Supply Chain Security Collaboration
March 1, 2008
Cargo and supply chain security are widely acknowledged as being a matter of collaboration between all players in all sectors of the transportation and logistics industry, from shippers, logistics services providers, freight forwarders and carriers to port and terminal operators, customs authorities and technology solutions providers.
Governments and industry associations are also valuable contributors in the grand scheme of things: governments in a regulatory capacity, and industry associations in a monitoring and advisory capacity.
While the ultimate goal of all stakeholders is to ensure the integrity of cargo throughout its journey from point of origin to final destination, not all parties share the same motives for doing so.
For manufacturers and retailers, particularly just-in-time operators, it’s the need to ensure continuity and reliability of supply. For carriers, it’s largely a matter of preventing losses of their own assets and their customers’ consignments. For governments, it’s an issue of national security. And for security consultants, the whole business is a lucrative income stream.
COMPLICATED SITUATIONSupply chains that begin in one country and end in another are complicated by the lack of global industry standards. Different countries have different business practices, different customs requirements, and different government regulations – which are constantly updated to keep pace with an increasingly innovative criminal element.
Collaboration is the key.
On a domestic level, shippers, carriers, ports, etc. can work together to push industry standards and best practices. On an international level, governments can co-operate with each other to aim for a set of homogeneous security directives, and multi-national companies can take the lead and set superior standards for international cargo security.
Although compliance with regulations may initially have been regarded as just another expense, the entire industry has begun to realize the spin-off benefits. The implementation of additional security measures has resulted in safer and consequently more efficient supply chains. Fewer disruptions and incidents of theft translate into reduced losses and increased profits – for all concerned.
In the final analysis, the fundamental motive for implementing an effective cargo security program is the same for all industry players – very simply, it’s a matter of economics.
Almost half of the survey respondents are directly involved with freight and/or supply chains. Of these, around two thirds are direct trade service providers, while the rest are manufacturers or retailers. Almost one third of the respondents are technology providers, consultants or industry associations.
SECURITY CHALLENGESWhen asked which area of security is considered the greatest challenge for the respondents’ organizations, 50 percent said “reducing cargo theft across the supply chain”, compared to 41 percent in last year’s survey. This seems to reflect the apparent industry concerns about the increase in organized cargo theft. Well, all reports indicate that cargo theft is rising, but there’s nothing like the “unknown” to arouse a feeling of insecurity.
Accurate and current statistics on cargo theft are almost impossible to track down. While various industry groups do report transport sector-specific crime figures, there is no single database that publishes official up-to-date international statistics on cargo theft across the board.
Cargo theft costs the industry anything between $20 billion and $60 billion a year, depending which information resource you look at. According to Freightwatch, cargo theft is estimated to account for around $50 billion in direct merchandise losses each year worldwide, $15 billion of it in the U.S. While 9/11 was largely responsible for a global knee-jerk re-think on cargo security, almost six years down the line only a third of the survey respondents said that “implementing a security program to safeguard against a terrorist threat” is the major challenge. This issue has see-sawed in importance over the past four years, from 76 percent of the respondents to eyefortransport’s survey in 2004, to 37 percent in 2005, 22 percent in 2006 and 34 percent in 2007.
Managing an organization’s security budget has slipped in priority during the past twelve months, but the importance of staff training in respect of security improvements is still seen as a major challenge by 22 percent of the respondents. Of the 16 percent of respondents who replied ‘other’, the majority suggested that keeping up with constantly changing and sometimes contradictory TSA rulings presents a major challenge.
Surprisingly, a number of respondents reported that they had a problem convincing their own management or their clients of the need for cargo security, which ties in with those who said they believe that some Congressional mandates are unrealistic. Indeed, the U.S. Senate’s aim to screen 100 percent of U.S.-bound cargo has met with opposition from various industry sectors, mainly because these proposed measures are deemed to be melodramatic and impractical.
TERRORIST THREATSOverall, the survey responses suggest that priorities have shifted towards compliance with regulations. However, respondents appear to place more importance on domestic regulations than global.
About 41 percent of the respondents prioritized “meeting U.S. government regulations,” compared with just 13 percent for overseas government regulations. For a third of the respondents, compliance with regulations is seen as a means to accelerate the movement of goods. About 36 percent of the respondents said that improving self-regulation of the industry is a priority, compared to 40 percent last year.
Collaboration in this area is also important, with 20 percent of this year’s respondents saying that “maximizing security reputation in order to improve partnerships” is a priority, compared with 25 percent last year. Funding for security measures continues to slide in importance. Additional comments were variations on the same theme: the development of simple, practical, effective and affordable safeguards.
CARGO THEFT“New trends in cargo theft” is an issue for a third of this year’s respondents, compared to more than half of last year’s respondents.
Training employees to recognize and deal with cargo security threats is a key concern for less than a third of the respondents. This has dropped from 46 percent in 2005, which may indicate that the lack of effective training measures in the past has been addressed with new education programs and greater collaboration with industry associations and industry advisors.
“Funding a maximum security program across the supply chain” is a major concern for 16 percent of this year’s respondents, compared to 20 percent last y ear. And 86 percent of last year’s respondents did not consider “working with local cargo theft task forces” to be a key concern, and 87 percent of this year’s respondents feel the same way.
SECURITY SOLUTIONSPhysical security measures seem to be the most widespread, with almost two thirds of the respondents having installed locks, gates and fences, and 43 percent having implemented area surveillance.
More than one-third of the respondents use RFID or other tracking devices, while x-ray, non-intrusive detection and smart containers are used by 21 percent and 16 percent of the respondents respectively. More than one-third of the respondents said that they had measures in place to insure data protection and cyber security. More than half of the respondents screen their staff – a sensible precaution since around two-thirds of all cargo theft is reportedly carried out with insider co-operation. A few respondents also run background checks on their logistics services providers.
When asked what security solutions are under consideration for the future, almost half of the respondents reported that their companies plan to use RFID or other tracking devices in future, while almost a third are looking at smart containers. And 22 percent said that data protection is under discussion, and 21 percent are considering the merits of personnel screening. Area surveillance is still on the cards for 17 percent of the respondents, and physical locks and secure gates for 19 percent. Overall, all percentages have dropped slightly since last year’s survey, which may indicate that many of the respondents have now put last year’s “future plans” into practice.
OVERALL INDUSTRY IMPLICATIONS AND CONCLUSIONSThe results of this survey indicate that the entire industry acknowledges that cargo security is a shared responsibility that requires co-operation between the public and private sector throughout the entire supply chain.
Indeed, when asked which specific companies are leading the way in cargo security, the respondents named organizations in all sectors of the industry, from shippers (Wal-Mart, Home Depot, GAP, IBM, Motorola, Dow Chemical, Procter & Gamble), to logistics companies and carriers (UPS, FedEx, DHL, Schneider, YRC, Panalpina, Maersk, NYK), ports (HPH), solutions providers (Par Technologies, Savi, GE, Aeris, Qualcomm, BSM Wireless, Unisys, ISIS Secure, Safefreight), risk managers (Cisco Security, rxpatrol.org, Ronin Risk International) and industry organizations (National Commercial Vehicle Cargo Theft Prevention Task Force, TAPA and IATA).
While a determination to totally eliminate all security risks is optimistic to say the least, ignoring the risks won’t make them go away. On one side are those aiming for perfect security; on the other are those who believe the threat from terrorism is greatly exaggerated. The proper balance is probably somewhere in between.
SIDEBAR: Increasing Effectiveness in Port SecurityPort Canaveral is the second busiest cruise passenger port in the world, serving more than 4.5 million revenue cruise passengers. Located just 60 miles east of Orlando, the port is a major embarkation point for the world’s biggest and best-known cruise lines – Carnival, Royal Caribbean and Disney. In addition, Canaveral is a major cargo facility, annually handling 4.4 million tons.
Port management was looking for ways to increase the productivity of its public safety personnel. According to J.R. Klaman, director of public safety, the physical demands on personnel covering the cruise terminals on foot during a 12-hour cruise ship day reduced their productivity and effectiveness. “We needed to give our personnel a way to move quickly and safely from one area to the next. Stan Payne, Port Canaveral’s CEO, had seen Segway Personal Transporters (PTs) in use at Disney World and suggested we look into them as a possible solution. It did not take long before we saw them as a good fit.”
As thousands of cruise passengers come and go through Port Canaveral, Public Safety personnel patrol the terminals, parking lots and dockside. They monitor access control compliance and visitor movement throughout the complex. In June 2007, the Port acquired three Segway i2 units and assigned one to each cruise terminal. According to Klaman, “The idea was to have Public Safety personnel use the units throughout each active ship day and for security checks after hours.
“Acquiring the Segway PTs helped the Public Safety personnel in a couple of ways,” said Klaman. “First, it placed the officers above the crowd and gave them a good perspective to observe what’s going on. Secondly, the units make security personnel stand out where people notice their presence. As a bonus, the Segway PTs reduce the amount of fatigue that our security personnel typically experience in a 12-hour shift.” After a cruise terminal is vacated, Public Safety personnel use the Segway PTs to conduct their security checks inside and around the terminals. “The officers have found that they can cover a larger area in a shorter amount of time, which means we can do more security checks with the same number of people,” commented Klaman. “It also means that they can spend additional time covering areas that they would not get to as frequently. And perhaps most importantly, if they get a call in the vicinity, they can respond immediately. They just grab their Segway PT and go.”
Port Canaveral has plans to acquire two more units this year. “We intend to purchase 2x2 models, which are useful for off-road patrols,” said Klaman. “We will use one in our Jetty Park camping and beach area adjacent to the public access facility. The other will be used in the Cove, a public recreational area that includes restaurants and marinas. These are both large areas that are difficult to cover on foot, and I think the Segway PT will improve our security presence in both environments.”