Supply chain security refers to efforts to enhance the safety of the supply chain,
combining traditional practices of supply chain management with security requirements
addressing a host of threats such as natural disasters, accidents, or even malicious
attacks like terrorism, piracy, and theft. Any of these hazards can result in long delays,
especially at the border, and can play havoc with manufacturing, just-in-time delivery
and, of course, the bottom line for entire industries
The North American Supply Chain is deeply integrated, with products moving frequently
back and forth between the United States, Mexico and Canada. In the auto industry, for
example, products get preferential NAFTA treatment for having at least 62.5% of the
finished product coming from North America. In reality, the vast majority of all cars have
between 75 and 90 percent North American content. In order to achieve such a high
level of integration, North American industries have to have a continent-wide platform
for manufacturing and distribution, which requires a highly integrated supply chain.
Such a complex supply chain is vulnerable to a wide variety of hazards. As the joint
statement of the “Critical 5” member nations (Australia, Canada, New Zealand, the
United Kingdom, and the United States) states, the global supply chain repeatedly
demonstrates the “co-existence of operational optimization with operational
vulnerability”. Because systems are increasingly interdependent, the potential exists for
initial failures to cascade into events of catastrophic proportions. A recent example is
the 2011 tsunami in Japan, a local disaster which impacted the global supply chain for
months.
As an indication of how seriously the US views the risks associated with supply chain
security, the United States Department of Homeland Security developed a National
Strategy for Global Supply Chain Security in 2012. The Strategy establishes two goals.
The first is to promote the efficient and secure movement of goods – to enable the
efficient flow of legitimate commerce while protecting the supply chain from exploitation,
and reducing its vulnerability to disruption. The second is to foster a global supply chain
system that is prepared for and can withstand threats, and can rapidly recovery from
disruptions.
The Strategy is backed by several pieces of legislation passed in the last 15 years,
including the Security and Accountability for Every Port (SAFE Port) Act, the Maritime
Transportation Security Act, the Aviation and Transportation Security Act, the
Implementing Recommendations of the 9/11 Commission Act, and others.
The complexity of this problem requires the ability to respond to everything from
earthquakes to terrorism threats, mandating such disparate responses as trusted
shipper certifications, enhanced weather warning systems, and redundancy in
infrastructure such as ports, airports and highways, to name only a few.
To further add to the complexity, the necessary responses involve cooperation from
both the public and private sectors, and cross local, regional and national boundaries.
Integration of North American markets will almost surely continue. If the level of supply
chain integration continues to accelerate, new threats to the supply chain will continue
as well.
Whether the threat comes from Mother Nature or from terror groups with ulterior
motives, new menaces continue to arise. Climate change, for example, is resulting in an
increasing number of incidents – everything from severe winter weather to more
frequent hurricanes and tropical storms. Global terrorism is an ever-present threat to the
movement of goods, particularly in terms of contraband and cargo that has been
contaminated.
The governments of the three North American countries, and organizations focused on
worldwide commerce, are all establishing programs to identify trusted shippers and
enable the flow of legitimate commerce. Among the established programs are:
The Customs Trade Partnership against Terrorism (C-TPAT) is a voluntary US
compliance program for companies to improve the security of their corporate
supply chains. As of June 2012, C-TPAT had more than 10,300 Certified
Partners worldwide and has conducted more than 20,800 on-site validations of
manufacturing and logistics facilities in 97 countries.
The Free and Secure Trade (FAST) program is a commercial clearance program
for known low-risk shipments entering the US from Canada and Mexico. This
innovative trusted traveler/trusted shipper program allows expedited processing
for commercial carriers who have completed background checks and fulfill
certain eligibility requirements, and many ports of entry have dedicated FAST
lanes. Truck drivers from the United States, Mexico and Canada are eligible.
Participation in FAST requires that every link in the supply chain, from
manufacturer to carrier to driver to importer, is certified under the Customs-Trade
Partnership Against Terrorism (C-TPAT) program
The World Customs Organization (WCO) Framework of Standards to Secure and
Facilitate Global Trade sets common supply chain security standards for
Customs administrations around the world.
The Container Security Initiative (CSI) is a program led by U.S. Customs and
Border Protection focused on screening containers at foreign ports.
The Global Container Control Programme(CCP), a joint United Nations Office on
Drugs and Crime (UNODC)/World Customs Organization (WCO) initiative to
establish effective container controls at select port to prevent trafficking of drugs,
chemicals and other contraband.
Many private sector global companies have established programs to track and
monitor the integrity of cargo containers using technologies such as RFID and
GPS.
The International Organization for Standardization (ISO) has a series of
standards for the establishment and management of supply chain security. This
offers public and private enterprises an international high-level management
standard that enables a globally consistent management approach to supply
chain security.
In another promising development, in 2015 the United States and Mexico agreed to
three pilot projects that will permit American customs agents to pre-clear goods on
Mexican soil before they are brought into the US. The pilot projects became viable when
Mexico’s Chamber of Deputies agreed to loosen restrictions on armed foreign agents
operating on Mexican soil. Backers hope the projects will demonstrate to both
governments that expanding the program will allow shippers to move cargo more
quickly without sacrificing security. Interests in Arizona and Sonora are pushing for a
fourth pilot in their region, which was not included in the initial program.
Economic considerations / viability
The high level of attention being paid to supply chain security by the US government
the governments of Canada and Mexico, and global industry is indicative of the millions
of dollars at stake when the supply chain is compromised. Companies and individual
jobs may be threatened.
Even more importantly, the health and safety of millions of people are also at risk.
Goods such as electronics and autos are high value cargo where a loss can have
enormous economic consequences, but goods such as food and pharmaceuticals carry
significant health and safety risks as well. The risk of terrorism may be the type of high
visibility issue that makes the nightly news, but food that cannot be transported due to
flooding or hurricanes has the same negative health and safety impacts.
A shutdown, or slowdown, in the supply chain puts billions of dollars and millions of
people at risk, and carries the possibility to slowing significant elements of the global
economy. The economic and safety risks are so consequential for both the public and
private sectors that the ever-increasing costs of mitigating those risks have become an
accepted element of supply chain costs.