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October 8, 2002

Friction Over Security Gaps

Security concerns draw investment in SCM, but what about the goal of frictionless commerce?

by Ram Reddy

Even in this stalled economy, supply chain management technologies are still attracting investment dollars. In my previous column I discussed the reasons for this continued investment, citing two major impetuses: corporations' need for operating efficiencies and for post-Sept. 11th security. (See "Down, But Not Out," July 26, 2002.) This column focuses on security, giving an overview of the difficulty in securing global supply chains, the specific areas that technology solutions address, and a suggested approach that balances security needs with friction-free supply chains.

The Reality We Face

Reviewing a few numbers will put the problem of securing supply chains in perspective. More than 6.5 million trucks annually cross the border from Canada carrying raw materials, components, and finished products, supplying our factories and retail outlets. In the past year, approximately 10 million containers were unloaded in our ports. These containers in turn are transported (via trucks, trains, and so on) to factories and retail outlets. Opening and inspecting every single package or container that comes into the United States is not only cost prohibitive, but impossible to implement. As a participant at the Homeland Security Conference in Washington wryly observed, "We would have transport ships lined up and waiting from Hong Kong to Long Beach and Antwerp to New York if we decided to inspect every single container." Moreover, examining every package would bring assembly lines across the United States to a halt.

The automotive sector in Detroit did experience this situation briefly after Sept. 11th, when border inspections between Canada and the United States slowed traffic movement to a snail's pace. U.S. assembly lines were in danger of being shut down for want of parts sitting in trucks, waiting to be cleared at the border. A few enterprising companies bypassed traditional border crossing routes and organized barges to transport their raw materials across the Detroit River. Especially since Sept. 11th, many containers are being put on inspection hold at our ports by a variety of government agencies, such as the Federal Bureau of Investigation, Drug Enforcement Agency, and Customs. There are not enough personnel to inspect and clear these containers in a timely manner.

Prior to Sept. 11th, only 2 percent of the 10 million containers coming through our ports annually were inspected. Theoretically, even 100 percent inspection of all materials crossing our air, land, and sea ports of entry won't eliminate the fact that a combination of seemingly harmless materials could be assembled within the country's borders to launch terrorist activity. Without being flippant, the only way to ensure that raw materials, components, and finished goods crossing into our borders aren't used for terrorist activities is to totally ban all imports.