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International Cargo Conundrum

How much investment in security is enough?
By Leslie K. Downey
Feb 06, 2006What must be done to provide an "adequate" measure of cargo security? Are electronic freight container seals (e-seals) a good investment?

These questions were debated at eyefortransport's North American Cargo Security 2005 Forum—held in Washington, D.C., in December—by representatives from such large importers as Boeing and Procter & Gamble (P&G), as well as transportation and logistics companies, and information and cargo seal technology vendors. Not everyone agreed on the answers, but they did concur that the U.S. government must invest more to step up private investment.

Tectonic Shift in Cargo Security Since 9/11
Corporate supply chain security managers speaking at the conference described grappling with the change in cargo security emphasis since 9/11—from prevention of theft and contraband to terrorism. The new threat is exceedingly difficult to evaluate. Clearly, weapons of mass destruction, slipped in by terrorists into U.S.-bound cargo shipments, could cause catastrophic loss of life and harm to the economy. Still, the U.S. has not had a major terrorist incident since 9/11, and multiple speakers acknowledged that complacency was growing. Some are starting to see their company's security budget reduced in response to unremitting cost-cutting pressure.

Supply Chains More Vulnerable Than Ever
The increasing resistance by U.S. companies to spending on cargo security was especially worrying to attendees, who believed that—despite post-9/11 efforts to improve security—the vulnerability of U.S. companies' supply chains was increasing. Why the increase?

First, global trade is increasing at a 10 percent annual rate in recent years. The quantity of shipping containers, used to transport 90 percent of the world's cargo, have also been increasing, at 7 percent annually. What's more, U.S. imports continue to grow faster than exports. More than 10 million containers entered U.S. ports in 2005, and some experts predict that this number will roughly double by 2010.

Second, an increasing proportion of U.S.-bound containers are arriving from developing countries, where security practices are less reliable. "Security is different in different cultures as you go around the world," remarked Jeff White, director of asset protection at Kmart, a company known for its attention to supply chain integrity. "In some countries, a good security system may be a dog behind a fence."

The biggest security gap exists between the overseas factory or distribution center, where containers are filled, and the port where they are loaded onto ships. U.S. importers have limited ability to close this gap because of national sovereignty and the number of cargo handoffs obscuring the chain of custody.

Referring to his company's "Secure Commerce Roadmap"—a novel guide to assessing the investment-worthiness of various cargo security and tracking technologies—Ted Langhoff, director of supply chain security group at Unisys, pointed out that the sheer complexity of the global supply chain poses a huge challenge to security: "In addition to international jurisdiction, the typical international shipment involves 20-plus handoffs, 25-plus documents, 200-plus data elements, and public/private sector integration."

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