Supply Chain Security’s Place in Global Commerce

The fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason for remaining ashore. — Vincent van Gogh

At the time when trade imbalances among nations are the topic of contentions as well as intense discussions on global forums and the safety of the supply chain has never been more prominent, we focus attention on important developments in this area of commerce to highlight multilateral security agreements that have been implemented to protect the global supply chain. North America and the European Union have led the way with programs such as C-TPAT and AEO respectively.

Insights from a recent TV commercial state that supply chain or logistics represent for an organization new markets, global access and higher profit margins. But what it does not articulate is that logistics brings with it intrinsic risks; precisely because of the same benefits it spouts. Case in point is the recent cargo bomb plot out of Yemen, which led to a major disruption of cargo networks around the world. As simple as it was heinous, it exploited many of the security loopholes inherent in our global economy; it abused the ease by which anyone can ship parcel via one of the many global shippers.  As mass production hits the global air, sea and ground transportation grid the risks compile. Public-private partnership in North America yielded the Safe Port Act of 2006 the Customs-Trade Partnership Against Terrorism (C-TPAT), and Container Security Initiative (CSI) established with 9/11 as a backdrop.  Under the C-TPAT program companies have certain security requirements end-to-end to remain C-TPAT compliant. Similarly with AEO, the EU aimed to develop a framework to protect its port facilities in a way that would not impede the free flow of commerce.

Under the stewardship of The World Customs Organization (WCO) security criteria have been established, and objectives have been set for trade facilitation and mutual recognition.  Currently 157 countries are signatories and have expressed their intent to comply. Accordingly business operations are encouraged to undergo Certification to ISO 28000 – Supply Chain Security Management Systems for recognition globally to C-TPAT, AEO, or other local customs security programs.

These initiatives have revolutionized the way logistics are secured, but it’s not a panacea. There are simply too many interlocking relationships and moving parts for the integration of security at the enterprise logistic level to mitigate all risks. To become more robust it needs to drill down to the core of supply chain operations by ensuring the proper inter-organizational process coordination among all supply chain actors (e.g.) shippers, consignees, port authorities, customs, shipping companies and logistics service providers.  At the same time for any protection grid to become functionally operational across the board it needs to be communicable across organizational boundaries. Similarly inter-operable technology standards that can adequately monitor shipments in transit would need to be implemented.  Such implementations, by the way, have benefited from the fact that its multi-disciplinary approach can be leveraged in, out and around the enterprise.

Equally important is maintaining sanity during crisis situations; avoiding the knee-jerk reactions requires adequate crisis response for shipments in transit. Evidence abounds especially in maritime shipments in the Gulf of Aden. Organizations can’t neglect establishing liaisons with rapid response units from governmental agencies and militaries to combat piracy on international waters.

Although many of these initiatives are an off-shoot of a more security- minded post-terror attacks world, they do not exist in a vacuum. They also aim to tackle a world where protectionist measures hampered global trade. In fact these programs are often billed as a way to expedite processing of customs entries, reduce number of inspections resulting in fewer cargo delays and potentially faster border transportation times. That said, I’m told that even these obvious trade-offs do not guarantee easy selling from security and logistics executives to their shareholders. The nagging questions that remain is whether these “voluntary compliance” logistic protection measures would be embraced and widely implemented across the board or whether regulatory regimes would need to be imposed as some risks take root.

To conclude, your organizations gap analysis would barely scratch the surface if you’re not focusing on the broader risk picture. Knowing your specific risk exposure is important to allocate protection priorities, objectives and resources, but to achieve breakthrough in terms of tangible results in making your organization more efficient and competitive, removing global barriers, all while protecting the supply chain and establishing enterprise wide security standards more vision is de rigueur. In this context global regulation of supply chain security would take hold and be embraced my organizations large and small.

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Embezzlement in The Security Suite

You might think I’m writing about the investigation function of the security department. No, this time I’m referring to fraud perpetrated by the watchdog. What happens when the person responsible for guarding company assets goes rogue? It is indeed a rare occurrence. In my 10-year career I’m only aware of two such cases. In one case the Asian security division of a major financial concern colluded with its contracted security guard firm to bilk millions of dollars in the form of kick-backs over several years. Another case concerned a senior security executive who embezzled money from the firm through a cunningly constructed fraudulent disbursement scheme; creating false vendor accounts (International consultants) and submitting false invoices payable to a fictitious third-party.

The article below highlights the dangers of asset misappropriation committed by apparent trusted internal senior executives:

Read More: CIO Gets Six Years for Embezzlement Scheme IDG News Service (12/14/10) McMillan, Robert