Strong Medicine

Jun 01, 2002 9:30 PM  By

Last September’s attacks on New York City and Washington, DC, produced a strong and continuing consensus about the need for a heightened state of security in every conceivable sector.

Naturally, no link in the global supply chain wants to be either a victim or an unwitting accomplice of terrorism.

Closer scrutiny of global cargo is key to efforts by U.S. and foreign governments to prevent additional acts of terrorism. A related change affecting all modes of shipping was the passage last November of the Aviation and Transportation Security Act, which created the Transportation Security Administration (TSA) as a division of the U.S. Department of Transportation. TSA, along with U.S. Customs and other government agencies, is now collecting shipment data and reviewing that data against potential risk factors developed since Sept. 11. For some shippers, this means yet more paperwork and delays, but most seem to accept the need for increased scrutiny philosophically.

“The government is screening the shipment data more intensely than it did previously,” says William Evans, senior vice president of Philadelphia-based Barthco International Inc. and chairman of the security and freight forwarding committees of the National Customs Brokers and Forwarders Association of America. “They’re looking at companies, products, trade lanes. They’re using a conglomeration of data to ascertain which shipments they want to look at physically depending on maybe the product, company it’s shipping from, and company it’s shipping to. It’s a very complex matrix. You couldn’t just say that all shipments going to Country X are being examined.”

New Pig Corp. of Tipton, PA, for example, ships industrial clean-up supplies and personal protection gear to distributors in more than 40 countries around the world. A shipment recently destined for Turkey was held at New York’s JFK airport for three weeks before it was cleared to go. The official explanation for the delay was “security reasons,” and neither New Pig nor its customer was ever given an estimate of when the shipment might actually leave.

That delay underscores the importance of having good customer relationships. New Pig’s customer was understanding, and New Pig retained the business. But as a result of that experience, New Pig now gives customers in global hot spots a heads-up that their shipments might be subject to delay.

Strange symptoms

Like the events that have given rise to heightened security measures, the measures themselves seem to have unpredictable results. Even shippers of seemingly benign products may experience delays. Lands’ End ships clothing and home goods to consumers in 185 countries, and reports an average increase of two to five days for ground and air shipments to customers in some countries.

In contrast, San Francisco-based specialty retailer The Sharper Image reports no changes at all — no delays, no increased documentation, no extra costs, nothing. The Sharper Image ships directly to consumers primarily in Canada, England, Japan, and Germany.

Cargo loaded onto passenger planes typically undergoes greater scrutiny than freight loaded onto cargo-only planes. “Passenger aircraft is considered the highest risk of terrorist attack,” says Tom Stanton, international pricing analyst at Air Freight Management Services (AFMS) in Portland, OR, so “there is significantly greater concern and review of passenger aircraft cargo movement.”

To reduce that risk to passenger planes, TSA has established rules defining who may use what kind of aircraft. Known shippers — companies that make at least 24 shipments per year — are considered a lower security risk and may send cargo on passenger planes. Unknown shippers — those who send fewer than 24 shipments a year — are considered a higher security risk. Unknown shippers cannot ship cargo on passenger planes unless they first go through a profiling system, receive on-site visits by a freight forwarder or carrier to certify their existence, and allow their shipment to be held for potential inspection by TSA.

“The shipper’s declaration needs to be verified before a freight forwarder will go to any distribution center to pick up cargo,” says Chrystina Farley of CF Logistics, a global logistics consulting firm in New York City. “Freight forwarders have to do their due diligence, and they have to feel comfortable picking up cargo. They could do a reference check to make sure a company is credible, and they have the right to ask for a facility site visit prior to pick-up to see the company’s facility and to understand the commodity that they would be shipping.”

In another change, many airlines are imposing a security surcharge on shippers to cover the costs of new cargo screening equipment, extra manpower, and other enhanced security measures. And, says Farley, many airlines require the cargo to be in their hands several hours earlier than before to put it through increased security processes and still ship it on time.

For their part, catalogers, e-commerce companies, and other sellers of commercial goods are trying to be proactive and put strong security controls in place. They are reviewing existing security policies and procedures, trying to plug holes that might leave them exposed, and evaluating the security practices of their logistics partners.

Not every company finds it necessary to increase security measures. For instance, 3Com Corp., headquartered in Marlborough, MA, distributes its network access devices through channel partners around the globe. The company believed it had strong security controls in place prior to Sept. 11, but chose to review its existing policies and procedures in light of the new climate. When 3Com completed its review, the management felt comfortable with what was in place and made no changes.

Not good enough

Danbee Investigations in Midland Park, NJ, has received many calls from retailers requesting a review of entire security programs and a determination of their effectiveness. “There’s an attitude change,” says Barry Brandman, Danbee’s president. “Good enough is no longer good enough.”

Brandman has been speaking at the annual convention of the Food Distributors International association for the last 15 years. Most of the questions he took at last fall’s event had never been asked of him before. Attendees wanted to know things like how they could protect the entire chain of custody of their product; how they could prevent employees, vendors, and contractors from contaminating goods; and what kinds of anti-terrorism policies and procedures they should have in place.

“I talked with them about how to establish an effective hotline program so employees, vendors, and contractors could call in when they see what they think might be illegal or unethical activity,” says Brandman. “We talked about how to flush out people that may be bringing in contaminants. We talked about types of training they should provide to management and supervisory personnel, and some red flags to look for.”

In custody

Just as freight forwarders and carriers need to know whose product they’re taking custody of, retailers ought to know to whom they’re giving their products. “Companies are taking more steps to ensure the integrity of inbound and outbound shipments, both domestically and internationally,” says Brandman. “It’s an issue that encompasses the entire chain of custody of product today.”

Evans of Barthco International cautions that it’s vital to “maintain the integrity of the shipment from the point of origin to the point of destination, and you want to make sure that the people in custody of the shipment during that time follow that chain of custody.” Evans adds that, as the old saying goes, “Cargo at rest is cargo at risk. You want to keep your cargo moving from origin to destination. If you’re sending it from a point to the airport and normal driving time is five or six hours, you don’t want that cargo sitting around for 24 hours or two days before it’s delivered unless you know where it is and who has custody of it. You want to check out your vendors and transport people to make sure that they’re security conscious as well.”

Brandman concurs: “You have to know that at each step of the way the product is under your control. We have to set up better policies for many of these companies because their policies are antiquated or are paper tigers. They are policies that are either weak or not being enforced on a consistent basis.”

Adding these kinds of security measures to an existing security program might not be as expensive as it may sound, especially considering the potential losses. Brandman estimates that retailers may need to increase their existing budgets for theft by 3% to 12% to protect inventory from sabotage, contamination, and tampering.

Ironically, guarding against terrorism has raised the risk of other problems for shipments crossing international borders. Inspections of vehicles and cargo at border crossings is up since Sept. 11, and heightened security at these points can mean greater risk of theft, damage, and other issues.

“Without naming countries, it’s a definite concern,” says Brandman. “Certain governments are going to consistently open up containers coming in or going out of their countries. Depending on the value of the goods and how significant a problem it is, you may have to station people at crossing locations or inspection sites, or send them with the transportation people so that they will be there to witness what happens when the containers are opened and inspected.”

New kind of normal

Retailers have had enough time to adjust to the impact of heightened security concerns since Sept. 11 on global shipments, and so generally view what’s happening today as a new kind of normal.

“We’ve pretty much accepted that this is a new way of life for business and have adapted to that,” says Tammy Parson of New Pig Corp. “I believe that the new security measures do impact business, but, unfortunately, at this time it is needed.”

“I think that the concern on the part of retailers is genuine,” says Brandman. “Their commitment to security still seems to be very strong. Sept. 11 was certainly a horrific tragedy, and it’s hard to say something good’s going to come out of it, but I think that upgrading security safeguards will dramatically reduce the odds of having something worse happen in the future.”

Dana Dubbs is a freelance business writer living in Escondido, CA. She can be reached at (760) 432-9444 and at ddubbs@pacbell.net.