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.

Protect the People Stupid: New Commodity in the Gulf of Aden

Out of Africa, news about record number of people being held for ransom by Somali pirates. The numbers are staggering; such is the economics driving piracy in this sea lane critical to global commerce. As many expert investigators know if you want to get to the root of chronic crime problem, follow the money. That is indeed what the pirates are after; they’re telling the shipping companies and their insurance policies to show them the money. Their sweet spot is not only taking whole cargo ships hostage, but taking the crew members to induce faster payment.

So far the benefits (Payment of $12.3 million ransom for 2 ships recently) have outweighed the risks of being interdicted by the multi-national naval force currently deployed in the region and the cost of doing business remains low. They recognized the odds are in their favor having 1.1 million miles of sea, encompassing the Horn of Africa, as their playground.

Of the recent innovations and best practices adopted by some merchant shippers, one appears at face value to be effective deterring hostage taking and denial of entry to the cabin area by which pirates can gain control of the ship. The hardening of a ship’s cabin by installing bulletproof components creating what is known as citadels has proven successful at keeping the crew safe and delaying the pirates while an armed response is mustered.  Adding remote control to these citadels would allow the ship’s captain to maneuver the ship from the relative safety of this secure cabin or relinquish control to an off-ship location via GPS link-up.

Read more:

Security Risk Management On-Demand

By Francisco Mateo

It appears to be prime time for corporate security units across Europe. During the last few months Greece, Portugal, Spain, France and England have seen a resurgence of labor protest as austerity measures are enacted to contain the onslaught of a worsening global economy.  With that in mind it is important for security managers to prioritize strike and violent protest protocols and have their teams at the different facilities ready for any collateral or spillover risk from violent confrontation between protesters and police.

When strike action involves countrywide protest, road and critical infrastructure blockades, it is necessary that you assist your supply chain team prevent disruptions by protecting in-route cargo and seeking alternatives for continued operations.   It is important that contingency plans be drawn in advance and that duties for carrying out specific actions under the plan are top of mind for each member of the team. Although many of the security decisions that need to be made at this time are situation-driven, your knowledge of internal business operation; clients, routes, labor and police leadership, as well as open-source intel can give you the most leverage.  In short know the terrain and know the stakeholders, so that you can intelligently steer your contingency team and navigate clear of any risks your company may face. 

Do not underestimate how much demand for third party service (cargo security escort) would peak during these times. My experience has been that, in anticipation of such events, the security departments must secured agreements with key vendors way in advance of such events to ensure preferential treatment when it is must critical. You don’t need to be psychic to know these protest have been brewing for a while and as a result of the burden the sustained economic recession has put on government’s purses.  It is also very likely that these protest will continue to spread other European Union member countries.

Another thing I want to share with you is that the protesters have shown signs of sophistication and a high degree of organization. If you take into the account the way protesters in France have aimed to provoke systematic disruption of critical supplies by blocking fuel depots and creating choke points against delivery, where it is most needed.  If you are responsible for risk management in the affected industry don’t forget to bring your A-game when crafting your response. If your organization lacks the leadership to tackle these risk management efforts than now may be a good time to consider hiring a knowledgeable and experienced security practitioner that can set a roadmap to protect your PARB.

Additional Recommendations:

  • Increase your operation’s alertness level; encourage staff to provide status updates of risk conditions, in and around the facilities and main routes, to your command center
  • Update  your key contact list, and test communication systems
  • Keep a detailed activity log
  • Advise staff to be aware of localized bouts of unrest with the potential to result in violent confrontations
  • Also advise staff to avoid all demonstrations and if caught in the middle of a violent confrontation seek immediate safe haven in a predetermined location where assistance can be summoned
  • Have additional security staff on stand-by in case you need to ramp up your protective presence at any facility

The Global Illicit Pharmaceutical Business; A Scourge of the 21st Century

“As much as fifty percent of the medicine sold on the Internet is counterfeit” – WHO

“Counterfeit medicine sales will reach seventy-five billion dollars worldwide this year” – CMPI

Have you consumed fake prescription drugs?  Odds are you have purchased and ingested these concoctions at some point or another, especially if you live in a developing country; with their lax health regulatory environment and acutely corrupt institutions.

“The World Health Organization says the problem with counterfeit medicines is especially bad in Africa, Asia, Latin America and the Middle East. The W.H.O. estimates that up to thirty percent of the medicines on sale in many of those countries are counterfeit.” Up to know industrialized nations, like the United States, Canada, Japan and New Zealand, have kept the problem relatively under control, restricting fakes to approximately one percent of the total prescription and over-the-counter drug’s market. But that is no solace, judging from the effectives of counterfeiters to innovate their packaging and overall appeal online, as huge profits would provide the incentive to continue injecting these often deadly products into the drug supply chain, and in the process grabbing market share (competing as low cost substitutes, effective in a down economy) from legitimate drug companies.

The best weapon in the fake drug profiteers’ toolkit happens to be consumer’s ignorance of the real source of drugs they think will cure them or alleviate an ailment. Product that could be in reality a toxic mix of chemicals; that end up being expensive (cost in human lives/livelihood) placebos.  The stakes are high for the pharmaceutical industry; these companies have had to come up with ways to make fake drugs easy to spot. After all the most effective prevention and eradication method is to disrupt the consumer’s propensity to be duped by worthless and deadly knock-offs, whether they’re in the developed or developing world.

Combating counterfeit medicines is no walk in the park, as small, yet nimble organized crime groups (A loosely federated collection of manufacturers, distributors, and even marketing operations) are dedicated to this racket. They often use new media and social networks (for their anonymity and mass reach) which allows them to hawk their dangerous products while skirting the risk of ever getting caught. To make affront to this global illicit business the pharmaceutical industry would have to go beyond the technology solutions it has implemented and try the true and tested awareness campaigns to make consumers worldwide sensitive to the issue. In closing, I’d advocate bringing these campaigns to the criminals’ own turf, online and through social networks.

Learn More:

Risk To Maritime Transport

“Ships may move slowly, but they can carry far more cargo than more recently invented modes of transportation such as planes, trains, and trucks, according to the U.N. Conference on Trade and Development in its “Review of Maritime Transport 2009.” – Foreign Policy

According to this article 80% of the world’s cargo is transported via cargo ships.  That said, the fact that we are so heavily dependant on this mode of transportation adds a great layer of risks to global trade. It begs two important questions: first, what are the risks associated with maritime transport around the world? And, second how are they mitigated?

First I’d focus on the Piracy problem, which ranks high on the maritime transport industry’s risk charts. The fact of the matter is that tankers and cargo ships are being hijacked on the high seas at an alarming rate. Since 2008 pirates off the coast of Somalia have up the ante, taking to firing automatic weapons and rocket-propelled grenades on their way to making cargo ship hijacking into a growth industry.  Piracy has not only added additional cost of doing business for ship operators, but avoiding hotspots aggregates additional time to complete trips as ships sail around the Cape of Good Hope. Navigating this alternative route can take two to three extra weeks, saddling the industry with inefficiencies.

Consequently, what can cargo vessel owners do to deter/repel attacks?  They’re teaching their crew to fishtail (evasive maneuvers) their vessels at high speed, drive off intruders with high-pressure water hoses and illuminate their decks with floodlights, or emitting deafening sound waves from special devices. They’re also working on prevention protocols, mandating “pirate watches,” learning to use hoses and conduct frequent drills with alarms indicating when the ship has been boarded. They also take account of the fact that it is illegal for crews to carry weapons in the territorial waters of many nations, and many ship captains are wary of arming crew members for fear of mutinies. If gunpowder is your kind of deterrence, than go with the pros. Many PMC’s have began offering their ship protection services in the Gulf of Aden, Malacca Straits and other piracy hotspots. Of course the latter countermeasure is not without its share of controversy.

A second threat to the maritime transport industry, with high potential for disruption, is political risk. A particular concern today is the Strait of Hormuz, that narrow stretch of sea between Iran and the United Arab Emirates and Oman to its south that connects the Persian Gulf to open international waters where approximately 40 per cent of global ship-borne crude oil passes through on its way to the West.  According to the US-based Energy Information Administration, an average of 15 tankers carry 16-17 million tonnes of crude oil through the Strait every day. Needless to say this is the world’s most sensitive choke-point for vessels transporting oil. Add in the element that Iran, leveraging its sovereign territorial rights over these waters, could seek to blockade commercial traffic through the Strait of Hormuz, given an escalation of its conflict with the West.  It is indeed a factor that should be playing out in scenario planning sessions for both industries concerned.

As far as countermeasures are concern, political risk, especially the aforementioned example, is obviously an issue with implications beyond the maritime transport industry.  It’s indeed a prime policy issue on the diplomatic agenda for the US, China and Russia. The maritime industry however can’t sit around and wait for a diplomatic resolution. It must instead develop a business continuity portfolio. Knowing that such risk exposure can’t be fully avoided, ship operators should focus on strategic planning, “Mapping key supplier dependencies is the first step in taking control of the risk exposures. By identifying single-point failures and quantifying exposures, organizations can take conscious decisions to mitigate exposures.” Like the piracy issue the industry can mitigate part of the hazards through “political risk insurance” to offset the cost of rerouting its cargo. Unlike the piracy problem however, ship owners cannot deploy armed response in a potential conflict zone.

Quiz: What percentage of world trade is carried on ships?

Food Fraud Busters – Getting Rid of Dangerous Fake Edibles

Few crimes are as abominable as food fraud, which according to this Newsweek article endangered thousands of lives.  Imagine going to your local grocery store for UHT packaged milk only to find out it’s fake after you’ve been hospitalized with food poisoning.  Many of us would never see it coming; the tell signs would not always be obvious and even the store owners can be deceived or worse, they could be in collusion, sourcing cheaper products to increase their profit margins.

The Fake-Food Detectives

Food fraud has been around almost as long as food itself. Finally, some experts are starting to get tough.

Read More:

Hunting Down Fakes

This is a significant and insidious global problem.  Consumers’ lives are put on the line for dirty profits from these merchants of death.  Sadly many consumers lack the ability to differentiate authenticate drugs from fakes.  Worst of all corruption officials are paid enough to look away and act like the problem does not exist.  My hat is off to the Interpol and Customs Enforcement task force working to attack this death supply chain.

Crackdown Targets Counterfeit Drugs
Washington Post (11/20/09) Mui, Ylan Q.

Law enforcement agents from around the world have cracked down on counterfeit pharmaceutical products as part of a new global effort to prevent these medications from reaching patients. The operation, known as Pangea, has already uncovered nearly 800 alleged packages of counterfeit or suspicious medications in the United States, including imitation Viagra, Vicodin, and Claritin. Officials say these counterfeit medications pose a serious patient safety risk, as some have been found to have as much as three times more of the active ingredient than is usually prescribed. Other medications may be placebos and some have been found to contain potentially toxic substances including drywall material, antifreeze, and yellow highway paint. In addition to seizing these medications, officials also shutdown 68 online pharmacies believed to be trafficking in fake pharmaceuticals. The National Association of Boards of Pharmacy maintains a list of approximately 4,000 Internet-based pharmacies that it says are questionable. It also certifies legitimate sellers through its Verified Internet Pharmacy Practice program. Thus far, 17 Web-based pharmacies have met the requirements for certification through the program. In an effort to further prevent the sale of counterfeit drugs, Rep. Steve Israel (D-N.Y.) recently proposed a bill that would increase penalties for counterfeiters and enhance the Food and Drug Administration’s ability to track them. However, the bill is currently stalled in committee.