Supply Chain Frontiers issue #11. Read all articles in this issue.
Measures introduced in the United States since the 9/11 terrorist attacks have made supply chains more secure, now this effort is moving to a global level with an initiative to implement security standards worldwide. "This has the potential to revolutionize security in trade and to move trade more predictably than ever before," said Robert Bonner, Commissioner, US Bureau of Customs and Border Protection, at a one-day symposium on September 29, 2005, organized by the MIT Center for Transportation & Logistics (CTL).
Commissioner Bonner told attendees at the "Resilient & Secure Supply Chain" symposium, Cambridge, MA, that he has contacted seven countries to discuss implementing the standards that are based on a framework developed by the World Customs Organization. This June 168 countries adopted the framework. "Many nations will adopt the same principles that the US has pioneered," Bonner said, although he acknowledged that implementation is "the hard part" now that the framework has gained international recognition.
Implementation of the framework is crucially important for companies that engage in global trade noted Theo Fletcher, Vice President, Supply Chain Compliance, Security & Diversity, IBM. His company?s trade compliance and security effort covers more than 160 countries involving some 2,500 customs declarations daily. Having to negotiate different standards in each country makes global supply chains less efficient, he explained.
Fletcher emphasized the role of industry in promulgating uniform standards. "This is our supply chain and it is critical that we drive the implementation of supply chain initiatives around the world," he said. IBM?s objective is to be an industry leader in shaping the future of supply chain security and trade facilitation. He is visiting the heads of customs authorities in 120 countries that are critical to IBM?s supply chain to nurture relationships with these agencies. On-site security inspections of high-risk suppliers and global supply chain readiness assessments are also part of this effort. Additionally, the company is involved in extensive research, including a report released recently on supply chain security return on investment produced in collaboration with CTL. Another report due to be published soon takes a more detailed look at security ROI by analyzing the gains achieved in specific companies.
Commissioner Bonner also underlined the crucial role that industry must play in the development of supply chain security standards. The Customs Trade Partnership Against Terrorism (C-TPAT) program "is the largest and most successful government/private sector partnership to emerge from 9/11" he said. Companies comply with government security requirements in return for a lower risk designation for their shipments. The overarching aim is to secure supply chains without impeding trade, and in this regard "you don?t need to search everything that comes into the US," Bonner argued. Instead, the government evaluates "baseline information on who you say you are" against information it has in a vast database. By applying strategic intelligence in this way "we are ruling out risk" he said.
According to Bonner, C-TPAT now covers 40% by value of the containerized goods imported into the United States. "C-TPAT is being factored into the US Government?s contingency plans for terrorist attacks," he noted. Green lanes at borders, special channels where there will be no cargo inspections, are under development, and enterprises that reach the "gold standard" of C-TPAT compliance will qualify as users.
But the government wants to go further in enlisting the support of companies. "CEOs should have a vested interest in this issue," Bonner said, and supply chain security should be on the boardroom agenda. A new C-TPAT best practice requires that supply chain security is part of corporate governance and regularly reviewed by company leaders. It is important that senior executives understand the benefits their companies can gain by becoming top-tier C-TPAT members Bonner pointed out, and to encourage them to make the necessary investments in tighter security. For example following a major disruption membership of the program is "an insurance policy because C-TPAT companies will have their supply chains restored first," he said.
Stephen Flynn, US Council on Foreign Relations, warned that although many C-TPAT companies are on the leading edge, "many may be free riders who got on board knowing that it will take years to verify compliance." The program unites the government and companies in the fight against the terrorist threat, he said, but since companies do not have access to the detailed information that the government has, it is difficult for them to gauge the level of the threat and the security investments needed to counter it.
More security measures need to be taken because only one part of the supply chain has to be compromised for an attack to succeed. For example, a bomb could be placed on a truck by bribing the driver to take a long lunch, Flynn said. Companies can enforce security measures by tracking compliance among employees, he suggested. Those employees that fail to comply could be sanctioned or even fired. Such a system would ensure that supply chain security is taken seriously throughout the organization, Flynn said.
For more information on 'The Resilient and Secure Supply Chain' seminar, contact Jim Rice.