Some risks in international supply chains

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(Some) risks in international supply chains
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Example of stakeholders in an international
supply chain
Infrastructure operator
Infrastructure operator
Liability Insurer
Cargo Insurer
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Freight logistics issues
DoT National Freight Logistics Strategy
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Asset quality across the freight logistics sector
DoT National Freight Logistics Strategy
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Industry structure
DoT National Freight Logistics Strategy
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Border posts
DoT National Freight Logistics Strategy
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Safety and security issues

• The transport supply chain has four principal
  stakeholders, viz
• shipper,
• freight forwarder,
• carrier(s), and
• insurer (both cargo and carrier liability
  insurance)
• Behind these four are further stakeholders,
  including
• technical operators,
• warehouse operators,
• track (i.e. infrastructure) providers and
• intermediaries in the insurance world.
• 11 September 2001 redefined supply chain security
  issues throughout the world
• It does not only affect the shipping function
  only but also areas such as packaging, customs
  clearing, warehousing etc.

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Transport security and terrorism

• Transport systems/modes are continuously being
  used for ulterior motives e.g.
• Terrorism
• Train explosions in Spain
• Aircraft in 9/11
• Car and truck bombs
• Bombs on London underground and bus system
• Toxic gases in the Japanese underground
• Buses in Lebanon, Israel, Egypt etc.
• Smuggling on aircraft, trucks, maritime and rail
  systems etc.
• Criminals may attempt to introduce something into
  a legitimate shipment (e.g. drugs, weapons or
  explosives) en route or may transport illegal
  products disguised as a legitimate shipment.
  This requires improvements to the security of
  shipments.

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Transport security and terrorism

• Security experts are concerned about a variety of
  terrorist scenarios at U.S. ports. Among other
  things, they are concerned that terrorists could
  
• Use commercial cargo containers to smuggle
  terrorists, nuclear, chemical, or biological
  weapons, components thereof, or other dangerous
  materials into the United States
• Seize control of a large commercial cargo ship
  and use it as a collision weapon for destroying a
  bridge or refinery located on the waterfront.
• Sink a large commercial ship in a major shipping
  channel, thereby blocking all traffic to and from
  the port
• Attack a large ship carrying a volatile fuel
  (such as liquefied natural gas) and detonate the
  fuel so as to cause a massive in-port explosion
• Attack an oil tanker in a port or at an offshore
  discharge facility so as to disrupt the world oil
  trade and cause large-scale environmental damage.

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Transport security and terrorism

• Security experts are concerned about a variety of
  terrorist scenarios at U.S. ports. Among other
  things, they are concerned that terrorists could
  
• Seize control of a ferry (which can carry
  hundreds of passengers) or a cruise ship (which
  can carry more than 3 000 passengers, of whom
  about 90 are usually u.s. citizens) and threaten
  the deaths of the passengers if a demand is not
  met.
• Attack U.S. Navy ships in an attempt to kill U.S.
  military personnel, damage or destroy a valuable
  U.S. military asset, and (in the case of
  nuclear-powered ships) cause a radiological
  release.
• Use land around a port to stage attacks on
  bridges, refineries located on the waterfront, or
  other port facilities.

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Transport security and terrorism

• Companies should evaluate their risks in
  international trade and factor that into their SC
  planning and risk assessment
• Security experts believe that tightening control
  over maritime commerce requires that security be
  embedded into everyday business processes.

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Transport security and terrorism

• Transport security is the combination of
  prevention measures and human and material
  resources intended to protect transport
  infrastructure, vehicles, systems and workers
  against intentional unlawful acts.
• Transport infrastructure should be protected
  against terrorism and other unlawful acts.

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Transport security and terrorism

• In assessing the current security measures used
  at air and sea ports of entry in South Africa,
  the obvious first step is to investigate these
  systems in their entirety.
• Only when their processes, procedures and
  requirements are fully understood, would it be
  possible to identify any shortcomings and
  establish whether these could be exploited by
  terrorists, drug and firearm traffickers.

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Theft and pilferage

• The theft of goods in transit is a major problem
  which is costing huge amounts per annum
• Theft of goods in transit is especially prevalent
  in the rail industry
• Hijackings in the trucking industry
• Many of these incidents are inside jobs
• These thefts are not only a burden on industry
  (replacement cost, lost sales, customer
  dissatisfaction, insurance costs etc.) but also
  the proceeds from these crimes may be used to
  fund other criminal activity

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Impact of the SC externalities

• Many externalities pertain to the ports and rail
  system that are uncontrollable externalities
  impacting on SC performance (from a shippers
  point of view)
• Shipment delays
• Reliability, punctuality of shipment movements
• Theft and pilferage
• Product damage due to delays, handling etc.
• Capacity constraints human as well as
  infrastructure
• Technological issues
• Productivity issues- TEUs/hour throughput time
  on rail
• Labour issues skills and productivity
• Infrastructure issues rail, road and ports etc.
  such as investments and reinvestments
• Operational inefficiencies old equipment -
  locomotives, rolling stock,
• Maintenance practices rail, roads and ports
• International requirements that impact on cargo
  handling, security etc.

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Impact of the SC externalities

• Many externalities pertain to the ports and rail
  system and are uncontrollable externalities
  impacting on SC performance (from a shippers
  point of view)
• Shippers need to factor these into
• Modal choices
• Production schedules
• Product range
• Market reach nationally and internationally
• Delivery schedules
• Stockholding
• Cost of sales
• Security measures
• Placement of new factories, warehouses etc.

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Risk assessment of SC externalities

• Thorough analysis of supply chain externalities
  and potential risks, sensitizes the planner so
  that the risks and potential risks can be
  factored into the SC design
• This could result in a redevelopment of the
  supply chain
• Choice of alternative modes of transport to avoid
  certain risks
• Choice of alternative suppliers from other parts
  of the world
• Choice of alternative trading partners/development
  of alternative markets
• Choice of backup suppliers etc.
• By knowing the potential risks, allows the
  shipper to plan for such eventualities and the
  introduction alternative plans

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