As much as $40 billion per year is lost due to cargo thefts, and only recently has the FBI started keeping track of how many cargo crimes are committed every year. It's a major problem, and one that would enrage consumers if they were aware that affected companies are marking up their prices by up to 20% to compensate for these losses.
As a global manufacturer of electronic products sold in most of the world, Hewlett-Packard is using high-tech gadgetry to foil cargo thieves. HP manages one of the world's most extensive IT supply chains, and spends $60 billion per year on transportation, distribution, materials and other key components of its supply chain. "There's risk within every aspect of the supply chain," explains Fred Smith, director of global security group programs and supply chain for HP's Global Security Services Organization.
The GPS units are monitored by third-party security companies, who follow the regular "pings" sent out by the battery-powered units. Since cargo thieves these days tend to steal entire trailer-loads of goods, there's an immediate payback on the investment in the GPS units.
HP's suppliers are strongly encouraged to be proactive in securing the supply chain as well. "Several years ago, there was a lot of resistance within the supply base to implement security requirements, but now it's pretty much a standard part of business for most suppliers," Smith says. "Their security programs will differ greatly based on the country and the risks within a country. For example, in Brazil, where cargo theft is a problem, they've adopted a much higher degree of security measures and more rapidly because of the risks that they've had. My personal opinion is the supply base has advanced tremendously in the last decade."
Toyota Unleans Its Supply Chain
Automaker rethinks its supplier management to better recover from disasters.
Historically, Toyota's supply chain has focused on the keiretsu, an integrated group of suppliers that function as a joint partnership. Having earned Toyota's trust, these suppliers are responsible for developing and providing the key components that go into producing Toyota's vehicles. Under normal business conditions, Toyota is able to drive waste out of its process by limiting the number of companies involved in its supply chain.
But what happens when the supply chain breaks, as it did earlier this year when an earthquake, a tsunami and a nuclear meltdown effectively shut down some of Toyota's key suppliers, at one point costing the automaker $80 million per day due to supply shortages? Proving that it takes the spirit of continuous improvement very seriously, Toyota is currently developing what it refers to as an "earthquake-proof supply chain." The goal is to be able to recover full production within two weeks if and when another earthquake strikes. During the recovery period, Toyota will effectively "unlean" its supply chain by widening the scope of its supply chain to temporarily include its major competitors.
In a recent interview with Reuters, Shinichi Sasaki, Toyota's vice president of purchasing, outlined the earthquake-proof strategy:
- Standardize parts and components across Japan's automakers so companies can share common parts that could be built in several locations.
- Work with suppliers and get them to agree to hold enough inventory -- as much as several months' worth -- of specialized parts that are only built in one location.
- Make each region independent in its parts procurement, so that production won't be interrupted in other parts of the world if another disaster hits Japan.