What Manufacturers Need to Know about Protecting their Global Supply Chains

Dec. 5, 2013
More than 5 million cargo container shipments move through and across the U.S. every year and are potential targets for terrorists and smugglers. The only way to reduce these risks is to manage supply chains and their components proactively through a program like Customs-Trade Partnership Against Terrorism (C-TPAT).

Globalization, no longer just a trend, is in full swing, creating more opportunities for international trade. By 2020, world trade in goods is expected to tally $35 trillion, two-and-a-half times more than in 2010. Many companies are keeping a keen eye on rapid-growth markets, such as the Asia-Pacific region, which will become stronger players in international trade. The strong surge in global trade over the next decade will force companies to adjust their strategies as they seek new opportunities.

While this world trade trend offers U.S. companies many options to help increase competitiveness, it can also pose risks to those that import goods, as well as to the United States overall. More than 5 million cargo container shipments move through and across the U.S. every year and are potential targets for terrorists and smugglers. The only way to reduce these risks is to manage supply chains and their components proactively through a program like Customs-Trade Partnership Against Terrorism (C-TPAT). C-TPAT was launched in 2001 to ensure the safety of imported goods.

C-TPAT helps manage and effectively monitor the movement of goods and reduce the possibilities of unknown elements accessing the shipper’s containers and shipments. Not only does C-TPAT reduce risks, it also helps improve delivery times and reduce costs for companies importing and exporting goods.

C-TPAT requires examining all the possible ways that a company moves goods, identifying all countries and regions it is working with and the types of materials it is shipping, and assessing the risk of each partner. It all boils down to having an effective and secure trade plan that includes mapping cargo flow, identifying business partners, and conducting threat and vulnerability assessments. Companies need to obtain the best, most accurate information on their security processes in the supply chain.

Companies must be aware of both—the partners and regions—they are dealing with and make sure they are informed and aware of the risks and vulnerabilities of dealing with a partner and/or its region. For example, a company may have a safe and secure partner, but that partner may be operating in a region with vulnerabilities. Another thing companies can do is to encourage partners to integrate security into their processes from start to finish to reduce threats and vulnerabilities in the supply chain and help in punctual delivery and improving marketability.

With C-TPAT, companies are up to six times less likely to incur an exam from Customs, which translates into enough time and cost savings to justify the expense and time in pursuing the program. Companies that are examined by Customs face major supply chain demands, which cause delayed time-to-market and lost opportunities, in addition to fines and penalties.

C-TPAT certification is not just valuable for companies, but also for their partners, as importers are often more likely to select partners (truckers, brokers, freight forwarders, etc.) that are also certified and can show greater security and control over their processes. Only businesses related to the U.S. import supply chain may enroll in the C-TPAT program. A list of approved business types can be found on the CBP website.

How to Participate in C-TPAT

To participate in C-TPAT, businesses must meet or exceed the minimum requirements:

Choosing a secure business partner: All foreign manufacturers and partners must prove C-TPAT security criteria via written/electronic confirmation.

Container and trailer security and inspection: All containers and trailers require security and inspection procedures, such as ensuring proper sealing, reliability of locking mechanisms and doors, and reporting and resolving unauthorized entry into containers/trailers or container/trailer storage areas.

Personnel security: Regular, detailed background checks for new and current employees are a must. It’s also a good idea to create an employee identification system.

Secured procedures: Create security measures and procedures that track and manage cargo transportation, handling and storage.

Documentation control: All cargo documents must be legible and accurate. Outgoing and incoming cargo must also be verified against purchase and delivery orders, and all drivers must be positively identified.

Facility security: Make sure that all cargo and storage facilities have physical barriers and deterrents, such as fencing, gates, secured parking, alarm systems, proper light, locking systems and video surveillance.

Information technology security: IT security procedures and policies, such as password protection and employee training, should be in place.

Security training and threat awareness: Employees should be trained on how to identify possible threats posed by terrorists and contraband smugglers.

Threat Assessment

Once a company is C-TPAT certified, processes and technology can help companies manage the complexity of changing regulations, product information and requirements in the program, but there are several things to consider:

Are your processes collaborative? Create a flexible system and process that allows you and your partners to collaborate. It’s also important that you have a system and technology set in place that automatically provides alerts and follows up with partners when needed.

Are you considering Customs’ five step risk assessment process? This is not a must, but definitely a plus, and helps tremendously during revalidations. It’s critical for companies to perform their own risk analysis and to be thorough in their due diligence when researching and choosing partners (see the C-TPAT requirement bullets above).

Do you have an accurate way to do your region-based research on threat assessment? Depending on the number of regions and partners, you may or may not be able to visit your partners in their regions on a regular basis to understand the ground threats and vulnerabilities. If you are not able to visit, you would want to be able to use what’s available in the public domain, including several Customs recommended websites to do your research. It would save time if the tools you use help you narrow your search to only the keywords and the websites that you want to search on instead of all that’s available from a global search.

Do you have a methodology in place to manage multiple questionnaires for different types of partners and to add weightage for responses? Depending on the partner, companies may want to weigh certain questions and answers higher than others. For example, if the partner’s region is known to pose a threat, then security and fencing could become mandatory questions with higher weightage, or if you’re unsure about the research and available information on a region, then the weightage can be appropriately reduced for the region’s threat assessment.

It also helps to have an effective action plan to manage responses. This is where a robust tool comes in handy. Companies should have in place a software solution that has the flexibility and ability, for example, to send follow-up questions to partners based on their initial responses without having to eyeball every response. For example, if the answer to the question, “Do you have a security systems document?” is no, then that partner should automatically receive an action item and follow up questions to create one and attach it.

Do you have a comprehensive reporting system to manage revalidations with ease? Companies need to have a unified and inclusive technology solution that helps keep track of all the necessary information for keeping tabs on partners and their supply chains. That way, all the information will be easily and quickly available in one location, during a revalidation.

Continuously Update Your Strategies and Processes

Though it may seem like a significant undertaking, getting C-TPAT certified and putting all of the necessary process into place can be a source of tremendous time and financial savings for companies in the long run—from reducing the likelihood of audits and accompanying fines and lowering scrutiny from the CBP, to reducing a company’s personal liability and speeding up the time to get goods.

Companies that have C-TPAT down to a science and have implemented successful best practices are continuously updating their strategies and processes to keep up with the changing industry and regulations. Companies across several industries, from retail distribution to aerospace manufacturing, are using software to successfully manage their C-TPAT programs.

These guidelines highlight effective security practices designed to ensure supply chain security and to mitigate the risk of loss, theft and contraband smuggling that could potentially introduce terrorists and implements of terrorism into the global supply chain.

Sri Ramadas, director, projects & services for Netwin Solutions, has more than 10 years of IT experience in business development, account management, project management and product implementation management.

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