Operations Management Application Assignment
Securing Global Supply Chains: Seven Reasons Why “Getting It Done” Is So Hard
Ralph Welborn and Vince Kasten
© 2007 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20123
The relationship between a global supplychain and your people is vital. After all, what is a supply chain but a series of activi- ties supported by people, processes, and tech- nology that move products and services around? It all sounds so simple—if only it were. But, far too often, that “people thing”— and more specifically, the knowledge and expertise they have that underlie all of the activities and are embedded in the business rules and specific technology applications used to support those activities—is ignored . . . to the peril of getting done what needs to get done.
There a lot of challenges that come with “getting done what needs to get done” around global supply chains. Most, if not all, of these challenges stem from ignoring what people do and how their knowledge and expertise are used, captured, and expressed. So much of the supply chain remains invisible, undocumented, the results of workarounds and exceptions or activities and technologies that evolve or mutate over time in response to changing needs and requirements. Making visible what is far too often invisible is critical to making global supply chains effective and secure.
We all know that a company’s global sup- ply chain is a potent strategic weapon, eco- nomically speaking. Unfortunately, it can also be a potentially fatal area of vulnerabil- ity. Consider the hundreds of millions of shipping containers that move among the
world’s seaports—about 80 percent of the world’s cargo, which adds up to 5.8 billion tons per year. When you consider the many different people who will be in charge of the cargo at different times in the chain, you can see that there is a lot of room for error. Cargo could be lost, stolen, or, most alarmingly, compromised by terrorists. Two incidents from 2004 underscore this fright- ening reality.
In early 2004, Italian authorities found a suspected al-Qaeda member inside a sealed container headed for Canada. And in March 2004, following a double suicide attack in which ten port workers lost their lives, an Israeli security official at the Ashdod Port discovered a secret compartment in an incoming shipping container that had already passed inspection. Israeli security experts suspected the container was used to smuggle the two suicide bombers into the heavily secured Ashdod Port.
The bottom line is that companies must aggressively address this issue. If your com- pany’s supply chain is breached and used for a terrorist act, the resulting aftermath could be devastating. This we all know.
We also all know that securing global trade lanes is an enormously complex busi- ness problem that doesn’t admit simple answers. U.S. ports can’t possibly inspect every one of the seven million containers they handle each year, and with 200 million
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containers shipped globally each year, the ports of the world won’t be inspecting 100 percent of their shipments either.
Why companies must secure their supply chains is obvious: one of our clients, a senior executive in a Fortune 500 company, com- mented, “. . . if an act of terrorism were committed using one of our containers, we believe it would be a company-ending event.” How they should do so is much trickier. And here is where it gets interesting.
Regarding global supply chains today, com- panies have two often-conflicting objectives: first, to get stuff through their supply chain faster and faster, and second, to do so in a way that is ever more secure. Yet, they’re faced with a tough question: How do you secure what you can’t see?
One answer to the question of securing what you can’t see came via Operation Safe Commerce. A key goal for this U.S. government–sponsored initiative is to
make it so hard to put the wrong things into the supply chain that the likelihood of being able to introduce a weapon of mass destruction, a terrorist, or, for that matter, counterfeit consumer goods into a shipping container becomes significantly smaller.
While the government is doing its part to protect supply chains, businesses are neces- sarily getting in on the game as well. They are finding that securing a supply chain is a complex, time-consuming task. And that being successful starts with those who work on the supply chains—from those who plan its execution to those who are checking and loading containers.
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With so many hands in the cookie jar at so many different points in the chain, it is no wonder that many companies have trouble managing the ever-increasing tension between agility and security in their supply chains. Here are some of the reasons why “getting it done” on the supply chain can be so difficult.
WHAT HAPPENS AT SEA, STAYS AT SEA
Companies often find it difficult to monitor their cargo on every leg of the trip. Consider the following real example of a typical inbound supply chain to the United States, in which men’s shirts manufactured in Karachi, Pakistan, take around 75 days to get to a retail store in Ohio. The shirts pass through a number of warehouses, ports, and modes of shipping along the way, on average passing through 25 sets of hands in 75 days. The ship container with these shirts in it was, accord- ing to corporate executives, “at sea” from days 40 through 59 with “not much” happen- ing. Makes sense, right? After all, it takes a long time to get from one ocean to another.
In reality, the ship actually docked in the Maldives—not for long, but long enough to pick up some additional cargo from smaller ships passing through. It’s common enough for a ship to make a quick stop like this, reflecting the “you scratch my back and I’ll scratch yours” attitude of the seafaring fra- ternity. But common enough does not equate to secure enough. And it certainly does not meet the requirements of a Fortune 500 com- pany attempting to optimize and secure its supply chain.
The task of managing such a large number of containers passing through so many differ- ent hands is daunting. Too many companies simply assume that their supply chains are
While the government is doing its part to protect supply chains, businesses are necessarily getting in on the game as well.
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staying secure throughout the whole journey. Unfortunately, when making assumptions about your supply-chain security, you endan- ger your employees, port employees, your cus- tomers, and the security of your country in the process. And that is unacceptable. In order to ensure that their supply chains are secure, companies should incorporate a sys- tem of checks and balances to make sure all parties in the chain know what they should be doing and when they should be doing it. Also, because so many different groups are charged with the task of working together to keep supply chains secure, communication must be open and honest between every level.
THE SUPPLY-CHAIN JUGGLING ACT
The juggling act of coordinating people, tracking assets, securing information, and keeping up with changing regulations was once a lot less complex. A company had stuff to get somewhere, and everyone involved had a motivation to get the stuff there as quickly as possible. Today, increased regulations bring new people to the table, people with other objectives than “getting stuff some- where fast.” Their main focus is security, and making all of the necessary security checks can slow down the process. The extra requirement of end-to-end security means more people are paying attention to the pro- cess by which the container gets delivered, validated (along with its driver), stuffed, veri- fied, sealed, and documented. That’s a lot of coordination—and a lot of friction added to the supply chain.
TOO MANY CONNECTIONS
Inevitably, questions of who is responsible for what, where, when, how, and how much will
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come up. But often, these questions are impos- sible to answer even within a firm, much less across firms. This lack of visibility into what really happens—who really does what and where, when, and how they do it—leads to surprises and risks. The point here is simple: the goods; the containers the goods are in; and the trucks, trains, airplanes, and ships that may be used to move the containers are open to disruption at every step along the way. Understanding the interlocking dependencies that your company’s future rests on, and mak- ing sure that you understand the risk factors and how to mitigate them, is not just a cost issue; it is a survival issue. It is vital that orga- nizations close the gaps in execution and
communication between the different levels of workers on their supply chain. Vulnerabilities often include:
� Multiple participants and breakpoints. The securing of physical assets and informa- tion flow typically involves 25 different entities. At each point, there are many opportunities for security breaches, not only within each entity, but also during the exchange of both physical assets and information.
� Isolated security solutions. Today’s infras- tructure and solutions have potentially fatal gaps because they are focused on the isolated “nodes” (specific in-transit places) rather than on integrated “in-process places and processes”—with robust and effective security demands.
� Fragmented supply chains. Fatal gaps result from fragmented views of problems and
The juggling act of coordinating people, tracking assets, securing information, and keeping up with changing regulations was once a lot less complex.
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their solutions. Supply-chain views are fragmented because they are created one company at a time, with little or no com- mon approach to codifying and sharing between those companies. The days of loosely coupled processes held together by ad hoc information flows are over, as commercial needs and regulatory require- ments force more intimate integration of information.
To overcome these vulnerabilities, extra process steps, extra people (or at least addi- tional roles), and special skills are needed at various places along the way.
AGREEMENT AMONG DIVERSE AREAS OF THE WORKFORCE
For supply chains to be truly secure, people from all walks of life must work together. The fact is, operations people, marketing
people, and management all speak different languages. Each group of people may use the same words and nod at the same set of supply-chain objectives, and yet they often, if not always, mean fundamentally different things by them. It makes sense. Each group has fundamentally different sets of metrics, perspectives, and backgrounds—all of which are necessary—but they’re all so different that alignment across their differences is an enormous challenge.
The fundamental disconnect between diverse people within a company can make it very difficult to work together effectively. If you multiply this “disconnect” within your
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company by the many companies you work with that make up your supply chain, you can begin to understand how getting people to “make sense” and “take action” on the same set of objectives becomes mind- bogglingly difficult. You end up with what we have all experienced: big morale prob- lems, management mistrust, dysfunctional organizational behavior, and erratic decision making, just simply on a broader scale.
THE UNDETERMINABLE COST OF COMPLIANCE
The cost of compliance is difficult to calcu- late. Specific security initiatives and their costs change frequently and will continue to change as the nature of threats evolves and as new technologies become available. The question of who will bear the cost is an obstacle to global implementation of supply- chain security measures. According to Gerald Woolever, a former 35-year veteran of the U.S. Coast Guard, “The question is creating significant tension between the people in the ports, the carriers and transporters, who don’t necessarily want to bear the expense of buying the technology and putting these pro- cedures in place, and the government, which is trying to pass the cost down to the people in the supply chain.”1
THE “INVISIBLES”
It’s easy to say “Let’s redesign our supply chain to make it more cost-effective and more responsive to customer, supplier, and regulatory needs,” but it’s not so easy to do. There are many invisible factors and activi- ties that company executives don’t know about—and often don’t know they don’t know—when they kick off these “improve-
The fundamental disconnect between diverse people within a company can make it very difficult to work together effectively.
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ment” initiatives. After all, what are supply chains but sets of activities, workarounds, and exceptions that, over time, have evolved into the ways things get done, including tech- nology “patches,” “features,” and “modifica- tions” added to support those processes? And many of these things are undocumented, existing only in the heads of your employees— or embedded in the code of the added-to applications. For instance:
� The “exceptions” that have to be handled by, let’s say, Betty and Michael, because the computer application can’t under- stand them: a signature is illegible, or the customs regulation has changed in Hong Kong and Betty is aware of this and usually handles it manually, or the readings of a particular set of radio fre- quency identification (RFID) tags from a particular vendor requires additional work, and only Betty and Michael have dealt with it before;
� The “workarounds” that were added or new features that were never documented but are now part of the computer applica- tion; and
� The “we’ve-always-done-it-this-way- because-it-works-better” activities that only Betty and Michael know about because they’ve been here for 20 years.
These “invisible” things keep the processes and applications running, yet they’re hard to identify when you’re making a change— particularly if Betty and Michael are no longer with you. Companies discover these unseen factors after it’s too late—after cus- tomers complain, after frustrations have built up, and when the gap between what manage- ment wants to get done and what actually gets done gets wider and wider.
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FOCUSING ON A MOVING TARGET
In any supply chain, a lot of “stuff” has to get done. Execution involves making sense, then taking action. Making sense of this sprawling, pervasive thing requires under- standing (1) processes that can stretch from a factory in Karachi, Pakistan, to a rack of shirts at a retailer in Peoria, Illinois; (2) data making these processes work that passes through, on average, 25 different organiza- tions along the way; and (3) the physical goods that are packed, unpacked, repacked, shipped, stored, inspected, and used multiple times by multiple companies. It also means understanding what parts of the processes
and technology support the strategic goals of supply-chain efficiency, the goals of security, and the regulations guiding behavior—which are always changing.
Thus, creating a supply chain that works efficiently and securely can be a tall order for many organizations. The challenge, as Trevor Davis, the chief implementation officer of an effort to put a large company back on prof- itable footing, puts it, “It’s like hitting the bull’s-eye with parallel darts thrown with both hands.” And if that’s not troublesome enough, if one thing goes wrong, it has a “cas- cading effect” on other things. If you don’t have the right data for a manifest, you don’t get the goods loaded on the ship. If you don’t get the goods loaded, you don’t meet your time deadlines. If you don’t meet your time deadlines, you miss the market opportunity.
With enhanced security come additional responsibilities adding costs and time—
Creating a supply chain that works efficiently and securely can be a tall order for many organizations.
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precisely what supply chains are designed to eliminate. The result? Increasing tension between the need for speed and the require- ments for security and the groups associated with each. How a company balances these tensions will affect its competitive relevance and capability to take advantage of global commerce. Creating a system so that employ- ees on every level can play nicely together is the first step in creating a secure supply chain.
Blueprint your business processes to get visibility into what’s really going on. You need to know what connects with what, where, when, how, and how much. And always know who is running these operations at each level. There are far too many potential
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pitfalls and risks as well as real jewels and opportunities for you to not have this type of organization and clarity in your supply chains.
Working to bridge the “execution gap” is no longer optional. It has become a competi- tive necessity to make sense of the tensions between an agile yet secured supply chain and then to take action to ensure these ten- sions don’t cause problems for your company.
NOTE
1. Andrew K. Reese, Building the secure supply chain, Sup- ply & Demand-Chain Executive, http://sdcexec.com/ article_arch.asp?article_id=5287.
Ralph Welborn, PhD, is managing partner of the global Unisys Business Transformation team; he has held similar strategy and transformation roles at other global services firms. Vince Kasten is managing partner of the North America Business Transformation team at Unisys; he also has held managing director roles of systems integration at other global services firms. Welborn and Kasten have nearly 40 years of combined experience focused on business transformation, performance analysis, collaborative strategies, business and IT partnership, systems integration and management, and solution deployment. They coauthored Get It Done! A Blueprint for Business Execution (Wiley, 2006) and also The Jericho Principle: How Companies Use Strategic Collaboration to Find New Sources of Value (Wiley, 2003), as well as a number of articles on different business and technology topics. The authors may be contacted via e-mail at ralph.welborn@unisys.com or vincent.kasten@unisys.com.