The Last Mile: Protectionism vs. the Global Supply Chain

May 31, 2006
Can our current global supply chain strategy peacefully coexist with developing attitudes favoring a more protectionist stance? Why are supply chain management

Can our current global supply chain strategy peacefully coexist with developing attitudes favoring a more protectionist stance?

Why are supply chain management professionals struggling with visibility? Their supply chains have stretched and stretched again. First-tier suppliers are often overseas, not down the street. It's more difficult to see what is happening with them and to recognize and respond to developing issues before they become major problems. That's only part of it. The second and third tiers are nearly invisible, and that's where the seeds of future catastrophes may be taking root.

Monitoring those operational issues back to the source makes good economic sense because it helps to weed out some of the risks in your supply chain before they have a chance to become reality.

Another side to that challenge is the increasing need to have a clear view of the "chain of custody" for security purposes. Where did the raw material come from? Who processed it? Where was it assembled into the final product? Who handled it, transported it, and consolidated it into an export shipment that ultimately arrived at your dock and then was shipped to your customer?

The cumulative effect of large and small risks along the extended supply chain is to turn the metal in that chain very brittle. Apply a little too much pressure and it will snap.

Legislators and regulators pushing a security agenda want to drive supply chain visibility and the chain of custody concept to mitigate a physical risk. Logistics and supply chain professionals have an operational agenda that seeks the same visibility to manage risks that have significant economic consequences. It sounds like everyone is in agreement.

One sign of that progress is the announcement that the Transportation Security Administration's Air Cargo Final Rule "makes permanent some practices already in place and adds others." TSA calls it an example of how it works with industry partners to ensure the security of air cargo. When companies don't fulfill their security responsibilities, TSA revokes their air carrier certification—and it has recently done so for three companies in four locations.

Programs like the Container Security Initiative (CSI) push maritime security out to origin ports. The voluntary Customs-Trade Partnership Against Terrorism (C-TPAT) is, similarly, defining the chain of custody and establishing benchmarks for security practices along the supply chain.

This firm but reasonable approach to reducing risk appears to be working for both security and commerce. But concerns over foreign ownership of U.S. airlines and consequences of the Dubai Ports World acquisition of P&O Ports could lead to broader restrictions on foreign ownership of key logistics assets. The raging debate over illegal workers has led to approval of a physical fence along the U.S. southern border just as potential requirements to scan all imported ocean containers could create a virtual wall around the country.

There appears to be a disconnect. Open Skies negotiations are on hold. The world is questioning U.S. immigration policy. And we appear not to trust the systems we've already declared successful in maintaining security. While U.S. logistics professionals have been guarding their global supply chains, they may have failed to recognize some risks at home.

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