Locking Down Supply Chain Security

Locking Down Supply Chain Security

When it comes to cargo security threats, each mode faces unique challenges. But thanks to technology and industry best practices, shippers can improve their ability to protect valuable cargo.

Security in the global supply chain is more important than ever. Driven by threats such as terrorism, piracy, and theft, it is also more complicated.

In January 2012, President Obama introduced the National Strategy for Global Supply Chain Security, a policy designed to promote the timely and efficient flow of legitimate commerce while protecting and securing the supply chain from exploitation, and reducing its vulnerability to disruption. The goal of the policy is to "resolve threats early in the process, and strengthen the security of physical infrastructure, conveyances, and information assets while seeking to maximize trade through modernizing supply chain infrastructure and processes."

While the national policy is a positive step, transportation service providers—as well as shippers—must also take precautions to protect cargo. Given each transportation mode’s nuances and challenges, no one-size-fits-all solutions exist. Instead, understanding the challenges, studying best practices, and putting a comprehensive plan in place are critical components.

Protecting Over-the-Road Cargo

In the 1990s, most trucking-related cargo theft occurred in warehouses. In response, warehousing providers beefed up security substantially. Today, cargo is more likely to be stolen during transit.

"Cargo thefts most often occur when the vehicle transporting the cargo is stopped in an unsecured location," says Bill Boehning, corporate director security at Springfield, Mo.-based motor carrier Prime Inc., and Transported Asset Protection Association (TAPA) board member. "Freight at rest is freight at risk."

Eighty-five percent of all major cargo theft involves trucks, according to TAPA. Those thefts cost businesses more than $10 billion annually worldwide.

"Trucking presents more opportunities for unauthorized access than other modes," says Taya Tuggle, logistics and compliance manager for San Francisco-based third-party logistics (3PL) provider AG World Transport. "You can build a lot of security into warehouses, but when freight is moving, it’s more challenging."

Common areas where theft occurs include truck stops, unsecured drop yards, and restaurant or shopping center parking lots. Geography also plays a significant role. Twelve states—including California, Georgia, Florida, Texas, Tennessee, New York, and Illinois—account for 80 percent of all U.S. freight theft among all transportation types.

"The risk shippers face changes dramatically from region to region," says Boehning. "No matter where their cargo is traveling, shippers need to keep their presence in certain high-risk areas to a minimum, and not leave cargo sitting unsecured for any significant period.

"Any time cargo sits, it is vulnerable," he adds.

In 2011, TAPA announced the first trucking security certification program for motor carriers and logistics service providers in the United States and abroad. TAPA designed the program to help trucking companies transporting high-value goods targeted by cargo thieves ensure the safety of the freight they are handling.

As of January 2013, three companies have been certified, according to Boehning.

Rail and Hazardous Materials

Recent terrorist attacks on rail systems in Madrid, London, and Mumbai have highlighted rail’s vulnerability. In the United States, a large percentage of the 160,000 miles of railroad track transports freight, including highly toxic chemicals.

"Freight rail is an essential element of chemical security," says P.J. Crowley, a homeland security expert at the Center for American Progress, an educational institute based in Washington, D.C.

The Freight Rail Security Grant Program provides funding to freight rail carriers, railroad car owners, and owners of rail bridges to protect critical surface transportation infrastructure from acts of terrorism, major disasters, and other emergencies.

The Federal Railroad Administration, meanwhile, employs 415 inspectors who ensure rail freight conforms to federal regulations for transporting hazardous materials. Those regulations require rail carriers to implement security plans, including special training for their employees.

Additionally, some chemical companies have begun opting for less-hazardous alternative chemicals. For example, for a nominal cost difference, water treatment facilities can use liquid bleach in place of chlorine, and refineries can replace hydrofluoric acid with the less lethal sulfuric acid.

"Reducing the need for some of the most dangerous chemicals lowers the risk of their release, either by accident or sabotage," says Crowley.

Setting Common Air Cargo Standards

Air freight represents approximately 40 percent of the value of global trade. How best to screen air cargo for the presence of explosives or other threats without paralyzing commerce has been a hotly debated issue, particularly because different countries follow different protocols.

The United Kingdom’s approach, for example, focuses on ensuring that cargo, once it has been screened at its point of origin, cannot be tampered with at any point along its route. The U.S. Transportation Security Administration (TSA), on the other hand, imposes strict protocols at the last point of departure to the United States—regardless of whether the cargo had been previously screened in another country—and requires air carriers to guarantee that the cargo has been screened according to TSA standards.

In the past, this required air carriers and shipping agents to physically separate U.S.-bound cargo in airport warehouses for special processing. This method resulted in duplicate sets of paperwork, and often required that parcels be scanned by two sets of similar X-ray equipment to comply with both systems’ technical standards. The additional compliance costs were often passed on to customers in the form of higher shipping rates. And the extra handling procedures increased transit times.

On June 1, 2012, however, the United States and the European Union announced an agreement to recognize each other’s air cargo security procedures, putting an end to a costly duplication of security controls. More than $130 billion in air freight crosses the Atlantic from Europe each year. Mutual recognition is expected to reduce costs and improve shipment speed and efficiency.

Ports of the Future

U.S. ports require an uninterrupted flow of commerce. An underwater threat or attack is likely to stop port operations, leading to major shipment delays and financial losses.

America’s seaports are safer than they were when Congress passed the Maritime Transportation Safety Act in 2002, according to Bethann Rooney, a member of the American Association of Port Authorities’ (AAPA) Security Committee, chairperson of the AAPA Port Security Caucus, and security manager at the Port Authority of New York and New Jersey. She testified on behalf of the AAPA before the U.S. House Transportation and Infrastructure Committee’s Subcommittee on Coast Guard and Maritime Transportation.

In her testimony, Rooney was quick to note, however, that major challenges still exist in areas such as fully funding the federal Port Security Grant program, upgrading Department of Homeland Security (DHS) threat detection equipment at ports, and completing the Transportation Worker Identification Credential card reader evaluation and testing process.

The key to enhancing and maintaining ocean cargo protection measures is the Port Security Grant Program, Rooney says. Since its inception, the program has provided more than $2.7 billion in grants to enhance port security. But in the past few years, Congressional support for all Homeland Security grants, including the Port Security Grant Program, has eroded.

In fiscal 2012, Congress appropriated $1.3 billion for all Homeland Security grants—a 40-percent cut over the previous year—and gave the DHS secretary authority to determine the final funding level for each individual program. Only $97.5 million was allocated for port security in fiscal 2012.

Newer technologies may help ports improve security without requiring huge investments. For example, real-time 3-D sonars are enabling more efficient survey methods. Currently, most sonar imaging supplements hand-over-hand underwater inspections. The sonars allow divers to survey a perceived underwater improvised explosive device in minutes, for example, as compared to several hours manually. Security officers can then take immediate action to remove the threat.

New 3-D real-time sonars have dramatically improved image clarity and resolution in even the most demanding acoustic environments. The sonars allow ports to conduct routine detailed surveys of critical infrastructure, identify parasitic devices on vessel hulls, and map submerged hazards to navigation.

Technology Tools

The terrorist attacks of Sept. 11, 2001, and the creation of the DHS, prompted both the public and private sectors to commit to developing new supply chain security technologies.

"These endeavors have resulted in new systems that make trade not only more secure, but also more efficient and cost-effective," says Ed Harrison, chairman of the Cargo Intelligence and Security Association (CISA). "Through discussions in the United States, EU, and elsewhere, governments and industry are becoming more aware of the economic and security benefits these systems offer."

CISA was formed to facilitate a public-private dialog on supply chain technology. Such conversations are vital because progress in this field is occurring so quickly that technology is getting ahead of laws and policies drafted decades ago.

Technology companies are developing faster, more advanced techniques that offer more detailed data, and systems that provide shippers real-time container tracking are improving each year. New technologies also allow shippers to monitor containers for tampering, and determine whether they contain dangerous cargo.

"There is no excuse for not using the available technology to support supply chain security," says Tuggle. "Tracking and access control are integral parts of security, and technology can easily provide those capabilities."

Meanwhile, the Flanders Institute for Logistics recently released a report chronicling a multi-year test using technology to establish secure trade routes. "This initiative serves as proof that broader use of security systems can assist governments, and save time and money for the trade industry," says Harrison. "The DHS and the World Customs Organization have started similar supply chain technology programs."

But more technology is not always the solution; it depends on the situation at hand. "The market is moving toward technology, but there will always be a place for low-tech solutions, too," says Brian Lyle of Cambridge Security Seals, a Pomona, N.Y., supplier of loss prevention seals.

Shippers must balance their security investment with the value and volume of the items they are shipping. "Expensive high-tech solutions may not always be the answer," Lyle notes.

Best Practices

The foundation of a robust supply chain security plan and program is comprehensive and accurate risk assessment. Once shippers conduct an assessment, they can devise a security plan.

Typical supply chain security activities should include:

  • Credentialing of supply chain participants. Take care to select transportation partners who can help analyze any security problems that arise, mitigate the incidents, and prevent them from happening again.
  • Screening and validating the contents of cargo being shipped.
  • Sending advance notification of the contents to the destination country.
  • Ensuring cargo security while in transit via the use of locks and tamper-proof seals.
  • Limiting access and exposure within the supply chain. It is critical to restrict workers’ access to only what is necessary to perform their jobs, and to monitor that access for inappropriate use.
  • Inspecting cargo on entry.
  • Performing supply chain risk management awareness and training. A strong risk mitigation strategy cannot be put in place without training personnel on policy, procedures, and applicable management, operational, and technical controls and practices.

Focus Points

The more data about shipment status supply chain partners can record and access, the more secure their cargo will be.

"Ensuring cargo security requires creating an audit trail," says Lyle. "The challenges in the market require maintaining shipment integrity."

"Chain of custody is important, as are documentation and tracking devices—knowing where your goods are and who has them at all times," says Tuggle. "Also, make sure vendors meet your security standards, which are a vital part of cargo security. If you don’t have a clear set of standards, how can you expect vendors to comply?"

Tuggle recommends developing explicit vendor shipping requirements that include clear non-compliance consequences. Equally important is a comprehensive security training program, both internally and with partners.

If a security breach does occur, it’s important that shippers have policies in place for handling investigations so they can find root causes and use the incident as a learning tool.

Companies should also familiarize themselves with local and national law enforcement agencies. Taking the time to meet these agencies—specifically the personnel involved with investigating cargo theft—is important for recovering product and assets. Several states have their own cargo theft task forces.

Overall, all supply chain partners that bear the burden of cargo should be involved in the security process as much as they can, as they all share in the monetary loss if cargo is destroyed or lost.

"Data quality and reliability are vital," says Harrison. "Shippers all have the same need for security. Effectively combining security solutions, intelligence, law enforcement involvement, and analytics is the key to ensuring supply chain security."

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