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Post 9/11 US Security Measures & Growing Quality Logistics Practices

by Russ Doak

No one will argue that the horrific attacks of 9/11 changed the rules for receiving global supply and established security measures. The result – the U.S. government has now placed the burden for compliance on the shoulders of business and requires documentation as much as 24-to-48 hours before goods leave their countries and ports of origin.

“Many of the issues being addressed by these trade security initiatives have existed for decades. The 9/11 attacks simply served as a catalyst for reform.”
Adrian Gonzalez of ARC Advisory Group

As onerous as this challenge is, there may be a silver lining; This increased focus can have a positive downstream effect.

Specifically, it has heightened the value of possessing a responsive global supply chain with improved quality of information in the form of key shipping data flowing to international trading partners at earliest possible moment.

In the project logistics area, this approach is not new. Pre-inspections and key shipping/documentation information have always been sent well ahead for customs clearances and customer contract requirements. It made good business sense and is comparable to the emphasis on quality measures taken in late seventies and eighties, with the focus on making it right the first time.

“With the Bush administration budgeting $8.8 billion for transportation security in 2003, no single factor has as much prospect to change the way transportation is managed as the after effects of Sept. 11. Security concerns will require improvements to the process by which freight is moved, especially across international borders.”
Jerry McNerney of AMR Research

Executives did not argue with the costs for quality initiatives in seventies and eighties or with recent popularity of programs such as the rigorous Six Sigma movement because of the improved positioning of companies with their customers. These initiatives resulted in profitability from retaining and growing market share versus companies that suffered because they did not get on board early enough. The bottom line is executives are realizing that the long-term benefits of quality far exceed the costs. The support by senior management for improving the quality of the global supply chains is already there. The security measures are prompting this change. Senior management will realize an eventual return on their investment in the form of greater efficiencies of supply chain, better contingency plans against disruptions such as port strikes or border delays, and improved levels of customer service.

Supply Chain Security and Quality
Security & Compliance Measures Quality Initiatives
Every stakeholder must be involved Total Quality Management & Six Sigma require everyone’s involvement
C-TPAP, verifiable sealing and anti-tamper technologies Emphasis on prevention – “Do it right the first time!”
CSI and source inspection Source or pre-inspection
Automated chain of custody Process control
Container tracking (RFID) & total visibility Identify, track, and improve quality

Exhibit 1 the chart right demonstrates how key aspects of the quality initiatives can complement supply chain security & compliance measures.

One of the immediate security measures is the hardening of U.S. borders -- virtually extending their reach beyond traditional borders with the U.S. customs 24-hour rule. It requires ocean carriers and consolidators to submit cargo manifests electronically 24 hours prior loading containerized cargo onboard vessels at the port of origin. On Feb 2, U.S. Customs began enforcing the rule and, if ignored, can issue “do not load” messages for ocean containers that fail to meet the 24-hour advance manifest regulation.

If you can’t deliver on time it can cost you big money. Think of what it will cost if you must delay, even a day, to get your goods to market. That cost alone justifies what you must spend to meet these new requirements. But more than simply meeting rules, you have the opportunity to completely reevaluate the processes you use, and the quality you deliver.

A couple of actions to immediately consider are:

Post 9/11 created a golden opportunity to revamp supply chains, bringing about much needed reforms that seldom got beyond boardroom discussions. Now we can take from that quality experience and look at global supply chain security as an opportunity. Restoring confidence in the supply chain, while aligning good business practices for process and quality improvement is increasing productivity and reducing costs.

Major channel masters are continue to place an emphasis on securing measures with their vendors in form of proper documentation for shipping and custom compliance. The best companies won’t wait; they’ll use this opportunity to improve processes in their supply chains.

There are opportunities for major companies with their global supply chains. Inbound strategies and actions need to be put into place. In my next article, I will address some tactics and solutions for realigning the inbound strategy.