Strengthening Global Supply Chain Security
As international trade continues to expand, the global supply chain remains even more vulnerable to security threats. Despite efforts by importers and other supply chain participants to improve security, the danger of a terrorist attack involving the international transportation system remains high. Companies have also become aware of the vulnerability of its supply chains to an ever-increasing range of security threats and disruptions.
The Customs-Trade Partnership Against Terrorism (C-TPAT), part of the U.S. Customs and Border Protection’s (CBP) cargo enforcement strategy, has played a key role in strengthening the security of our country’s supply chain. The program works by engaging businesses in a cooperative effort to improve the integrity of its security practices and communicate and verify the security guidelines of its business partners within the supply chain.
OTHERS INCORPORATED IN THE C-TPAT PROGRAMWhile participation in the program has increased, and CBP continues to roll out minimum-security criteria covering new business types, a key category has yet to be incorporated into the program – third-party logistics providers (3PLs). While U.S. Customs and Border Protection has announced that security criteria covering 3PLs will be incorporated into the C-TPAT program sometime this year, it is unclear how they will develop a common definition for service providers in the outsourced logistics sector.
To effectively incorporate minimum security criteria for 3PLs into C-TPAT, it is critical that CBP recognize the extensive impact that outsourced logistics providers have on international supply chain security and develop a clearer definition of business partner requirements associated with 3PLs. To do this, 3PLs need a seat at the table in the C-TPAT process.
Ryder completed its validation process in 2007 and is currently a validated C-TPAT partner. Because there is not a category for 3PLs within the program, Ryder is certified as a land carrier, along with other 3PLs interested in securing the global supply chain.
Ryder, which has global operations throughout North America, Latin America, Europe and Asia, moves goods for hundreds of customers in and out of Canada and Mexico alone. For the customers who rely on the company to safely and securely transport products in and out of the U.S., working with a C-TPAT partner like Ryder has certainly been beneficial. Border crossings with a C-TPAT validation are faster and smoother, and the validated status gives customers added security to their loads.
Currently, ten percent of goods entering the U.S. are managed by 3PLs. And according to Ryder’s own research, the global supply chain market is large and growing. As this trend continues, the security of the global supply chain will rest more and more in the hands of top tier supply chain managers.
Rail, sea, highway and air carriers have already been incorporated into the C-TPAT program along with importers, marine ports, long haul carriers in Mexico, customs brokers and foreign manufacturers. However, without an overarching 3PL definition, 3PLs must piece together security processes and protocols using the various criteria in order to meet the incredibly diverse range of supply chain activities that we manage and implement for our customers. This results in more interpretation of the criteria and a lack of standardization, which ultimately impacts the overall effectiveness of C-TPAT.
With the involvement and support of 3PLs, CBP can develop criterion that is:
- Supported by the outsourced logistics industry;
- Consistent and standardized; and
- Considerate of any economic impact to logistics providers.
BENEFITS OF A SOLID PROGRAMBENEFITS OF A SOLID PROGRAMIn addition, a solid C-TPAT 3PL program has added benefits. Anytime a company invests in supply chain security, it is helping to build a more resilient organization. Strong security processes and programs provide businesses with a competitive advantage that allows them to prevent loss and accelerate recovery.
A well thought-out and implemented security program has far reaching effects in an organization. It helps ensure the screening and hiring of qualified people, improves the safety of employees, assets and operations, it streamlines customer service, enhances supply chain visibility and reduces costs associated with lost product and reduced insurance levels. Participation in a voluntary program like C-TPAT also serves to instill process discipline, which increases compliance and higher performance in other areas such as quality and safety.
The more 3PLs can influence CBP to develop appropriate and effective criteria, the more participation and support it will get from the outsourced logistics sector. Along with other similar businesses, we may be able to participate in the development of C-TPAT criteria that is beneficial to our companies, customers and the security of the nation.
About the Author
Bill Anderson is director of global security for Ryder System, Inc.
SIDEBAR: Applying Western Security Standards in ChinaA challenge that many U.S.-based multinationals currently face is how to integrate global security practices into international supply chains. What works well in the U.S. may be challenging in other parts of the world. Different regulations, cultures and costs factors impact security programs and like any other area of business, these programs need to be localized. As more manufacturing operations move to China, companies attempting to apply C-TPAT guidelines to the operations in that regional will find that this is no exception.
U.S. supply chain security programs rely on a fairly standard set of regulations and processes that can generally be applied with some sort of conformity across the country. In China, the transportation landscape is drastically different, primarily because it is regulated at the provincial level. A lack of standardization, in everything from licensing, to vehicle specifications, to labor, makes implementing C-TPAT guidelines a complex and often expensive undertaking. An expert third-party logistics provider, with experience in international operations, can help companies navigate the environment and develop an appropriate security strategy. Here are a few thing companies should consider as they look to apply these western security standards to China.
- Business Partner Relationships – In the west, transportation is typically managed on a federal level. There’s a comfort that licensed transporters comply with an established set of regulations that meet certain standards related to safety and security. However in China, each individual province issues transportation licenses and these licenses do not imply compliance with any set of safety or security standards. Carrier and agency relationships differ in China as well. Unlike the U.S. where the carrier network is fairly well documented, in China there is often not a clear connection between what company you subcontract with and who ultimately ends up at your door to transport your goods. Businesses operating in China will need to closely examine their subcontracting and agency relationships and clearly communicate their security policies to their business partners.
- Conveyance Security – In China, box trailers are rare and vehicle dimensions and specifications often vary from one truck to the next. Flatbed trailers are common and are used for a variety of goods that would normally be shipped in a box trailer. In addition, inventory in China is generally not palletized in order to maximize the load on a truck, which is often oversized and overweight. This means that loading and unloading is a manual process, typically one box at a time. In the west, less than a truckload (LTL) shipments will often flow through cross-docks where shipments are consolidated. However, in China, LTL loads are often manually transferred from one vehicle to another on the roadside or in a parking area. Current systems don’t always include advance notification of orders, so trucks arriving at their delivery destination often spend more time at the facility waiting to be off-loaded. This wait time can be a matter of days. Each of these issues will challenge businesses trying to apply traditional transportation security standards in China.
- Labor – In the U.S., where the cost of labor is high, we often rely on technology (security video, alarm systems, security badges, etc.) to bolster security. In China, labor is significantly cheaper, and it is often more cost-effective to rely on human resources to secure a facility. But a lack of a standard criminal background check process makes this strategy risky. In addition, unskilled and often uneducated workers represent the majority of warehouse labor in China. Instilling a security culture may be difficult unless financial rewards and job performance criteria linked to security are part of an employee incentive program.
SIDEBAR: 3PL Impact on the Supply ChainEach of the areas described here is vulnerable to a security threat. If criteria doesn’t match a 3PLs business needs, cost structure or infrastructure, each of these areas faces increased risk of a security breach.
Carrier Selection and Procurement – 3PLs are responsible for hiring carriers used by most major importers. Based on an importer’s requirements, those carriers may or may not be C-TPAT certified.
Warehouse Management – Many importer facilities are managed by 3PLs. This means that they often hire and train warehouse staff, design the workspace, recommend equipment and protocols to maximize facility security, and provide security monitoring services.
Drivers and Vehicles – Companies who engage 3PLs in a dedicated contract carriage agreement use drivers employed by their outsourced logistics provider. Ryder alone employs over 6,800 drivers that are responsible for transporting goods for more than 700 customers. Approximately 20 percent of Ryder’s drivers work in cross-border operations. These drivers are responsible for the security of a load while it’s in their
Freight Brokerage – 3PLs match freight with available modes on behalf of shippers and also facilitate customs clearance for international shipments.
Supply Chain Visibility – 3PLs use sophisticated technology that provides visibility deep into a customer’s proprietary supply chain. Movement of a product is often tracked in real-time.