Executive Briefings

Supply Chain Security: An Integrated Solution

The growth of global trade and sourcing creates new and massive security vulnerabilities within the worldwide supply chain.  In today's world of cybercrime, terrorism and piracy, effective logistics security requires a quantum leap from past shipping practices.  Vulnerability to criminal and terrorist acts and to large-scale theft is a legacy of fragmented methods developed for regionalized sourcing and supply.  Today, with cargo thefts soaring worldwide, a comprehensive supply security approach must integrate the latest electronic technology, global border integrity requirements and insurance planning strategies.  A look at key components of each demonstrate that better supply chain security starts with better security processes that reduce risk through systematic strategies and tactics.

Electronic Technology Tools

The electronic tracking and documentation systems used by sophisticated supply chain management specialists are the foundation of a comprehensive cargo security program.

The most sophisticated electronic shipment tracking systems are customized, interactive, transparent, available 24/7 and allow users at any time to see where a shipment is and what it consists of - down to individual item descriptions, quantities, product codes, vendor or consignee identities, and countries of origin and destination.  They provide automatic alerts for key events (loading, sailing, arrival, and delivery) and allow customers to query their shipments online using purchase order numbers and SKU product codes.  Such systems are password-protected, and encrypted for added security.  As a result, shippers always know the status of the shipment, and can immediately identify any disruption that requires remedial action.

Supporting and integrated with such tracking systems is the growing use of "geofencing".  With this technology, the carrier essentially puts a virtual "fence" around the route that the load is scheduled to travel from pick-up to delivery. A global positioning system (GPS) tracking device allows the carrier and shipper (marine, truck or rail for intermodal methods) to follow the load along the route. All parties are alerted the moment the load veers off the planned route or the device itself is impacted, initiating immediate remedial action to recover the shipment.

Border Integrity Regimes

Sophisticated electronic shipment management systems that itemize shipments and document their steps of custody integrity through the supply chain are essential for customs and border integrity approval.  Government security and customs agencies are generally in synch with professional supply chain organizations that know how to collect compliance data and keep track of all freight in a way that creates a provable and thorough electronic data trail.  This is illustrated by the requirements of select border integrity regimes.

Marine Security:  ISF

The U.S. Customs and Border Protection agency (CBP) has created rules for an Importer Security Filing (ISF) that requires importers to submit security-related information on their shipments at least 24 hours before the goods are loaded on board an ocean vessel. The ISF filing must be made electronically and includes 10 categories of detailed identification and individual line item information on the manufacturer, shipper, consolidator and importer, plus details on the shipping container stuffing location and various shipment identification numbers.

Air security:  CCSF

U.S. government standards mandate 100 percent security screening of all cargo transported on passenger aircraft.  The Transportation Security Administration (TSA) is not responsible for the screening of cargo, which is to be handled by a CCSF (Certified Cargo Screening Facility) that can be a shipper's own facility, a freight forwarder or an airline. Forwarders approved by the TSA can meet the air cargo security rules by using electronics, to document the integrity of a shipment throughout the supply chain by utilizing stringent chain of custody methods.

Ground security:  C-TPAT

The Customs-Trade Partnership Against Terrorism (C-TPAT) is a cooperative cargo security effort between CBP and the full supply chain of importers, carriers, consolidators, licensed customs brokers, and manufacturers. CBP asks these businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their supply chain partners, as affirmed in meetings with and inspections by CBP agents.  Electronic assurance of shipment content allows faster and more efficient movement through customs and security.

Risk profiling:  CHIEF

In the United Kingdom, the country's Revenue and Customs Agency (HMRC) interacts with the Border Agency to ensure freight security, and it has developed a number of new programs to facilitate security screening of import shipments.  That includes Customs Handling of Import/Export Freight (CHIEF), with a highly sophisticated risk profiling system to identify goods that require documentary or physical examination while using electronic communication between customs and business users.  Through EDI inter-system messages, CHIEF checks that the data on the customs declaration matches the inventory maintained on each of six independent trade systems.

Insurance and Contract Coordination

Insurance and security management have become inseparable.  On the insurance side, the Rotterdam Rules now allow carrier liability terms to be included in individual, confidential contracts that reflect the reality of today's containerized shipping.  This detailed documentation dovetails with the extensive itemization of security and customs regimes.  Just as sophisticated supply chain management specialists can secure approval from security regulators to conduct the required screening and itemizing, so too can they use electronic tracking systems to compile detailed bills of lading under the Rotterdam Rules, better documenting insurance coverage.

Bills of lading show where and from whom goods are received, describe the shipment and define carrier liability.  They typically have voluminous terms and conditions that contain exoneration clauses, benefit of insurance clauses, and limitation of liability clauses that in effect limit insurance coverage.   The Rotterdam Rules offer some relief by allowing liability terms to be included in individual, confidential contracts that cover the reality of door-to-door multimodal shipping.  The new rules clearly document responsibility and liability during the whole transport process, and information technology with trace-back capability effectively reduces insurance risks. When combined with effective use of Incoterms to define the exporting seller's and importing buyer's obligations regarding carriage, risks and costs, the entire package establishes advantageous insurance of transport and delivery.

Incoterms 2010, the internationally accepted definitions of trade terms, specify the exporting seller's and importing buyer's obligations regarding carriage, risks and costs.  Sophisticated importers prefer to use Group F terms such as FOB (Free on Board), which provide for shipment control that includes shipping terms and insurance coverage.  Global freight forwarders make FOB shipment easy with electronic tracking systems and standardized operations processing from vessel contracting to trip closure.  FOB integrates perfectly with electronic tracking because increased supply chain visibility and control is a critical FOB benefit.  It also can substantially reduce insurance costs because FOB Incoterms provide shipment control that includes shipping terms and insurance coverage.

Afterward

Supply chain security depends on collaboration between technology tools applied, regulatory compliance required and shipment processes chosen.  This comprehensive integration is a strategic solution to security issues that provides the control necessary for secure shipping at every stage of the supply chain. The benefit from reduced shipment theft and loss fully justify time and money invested for implementation and compliance.

Source: Jaguar Freight Services

The growth of global trade and sourcing creates new and massive security vulnerabilities within the worldwide supply chain.  In today's world of cybercrime, terrorism and piracy, effective logistics security requires a quantum leap from past shipping practices.  Vulnerability to criminal and terrorist acts and to large-scale theft is a legacy of fragmented methods developed for regionalized sourcing and supply.  Today, with cargo thefts soaring worldwide, a comprehensive supply security approach must integrate the latest electronic technology, global border integrity requirements and insurance planning strategies.  A look at key components of each demonstrate that better supply chain security starts with better security processes that reduce risk through systematic strategies and tactics.

Electronic Technology Tools

The electronic tracking and documentation systems used by sophisticated supply chain management specialists are the foundation of a comprehensive cargo security program.

The most sophisticated electronic shipment tracking systems are customized, interactive, transparent, available 24/7 and allow users at any time to see where a shipment is and what it consists of - down to individual item descriptions, quantities, product codes, vendor or consignee identities, and countries of origin and destination.  They provide automatic alerts for key events (loading, sailing, arrival, and delivery) and allow customers to query their shipments online using purchase order numbers and SKU product codes.  Such systems are password-protected, and encrypted for added security.  As a result, shippers always know the status of the shipment, and can immediately identify any disruption that requires remedial action.

Supporting and integrated with such tracking systems is the growing use of "geofencing".  With this technology, the carrier essentially puts a virtual "fence" around the route that the load is scheduled to travel from pick-up to delivery. A global positioning system (GPS) tracking device allows the carrier and shipper (marine, truck or rail for intermodal methods) to follow the load along the route. All parties are alerted the moment the load veers off the planned route or the device itself is impacted, initiating immediate remedial action to recover the shipment.

Border Integrity Regimes

Sophisticated electronic shipment management systems that itemize shipments and document their steps of custody integrity through the supply chain are essential for customs and border integrity approval.  Government security and customs agencies are generally in synch with professional supply chain organizations that know how to collect compliance data and keep track of all freight in a way that creates a provable and thorough electronic data trail.  This is illustrated by the requirements of select border integrity regimes.

Marine Security:  ISF

The U.S. Customs and Border Protection agency (CBP) has created rules for an Importer Security Filing (ISF) that requires importers to submit security-related information on their shipments at least 24 hours before the goods are loaded on board an ocean vessel. The ISF filing must be made electronically and includes 10 categories of detailed identification and individual line item information on the manufacturer, shipper, consolidator and importer, plus details on the shipping container stuffing location and various shipment identification numbers.

Air security:  CCSF

U.S. government standards mandate 100 percent security screening of all cargo transported on passenger aircraft.  The Transportation Security Administration (TSA) is not responsible for the screening of cargo, which is to be handled by a CCSF (Certified Cargo Screening Facility) that can be a shipper's own facility, a freight forwarder or an airline. Forwarders approved by the TSA can meet the air cargo security rules by using electronics, to document the integrity of a shipment throughout the supply chain by utilizing stringent chain of custody methods.

Ground security:  C-TPAT

The Customs-Trade Partnership Against Terrorism (C-TPAT) is a cooperative cargo security effort between CBP and the full supply chain of importers, carriers, consolidators, licensed customs brokers, and manufacturers. CBP asks these businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their supply chain partners, as affirmed in meetings with and inspections by CBP agents.  Electronic assurance of shipment content allows faster and more efficient movement through customs and security.

Risk profiling:  CHIEF

In the United Kingdom, the country's Revenue and Customs Agency (HMRC) interacts with the Border Agency to ensure freight security, and it has developed a number of new programs to facilitate security screening of import shipments.  That includes Customs Handling of Import/Export Freight (CHIEF), with a highly sophisticated risk profiling system to identify goods that require documentary or physical examination while using electronic communication between customs and business users.  Through EDI inter-system messages, CHIEF checks that the data on the customs declaration matches the inventory maintained on each of six independent trade systems.

Insurance and Contract Coordination

Insurance and security management have become inseparable.  On the insurance side, the Rotterdam Rules now allow carrier liability terms to be included in individual, confidential contracts that reflect the reality of today's containerized shipping.  This detailed documentation dovetails with the extensive itemization of security and customs regimes.  Just as sophisticated supply chain management specialists can secure approval from security regulators to conduct the required screening and itemizing, so too can they use electronic tracking systems to compile detailed bills of lading under the Rotterdam Rules, better documenting insurance coverage.

Bills of lading show where and from whom goods are received, describe the shipment and define carrier liability.  They typically have voluminous terms and conditions that contain exoneration clauses, benefit of insurance clauses, and limitation of liability clauses that in effect limit insurance coverage.   The Rotterdam Rules offer some relief by allowing liability terms to be included in individual, confidential contracts that cover the reality of door-to-door multimodal shipping.  The new rules clearly document responsibility and liability during the whole transport process, and information technology with trace-back capability effectively reduces insurance risks. When combined with effective use of Incoterms to define the exporting seller's and importing buyer's obligations regarding carriage, risks and costs, the entire package establishes advantageous insurance of transport and delivery.

Incoterms 2010, the internationally accepted definitions of trade terms, specify the exporting seller's and importing buyer's obligations regarding carriage, risks and costs.  Sophisticated importers prefer to use Group F terms such as FOB (Free on Board), which provide for shipment control that includes shipping terms and insurance coverage.  Global freight forwarders make FOB shipment easy with electronic tracking systems and standardized operations processing from vessel contracting to trip closure.  FOB integrates perfectly with electronic tracking because increased supply chain visibility and control is a critical FOB benefit.  It also can substantially reduce insurance costs because FOB Incoterms provide shipment control that includes shipping terms and insurance coverage.

Afterward

Supply chain security depends on collaboration between technology tools applied, regulatory compliance required and shipment processes chosen.  This comprehensive integration is a strategic solution to security issues that provides the control necessary for secure shipping at every stage of the supply chain. The benefit from reduced shipment theft and loss fully justify time and money invested for implementation and compliance.

Source: Jaguar Freight Services