A safe and secure world - at a price

4 September 2002
More news

05 September 2002

As part of its continuing war on terror, America is beefing up its checks at ports outside its borders. David Arminas examines how purchasing professionals should respond

Delivery times look set to increase as the US steps up its customs checks at sea ports around the world.

In a continuing effort to beef up security after 11 September, inspectors from the US Customs Service will be based at a select few - 20 - overseas ports designated as official entries to America.

Containers passing through any other ports will be subject to more stringent searches and paper-checks. This means the eight days normally taken for a container to cross the Atlantic may rise to two weeks or more.

As our news story shows, just-in-time (JIT) and extended supply chains are threatened by this restrictive customs inspection network.

The reality is increasingly that security of supply is the main competitive edge for many firms, and only purchasers can deliver that.

For purchasers, the key question must be whether their supply chains will be secure and flexible enough to cope with logistics disruptions. The forthcoming US customs regime is the first such test.

Purchasers must ask themselves whether their supply chains will perform under this regime as expected by their internal and external customers.

The question is important because it raises cost issues about supply chain efficiencies that are a main factor in competitiveness.

If costs go up because of the inspections, purchasers will have to examine their logistics and overseas supplier networks carefully.

Threats to supply chain logistics hit at the heart of a company's competitiveness. Communication between purchasers, logistics heads and operations managers will become increasingly important. They will have to co-operate on major corporate decisions, such as whether a company abandons JIT manufacturing now on the assumption that security of supply is or will be impossible.

One aspect of this is whether managers believe contingency plans will sustain JIT in times of disrupted logistics and supplies.

Whatever form of manufacturing is undertaken and whatever industry a company works in, contingency plans will be needed. If there are overseas suppliers in the supply chain, then contingency plans will include a database of local suppliers and their capacity and capabilities should late delivery - or non-delivery - threaten production and in the worst case jeopardise a company's financial stability.

Local sourcing

If another 11 September happens and access to overseas suppliers is cut off, purchasers could find themselves in heavy competition for local firms that are inundated with calls from procurement directors. A resourceful supply chain professional will already have avenues of communication open with these alternate suppliers to ensure they get priority.

Issues of security will become more important in all aspects of supply chain or purchasing activity. Since 11 September purchasers have been working in a much more high-risk environment and it doesn't appear to be getting any easier. Never before has risk assessment been as important a factor in supply chain activities.

But only the largest companies can afford employees who deal solely with security matters, such as travel and executive safety.

Purchasers with little or no experience of evaluating security will find themselves having to decide when they have enough of it. The cost of providing security will become more important to supply chain activity. Insurance is yet another issue where costs will rise according to perceived risks.

These issues are not likely to go away in the near future. America, its allies and many Islamic states are clashing over an expected US attack on Iraq, the country thought to pose the biggest danger since 11 September.

Purchasers can expect continuing rises in freight costs because of added security, slower shipping times and more paperwork.

Also, the cost of improving security measures such as security consultancy is likely to increase and become integral to purchasing functions at all levels.

In this climate, how purchasers handle the unforeseen and unexpected will be a test of their professionalism.

SMsep2002

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