Building the Secure Supply Chain

The threats may be new, but the tools and processes for ensuring your company's supply chain is secure are the same solutions you have been using to keep your goods moving efficiently through the chain.


Similarly, Target's Laden says that security issues were already one component of the company's education and inspection work with overseas vendors as part of a five-year-old program at the retailer in conjunction with the private-public Business Anti-Smuggling Coalition (BASC) set up by U.S. Customs in 1995. And, in testimony before Congress last year, Wayne Gibson, Sr., vice president for global logistics at The Home Depot a company that directly imports from 268 different vendors, sourcing 80 percent of its products from five countries said the home improvement chain could use its current quality procedures (which include vendor inspections) to improve supply chain security, and that it could supplement its existing anti-theft procedures with anti-tamper efforts to improve container security, another key component of securing the supply chain.

Toward Standards

Companies like Neiman Marcus, Target and The Home Depot that are taking steps to improve their supply chain security necessarily are funding these initiatives out of their own pockets. However, the government is providing some assistance for importers under the Customs-Trade Partnership Against Terrorism (C-TPAT), a program established last year by the Customs Bureau. Specifically, C-TPAT offers a set of guidelines that companies can follow in building their secure supply chains. The guidelines, which essentially are setting standards for the secure supply chain, cover such areas as procedural security, to ensure against unmanifested material being introduced into the supply chain; physical security of facilities and goods; security education and training; and manifest procedures.

Companies signing onto the voluntary program provide self-assessments of their supply chain security and agree to submit to CBP inspections. Importers that meet Customs' guidelines and recommendations for security improvements can take advantage of faster processing for their shipments coming into the country, assuring a smoother, more predictable flow of goods through their supply chains. C-TPAT members also gain access to the coalition's membership list, helping to establish a pool of best practices around supply chain security.

Other U.S. government initiatives around supply chain security may impose additional burdens on importers, but these initiatives, too, could come with benefits. The Container Security Initiative (CSI), for example, is a CBP program that calls for identifying so-called "high risk" containers and inspecting them at the port of origin in order to prevent a shipment containing, for example, a weapon of mass destruction from reaching U.S. shores before being subject to inspection. Some observers have questioned whether this system, initially targeted for implementation at the world's top 20 ports shipping to the States, could produce logjams at foreign ports, but the potential benefits would include faster processing of shipments on arrival and less risk that a transport ship might be diverted or delayed due to concern about a single container onboard. (See the sidebar, "New Rules of the Game," for a summary of government programs for supply chain security.)

Strategies for a Secure Supply Chain

The standards that these and other government initiatives are establishing will evolve, of course, and companies looking to build a secure supply chain must incorporate sufficient flexibility into their processes and systems to accommodate changes in regulations as well as new threats.

For instance, importers recently had to begin complying with the so-called "24-hour rule," a regulation requiring carriers and non-vessel operating common carriers (NVOCCs) to file a cargo declaration 24 hours before cargo is loaded aboard a vessel at a foreign port. Failure to comply with the rule could result in fines and denial of entry for the vessel's cargo. "That's a very big change to a process that has been fairly antiquated for a long time," AMR's McNerney says, "so it's a big leap for companies to meet that expectation." The analyst says that many companies have become accustomed to putting a container together at the last minute and delivering it to a loading dock. That may no longer be an option. In addition, some companies lack the electronic infrastructure to be able to provide the necessary data to Customs, so they will have had to work closely with their freight forwarders and carriers to ensure compliance.

The good news is that the government has not specifically defined what a secure supply chain is, says Beth Peterson, a 20-year logistics veteran who is now vice president of product solutions with Open Harbor, a provider of global trade management solutions. "That means that companies can apply their own interpretation to their operations and their product type to define what is secure," she says.

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