security in scm

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Security and the Global Supply ChainAuthor(s): RAVI SARATHYSource: Transportation Journal, Vol. 45, No. 4 (FALL 2006), pp. 28-51Published by: Penn State University PressStable URL: http://www.jstor.org/stable/20713653

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2/25

RAVI

SARATHY

Security

and the Global

Supply

Chain

Abstract

This

article examines

implications for global supply

chains

posed

by

security

threats

in

the

U.S. and elsewhere, and identifiesactions for addressing those threats. The principal goal is to

design

security

into

the

supply

chain rather than seek

to

mitigate

consequences

after

the

fact.

Redesigning supply

chains

to

make them robust and resilient

can

help

avoid and

mitigate

the

impact of

disruptions,

whether

from security

breaches

or

other

causes.

Such

efforts

require

collaborations

with

partners

across

the

supply

chains

and

with

governments.

The

short-term

costs

of

such

security

measures

can

be

balanced

against

the

long-term

gains

from

improved

supply

chain

performance

and

improved

customer

relations.

Globalization

is

a

central

fact

of the

global

economy,

involving

increasing

amounts

of

overseas components sourcing, overseas pro

duction,

global factory

networks,

and

lengthy

geographically

dispersed supply

chains servic

ing

international

markets

across

the world.

However,

the

physical

infrastructure

underpin

ning

globalization

is under threat

National

De

fense

University

2002),

possibly

compromis

ing

nations'

abilities

to

trade

goods

and

services

internationally,

in

turn

affecting

eco

nomic

growth,

employment,

and overall

pros

perity.

Overseas

shipping

now

accounts

for

over 90 percent of worldwide trade,with the

preponderance

of

non-bulk

cargo

shipped

via

containers.

If

ports

are

closed,

trading

partners

are no

longer

trusted,

and

container

movement

is

interrupted along

with world

trade,

reducing

supplies

of

goods

and

in-process

inventories,

shutting down factories, and causing layoffs

around theworld. Consumer choice is

reduced,

with fewer

goods

and

possibly higher prices.

Smooth

operation

of

the

international

trade

and

transportation

infrastructure

is

essential

to

global well-being.

When

supply

chain

executives

were

asked

about their

perception

of

supply

chain chal

lenges,

they

ranked

assuring

container

secu

rity

as

the

most

important challenge,

over

managerial

considerations such

as

reducing

in

ventory, reducing lead time variance, and re

ducing

stock-outs

(A.

T.

Kearney

2004,

Fig.l).

In

the

same

survey,

one

executive

noted

that

his

company

was

willing

to

do whatever it

takes

to

guarantee

container

security

(ibid.,

4).

Companies

with

strong

brands

are

likely

to

be

even more

concerned

about

the overall

impact

of

a

security

breakdown

on

theirbrand

value and

corporate

reputation.

Security

is

now

an

essential

and central

part

of the

supply

chain

and

all

supply

chain

participants

must

develop

strategies and skills to cope with these new

security

demands

(Banomyong

2005).

Russell

and Saldanha

(2003)

estimated

that

security

related

supply

chain modifications could

cost

around

$65

billion and

suggested

that

firms

Mr.

Sarathy

is

professor

of

strategy

and international

business,

Northeastern

University,

Boston,

Massachusetts

02115,

and

visiting

professor,

Australian

Graduate

School

ofManagement,

AGSM,

Sydney;

e

mail

[email protected].

This

article

originated

as a

paper

presented

at

a

conference

on

International Trade

and

Logistics,

Corporate

Strategies

and

the

Global

Economy,

University of Le Havre, September 2005. The paper was

further developed

while the author

was on

sabbatical

as

a

visiting professor

at

the Australian Graduate School

of

Management,

AGSM,

Sydney,

Australia. Final

refinement for publication

herein

benefited from

constructive

criticism

by

three

anonymous

reviewers.

http://www.jstor.org/page/info/about/policies/terms.jsphttp://www.jstor.org/page/info/about/policies/terms.jsp


3/25

2006 SECURITY

NDGLOBAL UPPLY HAIN

29

would have

to

develop

close

partnerships

with

both

government

and

supply

chain members

in

order

to

tackle

the

security

issues

effectively.

This article

begins by setting

out

a

general

ized

model

of the

supply

chain and

outlining

an

approach

to

managing supply

chain

disrup

tion. In

the

second

section,

we

highlight

and

discuss the various

points

of

security

vulnera

bility

across

the

supply

chain. We

also

discuss

the

role of

government

in

responding

to

secu

rity

threats and

governments'

interaction with

firms.We review how

technology

develop

ments

can

help

in

combating

security

threats.

We thendiscuss firm-level

strategies

for devel

oping

secure

supply

chains. We conclude with

suggestions

for

action

for firms

seeking

to

en

hance

supply

chain

security.

A

Generalized

Model

of the

Supply

Chain

Monczka,

Trent,

and

Handfield

(2005)

see

the

supply

chain

as

having

three inter-related

segments:

supplier

relationship

management,

internal

supply

chain

management,

and

cus

tomer

relationship

management.

Rice

and Can

iato

(2003)

subdivide the

supply

chain in terms

of

physical,

information,

and

freight

dimen

sions.

They

also

point

to

additional

distinct

aspects

of the

supply

chain

including

the

trans

portation

modes

used,

transportation

facilities,

manufacturing

systems,

people employed

across

the

supply

chain,

and

information

tech

nology.

Management's

task

is

to

design

the overall

supply

chain

across

the three

subsystems,

to

be

consistent

with its overall

strategic objectives,

and then to configure how various tasks, pro

cesses,

physical

facilities and

infrastructure,

means

of

transportation,

human

resources,

and

product

and information flow will be

aligned

across

the

supply

chain,

while

complying

with

government

regulations.

This

approach

is dem

onstrated

in Table 1. This

generalized

model

has several

implications

for

coping

with

disrup

tions,

including

security-related disruptions:

For smooth

functioning

of the

supply

chain,

management

would

have

to

ensure

that all components of the supply

chain?tasks,

physical goods

flow,

transportation,

information

flow,

people,

etc.?are

deployed effectively

and

as

planned.

Disruptions,

whether

security

related

or

otherwise,

could

occur

at

any

level

along

the

supply

hain,

t

the acili

ties

level,

at

information flow

or

trans

portation

of

goods,

or

elsewhere.

Ensur

ing

smooth

supply

chain

functioning

requires guarding

against disruptions

at

all levels of the

supply

chain.

Table

1

also

clarifies the fact that

only

one

of the

three

subsystems,

internal

sup

ply

chain

management,

is under

full

con

trol of

management.

The

other

two

sub

systems

are

governed by

shared

responsibility.

Guarding

against

disrup

tions,

including

that

from

security

threats,would

require

collaboration with

suppliers

and

with

customers.

Table

1

also

highlights

the

importance

of

strategy

in the

supply

chain,

with

the

implication

that

supply

chain

disruptions

can

prejudice

achieving

strategic objec

tives

as

much

as

affecting

the

delivery

of

goods. Any changes

to

the

supply

chain,

to

avoid

or

reduce

disruptions,

should be

consistent

with overall

strate

gic objectives.

Moreover, as supply chains become

globally

dispersed

and

scattered

across

many

nations and

cultures and

encom

passing

greater

distances,

there is

a

greater

possibility

that

disruptions

can

occur

at

distant

locations,

making

pre

vention and

mitigating

response

more

complex.

Trent and

Monczka

(2002)

em

phasize

that

global sourcing requires

in

tegration

across

global

locations and

functional

groups.

This

means

that

guarding against and responding to dis

ruptions

will

require

collaboration

across

nation

states

and

cultures,

with both do

mestic and

foreign supply

chain

partners

and

customers.

Risk

Management

and

Supply

Chain

Disruption

Risk

management

focuses

on

identifying

the

sources

and

nature

of

risk,

assessing

the

conse

quences,

and then

developing

measures

to

avoid

or

mitigate

risk

(Kleindorfer

and

Saad

2005; Chopra and Sodhi 2004). These three

distinct

phases

of risk

management?namely,

risk

specification,

risk

assessment,

and

risk

mitigation?can

be used

to

analyze

the

supply

chain

as

set out

in

Table

1.



4/25

30 TRANSPORTATION

JOURNAL

Fall

Table

1. A

Generalized

Model

of

the

Supply

Chain_

,

. ,

Supplier

Customer

SupplyChain -> Dispersion:

Relationship

Internal

Supply Relationship

Supply

chain

I

elements:

Management

Chain

Management

Management

Strategic

objectives

-

Tasks

-

Processes

-

Manufacturing

facilities

-

Transportation

facilities

-

Freight

(physical

flow of

goods)

-

Transportation

modes

-

Information

flow

-

Human

resources

-

Government

regulation/relations

-

Greater

complexity

s

supply

chain

is

integrated

cross

globally

scattered

locations

and

functional

groups

Sources

of

Risk. Terrorism and

security

threats

are

not

the

only

cause

of

supply

chain

disruptions.

Threats

to

the

supply

chain

can

be

due

to

natural

risks

(hurricanes,

floods,

and

earthquakes), operational

or

routine

risks

(plant

breakdowns,

material

shortages)

and random

but

purposeful

events

such

as

terrorist-related

risk.Disruptions also can occur due toepidem

ics such

as

SARS,

environmental

accidents,

and from

political

instability.

Mitroff and

Al

paslan

(2003)

consider

security-

and terrorism

related risk

along

with

disruptions

caused

by

normal accidents and natural

events,

distin

guishing

terrorism-related risk

by

highlighting

the

fact

that

acts

of

purposeful

agents

are

at

the

heart of such risk. This

suggests

that

protecting

against

security

threats and terrorism-related

risks

to

the

supply

chain

can

be

studied in

the

context of responding togeneral disruptions to

the

supply

chain.

Risk Assessment. The risk

assessment

phase

focuses

on

the

consequence

or

impact

of

spe

cific risks.

In

the

case

of

a

global

supply

chain,

risk

assessment

is

concerned

with

understand

ing supply

chain

vulnerabilities

along

their

en

tire

geographically dispersed

length,

as

well

as

among

their

various

elements,

from

goods,

to

information,

transportation

modes,

and

people.

Sheffi

and

Rice

(2005)

adopt

such

a

view

in

developing a vulnerabilitymap fora company,

categorizing

both the likelihood

and

conse

quences

of various

threats,

and

highlighting

those threats

that

have

a

high

likelihood

of

occurrence

and

can cause severe

consequences.

Supply

chain

characteristics

can

themselves

contribute

to

vulnerability.

Hendricks

and Sin

ghal

(2005b)

suggest

that

an

overemphasis

on

efficiency?characterized

by

single

sourcing,

low

inventories

and

buffer

stock,

and limited

slack?can

create

greater

vulnerability

to

dis

ruption. Similarly,

supply

chains

that

involve

greater geographic distance, extend tomany

countries,

and

involve

many

distinct cultures

are

more

vulnerable

to

disruption,

as

are

supply

chains that

place

greater

reliance

on

outsourc

ing

and

have

numerous

supply

chain

partners.

Security-related

risks

are

magnified

in

supply

chains that

are

already

vulnerable

along

the

lines

outlined

above.

Beyond

the

supply

chain

itself,

how

the

sup

ply

chain

is

linked

to

overall

strategy

can

affect

vulnerability.

For

example, supply

chains seek

todeliver a designed product. The product de

sign

dictates

how it

is articulated into

the

sup

ply

chain

and

how various elements

of

the

complete product

are

assigned

to

internal and

external

sources.

As noted

above,

a

greater

dependence

on

outsourcing

increases

supply

chain

vulnerability.

The

length

of

the

product

life

cycle

also

matters,

with

shorter

product

cycles

more

affected

by

sudden

supply

chain

disruptions.

Lee

and

Whang

(2005)

point

to

some

of

the consequences of supply chain disruptions

(whether

caused

by security-related

causes

or

other

reasons),

including

increased

cost;

deliv

ery

disruption;

interruptions

in

the smooth flow

of

product

and

service;

time

delays; uncertainty



5/25

2006

SECURITY

AND

GLOBAL SUPPLY

CHAIN

31

as

to

quantity, quality,

and

timely

arrival;

traf

fic

and

port

congestion;

and

longer cycle

times.

Further,

indirect

consequences

can

include

lower service

levels,

which could

affect

long

term customer

relations,

and

higher

insurance

premiums

due

to

security

and

other risks

of

supply

chain

disruption.

Hendricks and

Singhal

(2005a)

found

that

supply

chain

disruptions,

such

as

manufacturing

delays,

supplier

failure,

quality

problems,

and internal

errors,

led

to

firm

under-performance

in

the stockmarket

as

well

as

in

operational

performance.

They

cite

reductions

in

operating

income,

return

on

sales,

return

on

assets,

and

sales

growth

as conse

quences

of

supply

chain

disruptions,

while also

noting

increased

costs

and inventories. Such

performance

shortfalls

were

observed

to

last

as

long

as

two

years

after the initial

disruption.

These

consequences

point

to

the real

cost

of

disruptions, including

those caused

by security

related

causes,

and

suggest

that

the

costs

of

safeguarding

against security

problems

should

be

balanced

against

the

gains

from

avoiding

disruptions,

the

gains

from

improved

customer

relations and

lower insurance

premiums,

and

the

gains

from

avoiding

outcomes such as dete

riorating

supply

chain

performance.

Risk

Mitigation

After

specifying

and

as

sessing

risk,

firms

can

respond

by attempting

to

mitigate

risk.

Mitigation

can

consist of

at

tempting

to

reduce the

damage

caused

by

sup

ply

chain

disruptions,

or

taking

actions

to

pre

vent

or

reduce

the chance of

supply

chain

disruptions.

Given the

sources

of

vulnerabili

ties,

an

early warning

system

can

focus

on

these

sources

and

help trigger

timely

awareness

of potential and actual disruptions, allowing

for earlier

mitigation

and reduction of losses.

Mitigation

systems

can

also

assign responsibil

ity,

detailing

who

should focus

on

which

areas

of

security

threats.

Mitigation

can

range

from

designing

and

maintaining back-up

systems

in

reserve

and

developing

response

plans

for

worst-case

sce

narios,

to

rethinking product

design,

rede

signing

supply

chains,

and

focusing

on

loss

avoidance rather

than

mitigating

losses.

The latterapproach, of proactive prevention,

is

similar

in

spirit

to

the

underlying

philosophy

behind

TQM

(total

quality

management),

which focuses

on

process

control

rather

than

output

control,

using analysis

to

find the

causes

of

out-of-control

procedures,

and

then aims

to

remedy

these

root

causes.

Lee

and

Whang

(2005)

stress

the

importance

of

drawing

on

lessons from

TQM

in

supply

chain

risk

mitiga

tion,

particularly

in

attempting

to

avoid

secu

rity-related

risk

rather than

responding

after

the fact

to

events

caused

by security

breaches.

In

the

next

section,

we

draw

on

the above

ideas

to

analyze security

and

the

supply

chain

in

greater

detail.

Security

and the

Supply

Chain

Security-based

disruptions

can

occur

at

vari

ous

points along

the

supply

chain. Containers

are

one

of the

major

sources

of

security

con

cerns.

Containers

have been used

to

smuggle

illegal immigrants,

weapons,

and

drugs.

In It

aly,

a

suspected

terrorist

was

found

in

a

con

tainer

with

a

false

aviation

mechanic's certifi

cate,

maps

of

airports,

and

security

passes

(he

later

escaped

while

on

bail)

(The

Economist

2002).

The

consequences

of the

use

of

a

WMD

(weapon

of

mass

destruction)

or

discovery

of

such

a

device in

a

container

can

be

serious;

estimates

suggest

that

a

WMD

explosion

and

the

resulting

port

closure could cost

$1

trillion,

while

a

twelve-day

closure

following discovery

of

an

undetonated

WMD

could

cost

$58

billion

(O'Hanlon

2002,

Gerencser

et

al.

2002).

Large

containerships

with

cargo

capacity

ex

ceeding

4,000

ton-equivalent

units

(TEUs)

each

will

account

for

the bulk of container

traffic

in

the

future.

For

example,

in

2005,

COSCO,

the

China

Overseas

Shipping

Com

pany,

launched the

Cosco

Long

Beach,

an

8,000-TEU

containership,

at

the

Hyundai ship

yards.

This transition to

larger containerships

increases the need for

governments,

port

au

thorities,

and

international traders

to

oversee

their

security,

as

well

as

the

security

of increas

ingly larger

volumes

of

containers. From the

perspective

of U.S.

firms

and

theU.S.

govern

ment,

security

measures are

equally

necessary

at

the

ports

of

departure

of

goods,

as

they

are

at

their

points

of

entry

into the

U.S.

Of

the

top

ten

U.S. container

trade

partners,

seven

are

from

Asia,

the

other three from

Europe

(UN

CTAD 2003). China and Hong Kong together

account

for

about

one

third

of

total container

trade with the

U.S.,

while the

top

ten

foreign

ports

together

account

for about half of U.S.

bound

containers.



6/25

32

TRANSPORTATION JOURNAL

Fall

Of

course,

containers

are

only

one

part

of the

overall

security

issue.

Containership

operators,

and

operators

of other vessel

types

such

as

dry

bulk

ships,

tankers,

and LNG

carriers,

also need

to

be

secure,

as

do

motor

and

rail

carriers.

In

theU.S.

alone,

more

than eleven

million trucks

and

more

than

two

million

railroad

cars cross

its borders

(GAO

2004).

Ships

can

themselves

become

targets,

as

in

the

example

of

USS

Cole,

when

a

small boat

attempted

to

blow it

up

in

the Persian Gulf.

People

are

also

a

security

issue,

encompassing

those

individuals

con

nected with the

manufacture,

transportation,

handling,

and

loading

of

internationally

traded

goods.

This

means

evaluating

supply

chain

partners,

suppliers,

and

service

providers.

Thus,

firms,

long

with their

supply

chain

part

ners

and

governments,

have

to

collaboratively

monitor and

safeguard security

at

all

points

of

entry

of their

goods,

whether

itbe

by

ship,

air,

rail,

or

road

(GAO 2003).

They

need

to

be

concerned

with

cargo

security,

vessel

security,

port

facilities

security,

and

personnel

security

(Koch 2005).

Figure

1

summarizes these

various

points

of

vulnerability

in the

supply

chain.

Security

related

sources

of risk

can occur

at

various

points

along

the

supply

chain,

including

the

following:

Goods

shipped

as

cargo,

whose

procure

ment

and

transportation

is the

principal

objective

of

the

supply

chain;

Factories,

both

captive plants

and those

belonging

to

outsourcing

partners,

where

goods

and

components

are

manufactured

and

assembled,

for

eventual

shipment

to

foreignmarkets, including theU.S.;

Supply

chain

providers

and

partners

such

as

freight

consolidators,

and their

em

ployees

at

each

of

these

points along

the

supply

chain;

Supply

chain facilities such

as ware

houses,

where

goods

to

be

exported

or

for distribution

to

markets

are

stored

while in

transit;

and

the

terminals

through

which the

goods

and containers

pass,

and where containers

are

loaded

and unloaded;

Freight carriers,

whether

by

truck,

air,

rail,

or

ship;

People

who have

access

to

the

goods,

containers,

and

supply

chain

facilities;

that

is,

employees

at

the

manufacturer,

the

exporter,

the

freight

forwarder,

the

shipper,

and

other

intermediaries;

Information,

particularly

about

cargo

manifests,

confidential

supply

chain

in

formation,

direct

to

customer

delivery

information,

and data intended for inte

gration

with broader

corporate

data

bases.

Layered

Security:

An

Approach

to

Mitigating Security

Risk

The wide

range

of

vulnerability

across

the

entire

supply

chain

summarized in

Figure

1

underlines thedifficultyof securing the supply

chain.

Compromised security

at

any

link

along

the

supply

chain

can

prejudice

the

entire chain.

Hence,

attempts

to

secure

the

supply

chain

have

relied

on

the

concept

of

layered security.

Such

an

approach

builds

redundancy

into

the

system,

so

that

security

breaches

at

one

level

can

be

guarded against

at

a

subsequent

level. Since

insecure

supply

chains affect both individual

companies

and the entire

economy,

the U.S.

and other

governments

and multilateral

agen

cies have been active inpromoting regulations

and

measures

to

develop

secure

supply

chains.

Drawing

on

Figure

1,

we

can

link

security

related

disruption possibilities

to

the

points

of

vulnerability

across

the

supply

chain.

Figure

2

summarizes

such

an

approach

to

layered

secu

rity.

The left side of

Figure

2

lists

these

security

vulnerabilities,

while

the

right

details

various

governmental

and

private

firm

measures

to

pro

tect

against

or

mitigate

such risks.

The

security

measures

and

regulations

out

lined

in

Figure

2

are

discussed

in

greater

detail

below. At

many

points,

government

regula

tions

set

the

scope

of the

security

measures

that

will

be

implemented

by

the

supply

chain

members.

At

other

points,

security

measures

are

left

to

the discretion of

the individual firms

and

supply

chain intermediaries. For

example,

the

Advance

Manifest Rule

is

a

requirement

that

foreign shippers

and

foreign

ports

partici

pating

in the

Container

Security

Initiative

must

comply

with.

Foreign

ports

have

a

choice

in

complying

with the

Container

Security

Initia

tive, which imposes specific security proce

dures

on

them.

However,

the International

Maritime

Organization's

International

Ship

ping

and Port

Security

Code

is

a

set

of

stan

dards,

with

compliance

left

to

the individual



7/25

2006

SECURITY

AND

GLOBAL

SUPPLY CHAIN

33

Figure

1.

Points of

Vulnerability

n

the

Supply

Chain

Factories

-captive

-subcontractors

Supply

chain

facilities:

Warehouses

Supply

chain

providers

and

intermediaries

Transportation

carriers:

containerships,

air,

rail,

trucks

as

well

as

barges

Port

of

loading

Goods; and

container

loading

Ports,

airports, rail-yards,

nd

ports

and

stations

en

route

Borders

and

destination

ports

Onward transit n

importing

ountry,

to

customers


8/25

34


Fall

Figure

2.

Layered Security

Supply

Chain

Stages

Manufacturing

sources:

Captive

and outsourced

factories

Goods:

Stuffing

the container

Supply chain providers and

intermediaries

Transportation

nodes

and

carriers

Monitoring people

(With

access

to

goods,

containers,

carriers,

ports)

Establishing

trust

Information

flow

Security

Measures:

Governmental

& Private

J

Trusted

partners;

audit

security

measures;

employee

screening

at

hiring;

controlled

access;

secure

processes

AMR:

Advance

Manifest

Rule;

smart boxes :

container

security

devices,

sensors

CSI: Container Security Initiative, collaboration

with

foreign

ports

Smart

Portals

at

ports

for

screening

containers;

IMO:

ISPS

Code;

secure

facilities

and

access.

C-TPAT: Customs

Trade

Partnership

Against

Terrorism:

European

Union:

AEO,

Authorized Economic

Operator.

FAST

Program (US-NAFTA)

RFID

tags;

Encryption,

Secure

Networks

Automated

Targeting System;

Standards

setting

their

customers,

need

to

insist

on

and

motivate

the

use

of

secure

practices.

Programs

such

as

theU.S.

government's

C-TPAT

program

help

in

this

regard by setting

security

standards,

checking compliance, and offering incentives

for

adopting

secure

practices,

such

as

speedier

processing

on

arrival.

Transportation

Nodes and

Carriers.

Cargo

security

is

sought through

container

screening

by

using

sensors,

x-rays, gamma rays

(to

see

through clothing

and detect

concealed

weap

ons),

radiation

monitoring,

magnetic-field

based intrusion

detection,

and other

forms of

container

imaging

at

loading

(as

at

Hong

Kong's port)

and

on

arrival. This is

supple

mented with a policy of selective physical in

spection

of containers

deemed

suspicious,

along

with

controlled

access

to

the facilities

themselves.

Container

screening

aims

to

use

non-intrusive

techniques

to

inspect

for

danger

ous

cargo

such

as

nuclear

materials and chemi

cal

weapons.

Port

security

is

attempted

through

controlled

access,

coupled

with

surveillance,

based

on

intelligent

vision,

consisting

of fixed

and deployable cameras thatnot only see, but

also collect and

analyze, images

and

detect

threats,

if

present.

People.

Since

people

are

involved

at

every

stage

of the

supply

chain,

security

measures

need

to

ensure

that all such

individuals

can

be

trusted.

Measures include

pre-shipment

review

of

shippers

and

associates

at

the

point

of load

ing

and

departure,

and

monitoring

people

who

have had

access

to

the

container. The central

issue

is,

Can the

manufacturer,

the

shipper,

the exporter, the freight forwarder, and other

intermediaries

be

trusted?

Identification and

analysis

tools that

can

be used

consist of

smart

IDs,

biometrics,

fingerprints,

NA,

face

prints,

and retina

recognition,

all

allied with

databases



9/25

2006 SECURITY

AND

GLOBAL

SUPPLY

CHAIN 35

to

determine individuals'

antecedents.

How

ever,

political

considerations and individual

privacy

do

enter

the

equation,

and

the

use

of

suchmeasures

may

be constrained

by

the

vary

ing privacy

laws that

may

be in

place

in

various

countries

(Sarathy

and Robertson

2003).

Information.

Supply

chain

reliability

and

performance depends heavily

on

the

capture

and

processing

of

accurate

supply

chain infor

mation.

Hence,

data

security

best

practices

such

as

virus and data

access

protection

are

widely deployed.

The

goal

is

to

prevent

unau

thorized

access

to

data and thus

prevent

alter

ation of data

that

might falsify

cargo

manifests,

and render ineffective the use of theAdvance

Manifest Rule. Such

safeguards

also

help

pro

tect

the

confidentiality

of

supply

chain infor

mation;

similar

concerns

surround the

manipu

lation

of

personnel

data,

which could affect the

validity

of

trust

placed

in

supply

chain workers.

An

emerging

concern

is

guarding against

at

tempts

at

hacking

RFID

tags

and

deleting

or

changing

the

information

stored

on

them

(Juels

2005,

Weis

2003).

If

the

integrity

fRFID

tags

is

breached,

the

data stored

on

such

tags

can

no

longer

be relied on, and

security

measures

that

rely

on

such

RFID

tags

become ineffective.

Government

and

Multilateral

Agencies'

Attempts

at

Safeguarding

Supply

Chain

Security

Figure

2

summarizes

safety regulations

and

measures

that

are

pertinent

to

protecting

against

the

various

supply

chain

vulnerabilities.

Many

of

these

measures

reflect U.S.

govern

ment

actions,

with

parallel

measures

instituted

by theEuropean Union, theUN's International

Maritime

Organization,

and

others.

We

sum

marize these

measures

and

their intended ef

fects,

beginning

with

the U.S. Customs

and

Border

Protection

(CBP)

agency's

steps

to

monitor inbound

cargo,

safeguard

ports,

and

identify

trusted

partners,

incorporating

a

lay

ered

security approach.

The CBP

process

in

cludes

the

following:

-

The Advance Manifest

Rule,

requiring

submission of

electronic

cargo

manifests

forall shipments at least twenty-fourhours

prior

to

being

loaded

on

U.S.-bound

ships

in

the

foreign

ports.

Because

foreign

ports

sometimes did

not

provide

timely

informa

tion

to

allow

screening

of containers

with

the

Automated

Target System

(ATS)

soft

ware,

Customs

initiated

the

twenty-four

hour manifest

rule

as

a

way

of

ensuringthat critical informationwas available suf

ficiently

in

advance

of

the containers

being

loaded

on

to

U.S.-bound

ships.

This

was

mandated

through

the

Trade

Act

of 2002.

-

Use

of the

Automated

Target System

(ATS)

to

evaluate such

cargo

manifests,

evaluate

high-risk

vs.

low-risk

containers,

and

pick

shipments

for further exami

nation.

-

The

Container

Security

Initiative

(CSI),

which,

with

the

cooperation

of

over

forty

of theworld's

largest

ports,

helps

identify

dangerous

containers before

they

leave the

ports

for theU.S. and

elsewhere. CSI

can

reduce overall

delays,

as

container

screen

ing

can

occur

at

the

overseas

ports,

while

awaiting loading,

during

down time.CSFs

intent

is

to

cooperate

with

local

port

offi

cials

to

establish

trusted

categories

of

ship

pers

and their

networks

(importer, shipper,

freight

forwarder,

land

transportation,

dock

workers,

exporter,

manufacturer,

etc.). Further, local officials can

help

iden

tify

which

of the

shippers

unfamiliar

to

CBP

are

low-risk

operators,

helping

make

the

system

efficient. The

challenge

is

to

help supply

chain

partners?shippers,

freight

forwarders,

and

third-party

(3PL)

logistics providers?meet

security

param

eters,

with

levels of

knowledge

and

com

mitment

equivalent

to

the

shipper.

CSI

re

quires

that

CBP

personnel

be stationed

at

the various

foreign

ports

that

are

part

of

the CSI. These U.S. staffmembers have

to

communicate with and

cooperate

with

local

port

officials and with local

govern

ment

regulations

in

order

to

be

effective.

-

Customs Trade

Partnership against

Terror

ism,

C-TPAT,

is

a

public-private

partner

ship,

which

gives

participants

expedited

cargo

processing

in

exchange

for

tightened

security

and

cargo

tracking

at

points along

the

cargo

transit nd

supply

chain. Partici

pant

firms

receive

security

recommenda

tions from CBP (CBP 2005) and are re

quired

to

work with their

supply

chain

partners

to

implement

these

security

best

practices.

CBP officials

review their

secu

rity procedures,

make

recommendations



10/25

36


Fall

for

improvement,

and

typically

follow

up

with

an

audit

as

well

as an

annual

assess

ment.

Based

on

these

reviews,

companies

are

assigned

scores

which,

if

favorable,

give

them

expedited processing

through

U.S.

ports,

and

a

reduced

likelihood of

physical inspection.

Newly

created

supply

chain

specialists

within

the

CBP

organiza

tion

help

recruit

new

companies

into

the

C-TPAT

program

and assist

them

with

their

security

programs

and

in

establishing

their

security

profiles.

C-TPAT

teams

are

typically composed

of CBP

specialists,

in

telligence

officials,

and

Department

of

Homeland Security (DHS) representa

tives,

thus

giving

equal

weight

to

trade

and

security

issues.

-

Physical

Inspection

of

suspicious

contain

ers

at

ports

with non-intrusive

inspection

and radiation detectors.

-

Free

and Secure Trade

(FAST)

is

a

volun

tary

program

aimed

specifically

at

effi

cient

screening

and

clearance

of

commer

cial traffic

in NAFTA trade

among

the

U.S., Canada,

andMexico.

The

FAST

pro

gram requires carriers, drivers, importers,

and southern

border manufacturers

to

pro

vide

information for

a

security profile,

with

known low-risk

participants

receiv

ing expedited

border

processing.

FAST

works

in

conjunction

with the C-TPAT

and

PIP

programs.

Other

Governments'

Approaches

to

Monitoring Supply

Chain

Security

Other

trading

nations have

similarly

at

tempted

to

regulate supply

chain

security.

Can

ada, for

example,

has itsPIP (Partners in Pro

tection)

program,

similar

to

theU.S.

C-TPAT,

and

its

version of

theAdvance Manifest

Rule,

requiring

detailed information

on

shipments

being shipped

into Canada

to

be filed

within

twenty-four

hours

of

sailing

from

the

port

of

loading.

The

European

Union has

legislated

procedures

to

qualify

European

shippers

as

Au

thorized

Economic

Operators

(AEO),

granting

them

customs

simplification

and

security

facil

itation,

depending

on

the

level of

certification

achieved. They plan to work with the U.S.

government

to

obtain

reciprocal

recognition

of

the

C-TPAT and

AEO certifications.

The

UN's

International

Maritime

Organiza

tion

(IMO)

has

adopted

the International

Ship

and Port

Facility Security

Code

(ISPS)

as

of

July

2004,

though

these

represent

guidelines

rather than

specific

regulations,

with

compli

ance left to individual

ports

and

ship

owners.

The World

Customs

Organization

has

devel

oped

the SAFE

Framework?Framework

of

Standards

to

Secure and Facilitate Global

Trade?for

use

by

itsmember countries. The

International

Standards

Organization

pub

lished its

ISO/PAS

28000

standard,

Specifi

cation

for

Security

Management Systems

for

the

Supply

Chain,

in

2005. Fratianni and

Kang

(2004)

note

that such

multilateral

cooper

ative

approaches

to

managing

security

issues

in response to terrorismare likely to increase.

Private firms

must

comply

with these

regula

tions,

where

necessary,

and

adopt

the

recom

mendations

as

appropriate.

They

have

to

decide

furtherwhether additional internal

measures

are

necessary

to

complement

these

governmen

tal and

quasi-governmental regulations

and

measures.

In

many

cases,

implementation

has

to

be worked

out

by industry

nd

cross-industry

consortia,

and

a

key

element

is

the

cost

of

compliance compared

to

the benefits of

adher

ing to these regulations and recommendations.

In

the

case

of

regulations

that

are

recent

and

still

evolving, private

firms

must

decide

whether

to

work in

concert

with

their

competi

tors

and

supply

chain

partners

to

help

shape

industry security

standards

before such

stan

dards

are

determined

by

government

agencies

and

imposed

on

them.

Firms active

in the

indus

try

ave

a

better

understanding

of

industry

pro

cesses

and

may

be

better

able

to

judge

how

a

standard

can

be

shaped

to

achieve

greater

security

while

lowering

costs

of

compliance

with

the standards.

Technology

and

Supply

Chain

Security

New

technologies

offer

interesting

capabili

ties

to

help

firms

secure

their

supply

chain.

Technology developments

can

facilitate

secu

rity

at

several

facets

of the

supply

chain,

both

inside and

outside

the

box,

including

the

following:

-

Supply

chain

personnel

identification and

controlled

access

to

supply

chain

nodes;

- Secure loading of containers and verifica

tion with electronic

manifests;

-

Seals

for

containers;

-

Software

for

automated

targeting

of

sus

pect

containers;



11/25

2006

SECURITY

AND GLOBAL SUPPLY

CHAIN

37

-

Use

of

RFID

tags

for

monitoring

what

is loaded

onto

the

containers

as

well

as

monitoring

containers and their

contents

during

transit;

leading

to

smart

boxes,

containers

equipped

with

RFID and

com

plementary

advanced container

security

devices that

can

provide

greater

in-transit

security

of

containers;

-

Non-intrusive

inspection

of

suspect

con

tainers,

at

departure

and

at

arrival;

-

Supply

chain

intelligence

-

keeping

a

record of

who

has

had

access

to

the

con

tainer

at

warehouses,

at

the

dock,

at

load

ing

and

unloading,

and

in

transit;

as

well

as

continuously

recording

the

physical

lo

cations of containers and

individual

items;

-

Communication

among

transportation

modes, containers,

and

supply

chain

net

works,

linked

to

supply

chain database

management,

with

use

of

encryption

and

data

security.

Three

aspects

of

technology

aids

to

security,

namely,

the

use

of RFID

tags,

smart

containers,

and container

screening

and

inspection,

are

dis

cussed

in

greater

detail

(David

2005;

Tirsch

well 2005a; Tirschwell 2005b; McHale 2005;

Eisenberg

2005).

RFID

Tags

The U.S.

Army

has been

a

major

proponent

of

using

RFID

tags

to

provide

a

common,

integrated

structure

for

logistics

identification

smart

containers,

and

tracking, locating,

and

monitoring

of commodities and

assets

through

out

the

Defense

Department.

The Defense

Department

issued

a

Defense

Federal

Acquisi

tion

Regulation Supplement (DFARS),

which

mandated

the

use

of

passive

RFID

tags

on

certain classes

of

defense

procurement

such

as

operational

rations,

clothing,

individual

equip

ment,

tools,

and

weapon

system

repair

parts

(GCN 2005).

In the

private

sector,

Wal-Mart

has

been

an

early

mover

in

requiring

a

growing

number

of its

suppliers

to

equip

their

product

shipments

to

Wal-Mart with

RFID

tags.

Acer

uses

RFID

to

monitor and

efficiently

operate

both

incoming supplies

intoTaiwan and China

and

then

the

reverse

flow of final

products

to

international markets. Levi Strauss has used

RFID in

item-level

tagging, giving

them

more

precise

information about on-shelf

availability

of their

vast assortment

of

clothing

and

acces

sories,

by

details

such

as

size,

style,

and

color.

Pfizer

has used

RFID

to

fight

ounterfeiting

of

drugs

such

as

Viagra,

while

San

Francisco

Airport

has

used

RFID

to

track

baggage during

handling.

The RFID

tag

stores

data,

and

when

attached

to

a

sealed

container and

activated,

wirelessly

communicates

on a

given

radio

frequency

with

the

logistics

network.

Active

tags

allow

con

stant

updating

of

information,

such

as

where

the

container

stopped,

who had

access

to

it,

and whether

contents

had

changed.

Active

tags

can

process

information

relayed by

sensors

that

detect

changes

in

pressure,

radiation,

chemical

signatures,

etc.

This

continuously updated

in

formation

can

be

constantly

communicated

en

route.

At the container's final

destination,

the

tag

can

be

completely

read,

the data

analyzed

and

archived,

and the

tag

deactivated and

ready

for

re-use

if

possible

(A

T

Kearney

2004,

7).

The

RFID

tag

data

provide

an

audit trail of the

container's

journey,

and

help

keep

track

of

its

location

and

contents,

meeting

the needs

of

supply

chain

efficiency

and

security

(Tirsch

well

2005c;

Wall Street Journal

2005a;

Ed

monson

2004).

Since

active

RFID

tags

can

be

reused and

rewritten,

they

have tobe

protected

against

unauthorized intrusion and

hacking

(Weis

2003;

Juels

005).

Reusable active

tags

cost

more

than

passive

tags.

An

active

tag system

would

require larger

investments

to

support

repeated

use over

the

multi-year

container life

(Molar

2004).

A

De

fense

Department study

derived

an

estimate of

$70

to

$100

per

reusable

tag

(Department

of

Defense

2005,

18),

though,

as

early adopters,

they

paid

premium

prices.

The

costs

of

reusable

tags are

likely

to come down with

growing

volumes

of

use.

Nonetheless,

equipping

all of

a

shipping

company's

containers with active

tags

and related

communication infrastructure

could be

an

expensive

investment. The relevant

cost

is the total

system

cost

of

antennas,

read

ers,

tags,

software,

installation, service,

and

maintenance.

RFID

usage

and

efficiency

is

affected

by

a

number

of factors:

cost

and read

reliability

of

the

tags,

the

range

fromwhich

tags

can

be

read,

the speed with which tags can be read, tag

durability,

the

ability

of

tags

to store

and

pro

vide rich

information,

and the

extent to

which

tag

usage

can

be

relatively

free

of the need

for

human intervention.

RFID

tags

can

vary

in



12/25

38

TRANSPORTATION

JOURNAL

Fall

their

performance

dimensions,

as

not

all

users

have

the

same

need

for

rich

data,

longer

range,

and

higher-speed

communication.

RFID

read

ers

also

vary

in

their

capabilities,

with

some

readers better able

to

perform

in

high

noise

situations,

with

greater

range,

better

security

features,

and

lower

error

rates.

RFID

solutions

also

vary

in

their

ability

to

interfacewith

enter

prise

databases and software.

RFID

has several

advantages

over

barcodes:

no

line of

sight

is

required

as

in

reading

barcodes,

the

tags

can

withstand harsh

conditions,

as

in

ocean

travel,

and

multiple

products

can

be scanned

at

once.

RFID

Standards

Development.

The

development

of

RFID

standards

provides

insight

into

the role that

industry

efforts

can

play

in

devel

oping

standards

that

can

help supply

chain

se

curity,

as

opposed

to

accepting

government

derived and -mandated standards.

The

current

second

generation

standard,

EPC

Gen

2

Elec

tronic Product

Code,

was

originally

developed

by

the Auto-ID

Center

to

complement

bar

codes,

and

provide

information

to

help identify

manufacturer,

product

category,

and the

indi

vidual item.

Auto-ID

Center is

a

non-profit

collaboration between

private

companies

and

academia that

pioneered

the

development

of

an

Internet-like

infrastructure for

tracking

goods

globally through

the

use

of

RFID

tags

carrying

Electronic Product Codes. The

Gen

2

standard

uses a

single

UHF

specification,

allows differ

ent

communication

speeds depending

on

back

ground

noise,

is

better

at

reading

distant

tags

at

the

edge

of

the reader's

range,

improves

the

operations

of

multiple

readers

in

close

proxim

ity,

nd

allows

tags

to

communicate with multi

ple readers in parallel sessions.

In

September

2003,

the Auto-ID

Center

passed

on

its work

to

university-based

Auto

ID

Labs,

located

principally

at

MIT.

Another

organization,

EPCglobal,

was

created

to

dif

fuse and

expand

the

standards

being developed.

EPCglobal

is

a

non-profit organization

jointly

set

up

by

theUniform Code Council

(the

orga

nization that

oversees

the

UPC barcode

stan

dard)

and EAN

International

(the

barcode

stan

dards

body

in

Europe)

to

develop global

standards forRFID use, topromote EPC tech

nology,

and

to

stimulate

global

adoption

of

the

EPCglobal

Network,

which

facilitates the

seamless

use

of

EPC and

RFID

across

global

supply

chains.

RFID

tag

raud.

The

expanding

use

of RFID

and its

growing

role in

safeguarding

supply

chain

security

means

that the

system

must

be

able

to

guard

against

RFID

tag

fraud.

For

exam

ple,

the

Exxon

SpeedPass

has

an

embedded

an

RFID

tag

with

user

information

so

that

a

motorist

can wave a

SpeedPass

at

the

gas

pump

and have

payment

charged

to

the

account

of

the

person

whose information

is stored

on

the

SpeedPass.

If

this information

could be

altered

or

copied,

billing

errors

could

occur

and the

wrong

account

could be

charged.

Juels

(2005)

has shown how

an

encryption

code

in

Exxon's

SpeedPass

could be

uncovered,

allowing

fraud

ulent

alteration. This

problem

is

more

signifi

cant

in

reusable and

read-write

tags.

EPC Gen

2

standards

have

attempted

to

prevent

such

fraudulent

alteration

by

embedding

lock

codes;

if

the

RFID

reader tries

to

keep

feeding

differ

ent

lock

codes,

in

order

to

enable the

rewrite

capability,

the

tags

could be

deactivated

for

a

certain

period.

Weis

(2003)

outlines

several

security

proposals

to

combat such

security

weaknesses,

such

as

limiting

access

to

RFID

tags

through

hash locks

(a

hash

being

a

value

computed

from a

randomly

selected

crypto

graphic

key),

and the

use

of

low-cost hash

functions such

as

cellular

automata-based

hashes.

Weis

also outlines

proposals

to

prevent

eavesdropping

on a

tag's

content

when

broad

cast

to

the

reader.

Longer

lock

codes

and

en

cryption

can

help guard

against

such hacks.

If

attempts

are

made

to

change

the

product

identification,

that

is,

its

EPC,

software

could

check

to

see

if

duplicate

EPC

exists

anywhere

in

the

world

(though

this

assumes

real-time

access to a global EPC database and complete

interoperability).

Beyond

security applications,

RFID

has

im

mense

value for

supply

chain

management

in

tracking quantities

and the

movement

of

goods

across

geographically

distant

points

in

the

sup

ply

chain

network.

RFID

provides

incredible

transparency

and

clarity

in

the

supply

chain,

noted Robert

Turk,

who

serves as

national di

rector

for

supply

chain

at

Siemens and

played

a

central role in

Siemens'

RFID

efforts.

Thus,

the costs of an RFID system installation can

be balanced

against

the

benefits from

greater

supply

chain

efficiency

and

effectiveness,

as

well

as

impacts

such

as

lower

pipeline

and

buffer stock

inventories

and

greater

customer



13/25

2006

SECURITY

AND

GLOBAL

SUPPLY CHAIN

39

satisfaction from

receiving

accurate

shipment

information and

on-time

delivery

of

orders.

Container Security and Smart Boxes

The

term

smart

boxes'' refers

to

containers

equipped

with

tamper-proof

seals,

sensors

to

gather

in-transit

information,

and

reusable

ac

tive RFID

tags

that

store

and communicate

real-time information

about the

container's

sta

tus

throughout

its transit.

Information

relayed

from

the

RFID

system

can

be used

to

compare

the electronic

manifest

to

physical goods

in

the

container,

sounding

an

alarm

if

there is

a

discrepancy.

The

tags

could

pinpoint

the

geo

graphic source of intrusion.However, sensors

attached

to

container

doors

may

be

unable

to

detect intrusions

into containers from

the sides.

The

tags

collectively

could

gather

vast

amounts

of

shipment

information,

communicating

with

communication

hubs,

which

use

specialized

software

to

collect,

organize,

and

analyze

data

from

multiple

tags

and

sensors,

consolidate

in

databases,

and

store

for future retrieval.

Soft

ware

would be used

to

incorporate

risk

factors

to

analyze

data,

and

judge

threats,

suggesting

preemptive responses.

The

quantity

of data

gathered

inevitably

raises issues of data

secu

rity

nd

confidentiality.

Firms

using

smart

con

tainers have

to

ensure

that container

shipment

data

are

kept

confidential and

not

available

to

others

in

the

industry.

Container

security

devices

(CSDs)

may

also

be

prone

to

false alarms. The

containers

are

subject

to

harsh

environmental

conditions,

high

seas,

forty-foot

swells,

and

enormous

changes

in

pressure

(eight

containers

stacked

on

top

of

each

other),

all of which

can cause a sensor

to

issue false

readings.

Too

many

false alarms

would make the

system

costly

to

use,

and

cause

information from

alarms

to

be

ignored

in

the

U.S. and

at

ports

of

departure

and transit.Mas

sey (2005)

suggests

that

a

superior

alternative

would be the

external

screening

of containers

using

gamma

and

x-ray

scanners.

Another

problem

is

tag

switching,

where

tags

can

be

moved from

one

location

(container)

to

another

without loss of

function. One solution is

to

embed the

RFID

antenna to

the

adhesive,

so

thatattempts tomove the tag cause theantenna

to

separate,

making

the

tag

non-functional

(Manufacturing

Business

Technology

2006).

The U.S.

Department

of Homeland

Security

(DHS)

has

attempted

to set

open

standards for

emerging products

for

container

security.

Homeland

Security's

Advanced

Research

Proj

ects

Agency

(ARPA)

has issued Broad

AgencyAnnouncement

(BAA)

#

04-06,

setting

stan

dards for the

CSD. DHS

has

similarly

man

dated

power

source

standards,

requiring

a

mini

mum

30,000-hour

useful

life.

Container

Screening

and

Inspection

Despite

careful advance

screening,

therewill

be

need

to

inspect

some

containers

on

arrival,

based

on

information

gathered

from

manifests

and

during

transit. This

has led

to

the

emer

gence

of

the smart

portals

concept,

which

would involve non-intrusive inspection of con

tainers

at

ports

and

other

points

of

loading

and

unloading.

It

may

be

more

economical

to

inspect

containers with

external

scanning

devices than

equip

each

container with

individ

ual

security

devices

and

selectively

inspect

them.

Hong Kong

initiated

a

pilot

project

to

inspect

all

containers

(Wall

Street Journal

2005b).

The

Hong Kong

scheme

requires

con

tainers

to

pass

through

gamma

ray

scanning

stations,

which

would

show

images

of

the

con

tainer

contents

similar

to

an

x-ray

and

probe

suspiciously

dense

objects

that

may

have been

shielded

and hence

not

detectable with

x-rays

(Flynn

2006).

Technicians

would

analyze

these

scans

and

pick

containers

for

further

inspection

if

the

images

raised

suspicion.

A

second

scan

would

monitor

for

radiation from nuclear

de

vices and

superimpose

these

images

over

the

gamma-ray

scan

to

detect the

source

of

radia

tion,

if

any.

A

scan

of

the

container

ID

number

would enable

the

linking

of

scan

data

with

other

container manifest

data and the

geographical

origin

and transit of the container, with all the

information stored

and

available

in

databases

for worldwide

access.

The

U.S.

also

uses

gamma-imaging

and

radi

ation

detectors,

but relies

on

its

software-based

Automatic

Targeting

System,

together

with

the

cooperation

of

foreign

ports

and

shippers

in its

CSI and C-TPAT

programs,

to

identify

at-risk

containers for

intensive

screening

on

arrival.

Such

images

are

generally

not

stored and

are

not

available

to

other

ports,

and would need

to be supplemented with information from

CSDs

on

board

containers,

to

gather

informa

tion

on

the

origin

and

route

of

containers,

and

other related

information.

Longshoremen

unions

at

some

U.S.

ports

have

been

unwilling



14/25

40 TRANSPORTATION

JOURNAL Fall

to

drive containers

through

the

scanner,

raising

health

concerns over

the

safety

of

gamma-ray

scanners.

An

alternative would be

to

stage

con

tainers

in

an

open

area

and

allow the

scanner

to

pass

over

them. This

approach

could be

hindered

by

space

limitations

at

the

ports

and

by

inclement weather. Itwould also be

slower,

and could lead

to

a

lower

rate

of containers

being

screened. The debate

over

two

distinct

approaches

to

screening

containers

is

indica

tive of the

difficulty

of

choosing

appropriate

security

measures.

It

points

to

the increased

role that

supply

chain

industry

participants

need

to

play

to

choose

approaches

that

can

best

combine

security

needs with efficient business

operations,

rather than await

government-man

dated

approaches

and

requirements.

The

technologies

described above

are

pri

marily

concerned with the

security

of

goods

and

the containers

they

are

shipped

in.

Other

links

along

the

supply

chain,

such

as

factories

and

ports

themselves,

and

the

people

involved

along

the

supply

chain,

all need similar tech

nology-enhanced

means

of

safeguarding

secu

rity.

For

example, technology

can

be

used

in

controlling

access to the docks and other cargo

facilities,

through

identification cards

relying

on

fingerprints

and other biometric data. How

ever,

since the

greatest

danger

to

containers

is when

they

are

not

moving, procedures

and

technology

to

detect

tampering

are

valuable.

Technology

to

detect the

integrity

f container

seals is critical

to

in-transit container

security.

The first

two

aspects

of risk

management,

sources

of risk and risk

assessment,

are

being

addressed

by

U.S.

government

and

private

sec

torefforts, s discussed above and summarized

in

Figures

1

and

2.

Some

of the

security

mea

sures

help

reduce

or

avoid

risk

and

thus

also

address risk

mitigation.

In

the

next

section,

we

analyze

firm-level efforts

to

mitigate

risk.

Firm-level

Strategy: Security

and the

Supply Chain

Once

security

risks have been identified and

assessed,

the

next

step

is risk avoidance and

risk

mitigation.

A

main

objective

is

to

design

supply chains that can withstand security at

tacks,

and

are

secure,

robust, resilient,

and flex

ible.

A

robust

supply

chain is less vulnerable

to

disruption.

A

resilient

supply

chain is

one

that

can

bounce back

quickly

from

a

disruption.

For

example,

a

firmwith

modular

process

and

product design

can

adapt

to

raw

material

supply

interruptions

and

shortages,

and

develop

a

speedy

response

to such

contingencies

without

seriously affecting

product availability.

Resil

ience

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