Tuesday, May 02, 2006

100 Percent Secure U.S. Supply Chain

What Is the Cost of a 100 Percent Secure U.S. Supply Chain?

Everyone wants to be confident that growing international supply chains are secure and homeland security (or global security, for that matter) isn't threatened. The trick is to figure out how to do this without inhibiting the delicate balance of the increasingly global economy.
Just two years ago, a natural supply and demand imbalance at the Port of Long Beach caused major disruptions to the inventory levels of suppliers and retailers, regrettably just as the holiday season began. However, some national security officials report the likelihood of an attack through the global supply chain is so high that it is a matter of when, not if.
If supply were disrupted at just one major port, what economic problems would a U.S.-wide port shutdown cause, such as the airways stoppage during the September 11 disaster? A post-9/11 simulation exercise forecast that closing the nation's ports for 12 days would cost the economy roughly $58bn. We must ask a practical question: how can we establish a 100 percent secure supply chain without slowing the flow of the economy or imposing overly restrictive costs?
Most answers lead to the availability and use of more information, process automation, and new technologies not just by U.S. corporations, shipping companies, and domestic ports, but at factories and facilities at international origins as well.
Can we get buy-in from the rest of the world? Maybe...but we may have burned so much political capital after 9/11 and the Iraq debacle, that the sourcing nations may only pay us lip service until a "real" event presents itself. Scary, to say the least...


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Anonymous Anonymous said...

Hi Michael, Good blog!

We're (almost) former colleagues. I believe I left Exel before you joined.

Interesting subject and one close to my heart. At Exel, within my role as VP for the Industrial Sector in Asia, one of my areas of responsibility was establishing credible and workable DG and Hazmat handling policies. What we quickly realized was that the closer we got to the client and the more we knew about their business AND the better trained and more experienced our people were, so the chances of us unwittingly carrying illicit, or mis-declared material decreased dramatically. i.e. our people had to know who had access to the container, who had packed it, where it had been, what those products would normally look like or weigh.

The role and responsibility of the logistics service provider relative to that of the shipper has until now been greatly underestimated by governments around the world. This is changing slowly with various accreditation schemes for forwarders but the overriding emphasis is still on the shipper. Given that the part of the chain that is most vulnerable - the physical transportation - is the element which is most likely to be outsourced by the shipper, this leaves an over-reliance on the diligence of the shipper's transportation procurement team rather than state-mandated procedure embedded within the transport operator's physical responsibilities.

Until this is addressed, and it could be so easily with a little more thought, world trade is still vulnerable to emergency shutdowns caused by lack of knowledge of what is actually flowing through our ports and airports.


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