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What Will It Take to Secure Our Global Supply Chain?

Trust is a word not often associated with the concept of homeland security. It’s commonly used, however, in describing the partnership between our industry and the protectors of the public good. Law enforcement recognizes and appreciates the resources, information, and expertise that retail loss prevention brings to the highly complex world of organized retail and cargo theft. As an industry, we have closed the gaps in public investigative resources and established trusted partnerships with law enforcement.

At Target Corporation, we’ve held fast to the idea of being a good neighbor when it comes to assets protection strategies. We embrace opportunities to get involved in law enforcement partnerships that impact organized criminal groups, even when those groups are not directly impacting our business…at least yet. There’s simply no competitive advantage to allowing organized criminal elements to flourish

Not too many years ago, those of us who took the approach of combating these groups outside of the retail box were considered cutting edge. That’s no longer the case as increasing numbers of retailers take the fight to the criminals’ turf. Yet, I believe the assets protection team at Target, in its persistent quest for innovative new ways to execute its strategies, continues to be a competitive advantage to our corporation.

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We look for the best investigative and business minds to formulate these strategies and monitor our progress. And more importantly, we are critical partners in protecting our corporation’s present and future strategies. Trust is the price of admission for understanding what these corporate strategies even are. The internal decision makers trust that we have something to contribute in their formation and protection—and therein lies the competitive advantage.

Unfortunately, the concepts of partnership and trust have not taken hold in the world of homeland security and global commerce. Simply put, the public sector doesn’t fully trust that input from the private sector has value. In the absence of this foundation, there is no private sector involvement in the strategy of protecting global commerce, and thus the homeland, even though our industry has a stake in the outcome of this national conversation and has much to offer in terms of resources, information, and expertise.

What’s Going Right in Supply-Chain Security

I’m often accused of erring on the side of optimism. That has served me well to date, so let’s look at all the things that are going right. Customs and Border Protection (CBP) has a deservedly good reputation for identifying ways to challenge the status quo with regards to securing global commerce. It was among the first agencies to recognize the value of industry input and establish what can be described as a rudimentary form of partnership. The result was the post September 11th formation of the Customs-Trade Partnership Against Terrorism (C-TPAT). This program now comprises thousands of members and has proven that a voluntary approach to supply-chain security can work.

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Much of the credit for C-TPAT’s early success goes to U.S. Customs Service Commissioner Robert Bonner and his team, who quickly realized that a new threat requires a new approach.

That new approach has also led to the formation of the Container Security Initiative (CSI), a partnership between U.S. Customs and foreign ports that regulates the reporting, inspecting, and handling of containers. It also allows CBP officials to participate in the security process at those ports. Stationing U.S.government officials on the ground in all of the world’s mega ports represents a substantial shift from traditional thinking. And while the effort to “extend our borders” in this way has not met with a universally positive reception, it has raised critical questions about the security of global commerce, which is an unmistakable step forward.

The next challenge for the CSI is to incorporate second-tier ports into this partnership without requiring the physical presence of a CBP representative.This will require a new level of trust between the U.S. and the rest of the world’s customs services, especially since most developing nations are more concerned about revenue security than the threat of terrorism in the supply chain. A successful partnership with those nations will depend on our ability to tie their financial concerns to our homeland security concerns. The private sector can play a significant role here as well.

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Retail’s Influence in International Markets

The concept of “soft power” has not been put to effective use by the private sector in the post-9/11 global environment. The reality is that we have more influence than we sometimes recognize. The fact that we’re an integral part of the market economy in several countries means that we’re also in a unique position to raise awareness of security issues. For example, a retailer that imports many goods from Pakistanis apt to have considerable influence within the Pakistani manufacturing community.

The link between the private sector and our manufacturing partners in other countries is critical to supply-chain security because there tends to be a higher level of trust between these two business groups than between governments. That’s because we speak the common language of business. By having a good understanding of the business strategy behind our company’s sourcing and supply-chain operations, we have the ability to tie the needs and concerns of the manufacturing community with the requirements of securing global commerce. Through the language of business, we have the potential to be the harbingers of change and bring about a much greater awareness of the issues at hand, but the expertise of our industry has yet to be tapped to its full potential on this point.

The Need to Share Intelligence

My team and I spend a considerable amount of our time in Washington, D.C., discussing supply-chain security initiatives with government leaders and providing sometimes welcome advice to Department of Homeland Security(DHS) officials and Congress

During our early discussions with DHS, we made a key mistake when we used the term “information sharing”instead of “intelligence sharing.” Many of the people we spoke with wholeheartedly agreed that they would like more of our information. Trade data, for example, was something most agencies were very interested in obtaining. The point that was missed, however, is that the private sector can often provide useful intelligence as well.Again, the challenge is often one of understanding the language and perspective of the people with whom we interact. We need to dramatically improve communication between the various DHS agencies and the private sector.

Similar to the concept of soft power, the private sector and the security industry have a tremendous amount of knowledge and intelligence about the political and economic conditions of countries around the world. The Target assets protection team monitors world events that have the potential to affect the corporation’s strategies and puts them in a business context.

We’re also engaged in various investigations surrounding attempts to penetrate our supply chain. That’s the kind of private sector-style intelligence that can be of tremendous value to the government as well as to our industry as a whole. What a potentially powerful tool when combined with the intelligence resources of the U.S. government. But currently, no model exists for sharing and analyzing such data. In roads are accomplished through the establishment of trust, which we must earn by carefully building the credibility of our industry.

The Potential Role of RFID

Radio Frequency Identification (RFID) is a strategy that has the retail world talking about its remarkable potential to either change the way we look at our supply chain or to drain a lot of resources in pursuit of an unattainable goal [see “Understanding the Impact of RFID on Retail” on page 42]. Regardless of where you and your company stand on this issue, the loss prevention industry must be engaged. The possibility is very real that proper implementation of this technology will result in a more secure global supply chain network. That may, in

That may, in turn, validate our integrity and professionalism as members of private industry and lead to the trust we need to ensure a smooth and safe flow of containers into the commerce of the United States

As with any technology, the competitive advantage lies in how you implement it. As an individual with a vested interest in ensuring an uninterrupted flow of global commerce, I’d like to see more conversation in our industry regarding beneficial uses of this technology beyond simply inventory management. As loss prevention professionals we must all be engaged in shaping the future of supply-chain security.

Granted, many factors lie beyond our control, even in the near future, not the least of which is the potential change in leadership in Washington, D.C., which could redirect the supply-chain security philosophy of DHS. Other factors, including an actual or perceived terrorist event in the global supply chain or potential reactions to the ever-changing political and security environment, are just as possible.

Other factors, including an actual or perceived terrorist event in the global supply chain or potential reactions to the ever-changing political and security environment, are just as possible.

The Risk-Based Approach toSupply-Chain Security

Today’s approach to securing global commerce can be best described as encompassing incentive-based programs and the effective use of risk management. The risk-based targeting system currently deployed by CBP, which targets all containers entering the U.S., is a great example of effective use of resources. The alternatives, including such tactics as 100 percent physical inspection of these containers, would bring the world economy to a grinding halt.

Trade and homeland security are both failing their core missions if the programs we put in place negatively impact the flow of the world’s commerce. No matter where you fall on the debate about globalization, there is no doubt that global commerce is a vital component in improving the well-being of the world.

An often overlooked benefit is the cultural exchange and understanding that it fosters. The incentive-based programs and risk-based targeting approach have not yet converged with the concept of standards and regulations, but rest assured they will. In order for a strategy of trust to work, we must have a mechanism to verify that the stakeholders have a foundation from which they all work.

If asked as recently as a year ago whether or not they supported standards and regulations surrounding supply-chain security, the trade community would have responded with a resounding “No.” But the sentiment has since evolved to a reserved “Yes.”There’s concern that without standards the global supply chain will only be as strong as its weakest link. The trade community has come to realize that we need a system—a trust-building measure—that will hold each stakeholder accountable for securing their particular link in the chain.

This does not mean, however, that incentive-based programs like C-TPAT will be discontinued. Organizations choosing to innovate and drive the process will continue to benefit from their participation. They’ll also help shape the programs and procedures that will become the standards of the future.Fortunately, many companies, including Target Corporation, have chosen to play a significant role in this process. These companies will be the ones participating in such initiatives as Operation Safe Commerce and the CBP smart-box program. The reward for participation is not only a more secure network, but also the incentive of a true CBP green lane for containers arriving into our nation’s commerce, giving a competitive advantage to those willing to expend the resources necessary to pilot and test such programs

The purpose of these programs in particular, is to identify ways in which technology can…and can not…aid in ensuring the integrity of cargo containers. Both initiatives play directly into the philosophy of risk-based targeting by helping the experts at DHS narrow their focus to a fraction of the more than eight million containers entering the U.S. each year.

Despite DHS’s confidence in the integrity of this approach, in a report earlier this year, the Government Accountability Office (GAO) pointed out that there had yet to be a peer review of the targeting system. This presents another partnership opportunity for us as well. We as an industry could be the ones to provide that review—if we can be seen as trusted partners in the mission to secure global commerce.

A Collaborative Partnership between the Private and Public Sectors

Some in the supply-chain security community believe the world has been nothing more than lucky to have avoided a catastrophic event in the global supply chain. I argue that luck has only played a minor role and credit instead an over whelming support from all sectors in the effort to change the way we transact the business of global trade. This debate has become a topic of national conversation with politicians in this year’s November elections. But the politicos aren’t experts on this issue and too often they focus on port security rather than an end-to-end view of supply-chain security. We must counter this dangerously narrow perspective by working diligently toward comprehensive solutions.

Politicians certainly aren’t the only ones broaching the topic of securing global commerce. The issue was also addressed by the 9/11 Commission, whose final report included the unsettling statement that “opportunities to do harm are as great, or greater [as compared to pre-9/11], in maritime or surface transportation” and that“initiatives to secure shipping container shave just begun.”

Clearly, this can no longer be a game of cat and mouse between the public and private sectors. Each sector plays a unique, critical, and complementary role in the task of securing our global supply chain. To appropriately address this serious concern, a truly collaborative approach much be achieved.

While this is easy to say, it’s much harder to accomplish. Even so, many organizations are fighting the good fight.Jonathan Gold, vice president of international trade policy for the Retail Industry Leaders Association (RILA) and his colleagues have played an active role in bringing together the public and private sectors. RILA also has a dynamic supply-chain security committee chaired by Rosa Hakala, vice president of international supply chain for Home Depot, that has brought a fresh approach to this issue.  The National Cargo Security Council (NCSC) is another group attempting to tackle the need from a comprehensive approach to supply-chain security along with a host of other supply-chain challenges.

So far, there has been much success.

  • Attacks on commercial ships since September 11th have been limited in scope and impact to this point
  • The issue of supply-chain vulnerabilities has been given a voice on national platforms.
  • Incentive and targeting programs have been widely accepted and highly successful.
  • Many bright minds are now engaged in identifying new supply-chain security solutions.
  • Security is rapidly becoming part of the common vernacular of the transportation industry
  • And the movement towards uniform standards and incentive-based programs for testing and validating future security processes is gaining traction and support.

A few key elements are still missing, however.

  • First, the security industry in general and the loss prevention industry, in particular, must play a more vocal role, utilizing our expertise towards the goal of developing a more comprehensive approach to securing the global supply chain.
  • A new philosophy that encompasses a collaborative partnership between the public and private sector must be endorsed by both groups, with a suitable process for sharing intelligence and trend data.
  • Most importantly, current and future threats to global commerce, and in turn our corporations, require a new strategy of trust.

That trust begins with developing credibility within our own organizations so that loss prevention is allowed access to the strategies and resources of the supply chain and sourcing divisions. Only then can we begin to build trust with those in the government who are charged with protecting global commerce. And without that trust,supply-chain security will remain an elusive target.

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