our jobs. In many ways, logistics has been the front line of supply chain security all along, protecting assets in transit.

So from where I sit, there are two ways we can deal with supply chain security. One way, is to sit back and wait for government mandates. Understandably, in the post 9/11 environment, many governments are initiating efforts to ensure secure trade within their own countries and for cross-border transactions. So far, these initiatives are mostly voluntary, but the costs are staggering.

I believe the other more viable alternative is for industry to drive the agenda and work with governments to develop, adopt and implement global standards for supply chain security. Government can be a facilitator, providing incentives to invest in security and, wherever possible, make sure companies are not forced to comply with incompatible country-specific security requirements. But in the end, for companies to compete and for nations to have confidence in the security of goods flowing through their borders we need a practical approach one that considers both the need for security measures and the costs to implement them.

As technology advances the essence of supply chain security has changed and today more than ever supply chain security is a global issue. Security threats come in many flavours, from the spread of a computer virus, to acts of terrorism to the insertion of contraband and weapons shipped in company freight. And with container shipping increasing another 60 per cent in the next four years according to the World Trade Organization (WTO), this task is more daunting then ever.

Among the most prominent security technologies to emerge are RFID (radio frequency identification) and GPS (global positioning system), with the latter being more common.

According to a recent survey of 800 companies who experienced a supply chain disruption reported in the media, each one saw its shareholder value drop 25 per cent on average, and under perform the market by 40 per cent for a full year.

Taken one at a time, disruptions may appear to be rare, unpredictable and one-time events. However, in aggregate, the survey found that disruptions happen almost continuously in the supply chain. A recent survey by the Massachusetts Institute of Technology estimated the cost to a large size company at about US$100 million for every day the supply chain is shut down.

If customers or suppliers are uncomfortable about doing business with a company because of security concerns, they are likely to take their business elsewhere. To build that level of trust, companies will need to extend security enterprise wide and deep into the supply chain. That means encouraging their partners and customers to do as they do, and adopt the latest security measures. And they wont be individual technologies, but a combination of the best supply chain practices, logistics systems, data capture and communications tools, and security-enhancing technologies available. Lets consider some of them.

The UK-based, P&O Nedlloyd, a leader in global container shipping and international logistics, uses electronic tags to manage trucks in and out of its terminals.

Among the most prominent security technologies to emerge are RFID (radio frequency identification) and GPS (global positioning system), with the latter being more common. Initially designed to track and trace freight to improve efficiency, they have become powerful security weapons Carriers in future will adopt a form of RFID tag or GPS that not only confirm the location of freight, but will contain data about the vehicle, cargo, the driver and more. GPS and escort vehicles are frequently used throughout Europe when a carrier knows that it will be passing through threat zones to ensure safe passage.

The UK-based, P&O Nedlloyd, a leader in global container shipping and international logistics, uses electronic tags to manage trucks in and out of its terminals. Trucks no longer line up and wait two or three times a day, but log into a web site, and are notified by cell phone or radio when to pick up freight. There is no more waiting, and where drivers before could only handle three loads a day, they now move up to six loads. Theres better and faster information collection and sharing, less congestion, greater productivity and container transportation efficiency, as well as less gas consumption.

"Canada is testing a gamma ray mobile screening system designed to detect dangerous substances, weapons and contraband, capturing an image of the contents in a container, rail car, or truck.

And because new security systems are providing greater proof of content or tampering, freight is inspected more efficiently by customs, and often receives fast lane treatment. It accelerates delivery, reduces expense and customers are delighted. No longer is freight left idle for extended periods, lessening exposure to risk.

Companies are developing manual and electronic cargo seals to make illegal entry more difficult, and detect and report tampering as it occurs. Canada is testing a gamma ray mobile screening system designed to detect dangerous substances, weapons and contraband, capturing an image of the contents in a container, rail car, or truck. Other less technological ideas are also being employed. For example, when shipping highly pirated products such as mobile phones, carriers are using black shrink-wrap to mask the cargo, instead of see-through materials.

Airlines were among the hardest hit by the impact of extra security following 9/11. Speaking at a panel on the future of the industry, senior executives with three US Airlines complained that if security processes were not streamlined, passengers would continue to miss flights and impact airline revenue, threatening their existence.

 we have a unique opportunity to turn compliance with new security regulations into business value.

In Europe, the government and the airline industry responded with the Regulation (EC) No.2320/2002 of the European Parliament and the Council which was established to implement appropriate community measures in order to prevent acts of unlawful interference against civil aviation. And the airline industry is wasting no time in using the latest biometric technologies that enable rapid identification of passengers and personnel, including tools that identify fingerprints, hand geometry, eye retinal and iris identification, facial and voice recognition, as well as signature recognition.

Other security technologies include through-the-wall radar to detect humans or contraband in containers, monitoring containers through a password-protected web page, and portable memory and processing devices that can carry and transmit personal information, cargo manifests and vehicle information.

But perhaps the biggest transformation occurring, and the most ironic, is how the focus on strengthening security, brought about by terrorist attacks, is making business realize the need for greater supply chain security, and the efficiencies and productivity that emerging security technologies are driving. Like it or not, the bottom line with supply chain security is that it must prove to have viable economic benefits if it is to win any kind of broad support. The good news is that right now we have a unique opportunity to turn compliance with new security regulations into business value.

Bertrand Augere, Global Logistics, EMEA, IBM Integrated Supply Chain
Bertrand Augere is the Director of Global Logistics for Europe, Middle East and Africa within IBM's Integrated Supply Chain organization. His mission is to provide his region with strategic and operational logistics leadership and to transform the "old" distribution processes and activities into "logistics on demand" processes and activities. Augere joined IBM in 1974 and has held a variety of positions in manufacturing, finance, procurement and logistics. His interests lie in optimizing the IBM logistics, both locally and globally, as part of the IBM's customer driven end-to-end supply chain. Augere is based in Paris, France where he studied at the Hautes Etudes Commerciales (H.E.C.) and graduated with an MBA.