BUSN 6110WebsterFall 2Nov 30, 2011

Supply Chain Securitythe single biggest threat facing American traders is supply chain securityWebsite for C-T PAT

As a whole, supply chain professionals see cargo theft as a major risk for their operations over the nextfive years. With 74% having felt moderate to major impacts on their supply chain operations due to theft,coupled with the evercontinuing rise in cargo theft rates and loss values, it is no wonder that this criminalenterprise looms as one of the most significant concerns of the decade. As such, the industry continues toincrease information sharing, best practices and cooperative measures to ensure the timely arrival andsafe passage of goods throughout the nations supply chain.

Why should you care about SC Security?Is it a US problem?Global ProblemHeathrow Airport delays Superbowl weekend 2005RFID is this the solution?ISO Guidelines for SC SecurityTerrorism Insurance

Supply Chain SecurityWhats the cost of 9/11 to the Supply Chain?

Fortune Magazine - $50-80 billion a yearinefficient supply chainshigher transportation costsincreased inventory

Problem?Terrorism/PiracyObsolescencePilferageInformation BreachProprietary Data Camera Phones; Thumb DrivesCyberspace SecurityRFID Data Security66% of Sealift Containers arrive at 20 Major Ports>58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach~44% through Los Angeles/Long Beach in 2003Lengthening of Supply Chains coupled with Globalization*

Recent HeadlinesIMB identifies rash of false shipments into North AfricaPirates intensify attacks in new areas, with first Somali hijacking reported in Red Sea Maersk Alabama Captain Held by PiratesPeanut Corporation of AmericaSomali piracy is worst in world BBC NewsRussia Sends Warship to Somali Coast to Fight Piracy Bloomberg.comUN adopts new Somalia piracy resolution

**Supply Chain HeadlinesNew Budget includes $10.2 Billion for Border Security.Battling the Bad Guys: 2005 Was a Tough Year Dec 2005 Baseline MagazineMajor Data Theft Leads to Major Legal Problems Baseline MagazinePolo Ralph Lauren Lost Point of Sale DataSomali pirates hijack fourth vessel in a week , January 2, 2010

More HeadlinesSomali pirates hijack cargo ship near Seychelles, April 11, 2010, AP NewsSomali pirates attempt attack on Dutch warship, March 17, 2010New suite of ISO supply chain management standards to reduce risks of terrorism, piracy and fraud

**

ExamplesMajor Distributor, Dec 2006Locks on trucksSAFE Port Initiative Scanning of ContainersC-TPATISO Standards for Supply Chain Security Threats in the international market-place know no borders.

Terrorism Risk InsuranceU.S. Terrorism Risk Insurance Act (TRIA) property and casualty insurance experts are helping clients with interests in the United States make informed decisions about terrorism coverage. U.S. President George W. Bush signed the Terrorism Risk Insurance Act (TRIA) into law in November 2002 to stimulate business investment that had slowed to a trickle after the events of September 11, 2001. The law creates a three-year federal program that backs up insurance companies and guarantees that certain terrorist-related claims will be paid. TRIA is a short-term measure designed to give the insurance market time to recover and develop new solutions.

On December 26, 2007, the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 which extends the Terrorism Risk Insurance Act through December 31, 2014. The law extends the temporary federal Program that provides for a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.

Supply Chain SecurityWe have proved to our management that good security is good business. Ann Lister of Texas Instruments

Risk Supply Chains are inherently complex, dynamic, and fluid, characterized by uncertainty, ambiguity, and friction. These characteristics cloud the operating environment: they create risks

Risk AssessmentTerrorismPort Security over 12 million containers annually to the US; 400 million world widePort Security 300 US PortsLongshoremen Strike 2002Potential Airport Attack LAX; MPS; LGA

Risk Assessment If you do things the way youve always done them, youll get the same things youve always got. -Darrell WaltripThis is not your Dads Supply Chain!Security is an integral part of the Supply Chain and Homeland Defense

What are Supply Chain Hazards?Theft/PilferageCompetitionInformation SystemsCell PhonesThumb DrivesCamera PhonesDisgruntled EmployeesLack of Training

Problems?66% of Sealift Containers arrive at 20 Major Ports>58 % of all inbound containers come through New York/New Jersey, Los Angeles, Long Beach~44% through Los Angeles/Long Beach in 2003Lengthening of Supply Chains coupled with GlobalizationTop 5 Hottest Global Markets: China, Mexico, Eastern Europe, Southeast Asia, India

Important?September 11, 2001 - $2 billion per day lostLongshoremen Strike, 2002 300-500 ships backed upPotential loss of attack to major port - $20 billion estimate2008 estimate ~ 12 million containers into US; up to 490 million containers world wide; 2009 - ~10 million containers ; 2010 - ~ 11 million

New Problem?There were no secure rear areas. General Joseph Heiser on Vietnam LogisticsSun Tzu Chapter 1, The Art of WarNative AmericansAmerican Civil War Great Train ChasePirates of the Caribbean

Supply Chain SecurityA Global Perspective

ISO StandardsWith an internationally recognized security management system, stakeholders in the supply chain can ensure the safety of cargo and people, while facilitating international trade, thus contributing to the welfare of society as a whole

Top 5 European PortsRotterdam 9.743 million TEUs in 2009Hamburg 7.088 million TEUs (9.7 mil in 2008)Antwerp 7.3 million TEUs (8.6 in 2008)Bremen 4.565 million TEUs (5.5 in 2008)Valencia 3.65 million (3.6 in 2008)

Other Key PortsSingapore 25.87 million TEUsShanghai 25 millionHong Kong 20.9 million Shenzhen 18.25 millionPusan 11.98 million

Rotterdam> 900 intermodal barge moves daily to 72 locations> 200 rail moves220 million people within 600 miles of Rotterdam

Rail > 15% of cargo to Germany via rail~ 13% of Belgium cargo ~ 14 of French cargo

US Rail 4 major bridges over the Mississippi River

Other issues9000 distribution centers in the Netherlands2000 - $64.4 billion USD in logistics and distribution in The Netherlands

SAFE Port ActThe SAFE Port Act codified into law a number of programs to improve security of U.S. ports, such as:Additional requirements for maritime facilities Creation of the Transportation Worker Identification CredentialsEstablishment of interagency operational centers for port security

Safe Port ActContainer Security InitiativeForeign port assessments Customs Trade Partnership Against Terrorism

The three core elements of CSI are: Identify high-risk containers. CBP uses automated targeting tools to identify containers that pose a potential risk for terrorism, based on advance information and strategic intelligence. Prescreen and evaluate containers before they are shipped. Containers are screened as early in the supply chain as possible, generally at the port of departure. Use technology to prescreen high-risk containers to ensure that screening can be done rapidly without slowing down the movement of trade. This technology includes large-scale X-ray and gamma ray machines and radiation detection devices.

Containers - ConcernsCost to X-Ray containers ManpowerDelaysRadiation

DHS Secretary Janet Napolitano announced that the United States is no longer going to screen every cargo container before it enters the United States; she said, "We believe the so-called 100 percent requirement is probably not the best way to go November 28, 2011 news

Transportation Worker Identification CredentialsPort EmployeesLong ShoremenUnescorted access personnel

C-TPATVoluntaryNovember 20019000 membersCanada has a program very similar to C-TPAT named FAST Free and Secure Trade.

C-TPATAccording to US Customs and Border Protection Agency, the benefits of participating in C-TPAT could include:Playing an active role in the war against terrorism A reduced number of CBP inspections. Priority processing for CBP inspections.

Orlando International AirportNo staffing of doors for employee entrance to baggage claim areasGuns smuggled into planes by employeesno requirement for us to staff those doors OIA Spokesperson; TSA not my job!Identified as security issues in 20042006 of TSA Screeners failed test that measured how well employees could identify explosives, guns and other weapons on the scanner but can identify bottles of mouthwash and toothpasteSource: Mike Thomas, Orlando Sentinel, Mar 15, 2007, p. B-1

Food Security

BioTerrorism?Peter Pan Peanut Butter e coli 2007E-coli from fresh Spinach 2006Chi Chis e-coli from green onions 2003Taco Bell e coli 2005None were terrorist attacks but impacted supply chainsUS Salmonella/e-coli scare 2008Salmonella epidemic 2009 - >3921 separate items recalled