The Cost of Unsecured Supply Chains
Every single one of us partakes in logistic supply chains. Therefore, we are all affected when their security is breached. The consequences might include loss of production, reputation damage, or price changes at the cash register.
Different studies have researched the amount lost due to thefts and other breaches of security in supply chains. In 2007, the European Union concluded that the total loss is around 8 billion euros annually within the EU from breaches during road transportation. However, that statistic is from ten years ago, so there is a real need for new data. The Transported Asset Protection Association (TAPA) recently commissioned a group of academically distinguished supply chain professionals to study the total cost of cargo theft. A few examples of economic loss that TAPA investigates includes the cost of reproducing lost assets, re-transportation, and destroying damaged goods.
Small deficits here and there end up causing exponential loss in the long run. As such, it is imperative to have secure logistic supply chains.
Common Examples of Compromised Security
During the years that I have worked in logistic security consulting services, I have noted several common themes in compromised security situations:
- Lack of Security Awareness
Companies are not aware of the threats to their operating environment. This manifests as undervaluing or compartmentalizing the issues so that they do not seem to affect the local environment. Sometimes this idea can even be somewhat correct – nothing has happened to them. The question is, how long can you operate on sheer luck?
- Uncontrolled Sub-Sub-Contracting
Producers of goods subcontract their delivery services, which is, of course, logical. However, the real service provider for transportation is not always known, as it might be a sub- or even a sub-subcontractor for the company sold the service in the first place. Subcontracting chains are the part of the logistic industry that makes it efficient. These chains just need to be documented and controlled, so that the entity that is at least morally responsible in the eyes of the public remains in control.
- Inefficient Use of Resources
Inefficient use of resources manifests both as under- and over resourcing individual sections of security environments. Under-resourcing happens when issues are knowingly or unknowingly overlooked. Over-resourcing happens, when there is an awareness of the issue, but there is no comprehensive way to tackle it. This manifests, for example, with investing into the wrong equipment that does not meet the set requirements. The result then ends up being that the budget allocated for security improvements has been exhausted with no real solution reached. The options after that are to ask for more resources or just wait and hope that nothing happens.
- Trying to do everything by yourself
This is a big question in business overall – when is it worth it to do things yourself and when should you contract someone else to do it? There are multiple situations where working independently is successful. However, this requires someone internally to either have experience on the subject or have the drive to acquire the necessary knowledge. If these capabilities are not found, then the result might be what was described in section 3. Some might think that the following statement is something that consultants use to make their sales, but the harsh reality is: We are usually called in when things start to crumble. Unfortunately, this can end in a situation where the solutions are somewhat of a patchwork that tackles the most immediate issues, or the target is misunderstood, which causes inefficiencies.
What’s the Solution?
One of the best solutions to enhance security in the field of logistics supply chains is European Union’s Authorized Economic Operator (AEO) Program. It is part of a global program to secure our logistic chains against trafficking and financial fraud. The benefits for passing the audit and complying with the requirements of any of the official Customs security program are the same: The authorized company has a lower risk and threat evaluation, which for example lowers the chance and the amount of inspections conducted against their transportation units. According to a Stanford University study, this speeds up logistic chains which can lead to higher customer satisfaction.
Fortunately, there are some easy steps to take that clear the way for more comprehensive and long-term solutions. These solutions ensure that they support the primary business, which is always the goal for security.
- Map out stakeholders and subcontractors
Get the big picture of who has a stake in your supply chain. These entities are the ones that determine your business and therefore security environment.
- Make a clear decision to take control over your security
This decision is a requirement, and the policy makers must be onboard. The strategic goals are decided, documented and discussed so that there is a clear picture what needs to be done. A crucial part here is to assign the responsibilities and determine a follow-up schedule. If the goals are not met during follow-up, there must be a stated reason for it.
- State your security requirements for service providers and subcontractors
A clear statement of your requirements regarding security and practices of doing business makes everything easier. The following statement should be included in any service and subcontract agreement “Further subcontracting of any of the mentioned services in this contract is allowed only with the written consent of the customer.”
- Train your employees
Continuous training and dialog between employees in matters of security ensure that you gain the up-to-date information of the environment you operate. Training and dialog build trust that is a key component for a successful business.
- Contact specialized service providers as early as possible
You are always required to do certain things by yourself, but contacting a dedicated service provider as early as possible will save you time and money. The situation in many cases is that the required field of security is something new to you. Let someone with experience in the field help you in your way towards success.
How We Can Help
We at Centry have helped multiple companies, small and large, to enhance their security environment and meet specific security requirements. The process has always shined a light on common obstacles faced by corporations. These obstacles are usually always able to be resolved, which has ensured the attainment of desired benefits.
Centry is equipped with multiple security consultants that can train clients in acquiring AEO certification.
This article was written by Vilho Westlund, a specialist in logistic security consulting at Centry. He has utilized his work experience to share some valuable information about security in supply chains.
For any questions and comments, please contact Vilho at: