Using business complexity to handle supply chain risk: Dealing with borders of cargo liability (CORE1209)

Summary: The dominant part of the academic literature on supply chain management assumes that decisions are based on objectivity, determinism and rational choices. They consider seldom complexity of the networks and casting defects that are due to deviating organizational structures and information systems. In order to manage complex risks companies may be willing to make decisions that reduce their own risks at the expense of other supply chain partners. That is an old maid game. The paper presents two cases, where logistics actors confine one-sided own liabilities instead of reducing risks in the whole network. The paper can be viewed here: http://www.intechopen.com.

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Full review: Rational reasoning and responsibilities stated in agreements and contracts are assumed to create baseline for decisions in supply chain management. If contracts do not give clear answers, we assume partners can be brought into a fair and impartial agreement.  In general, cooperation and information sharing are seen to produce long-term benefits for all stakeholders. These assumptions hide situations where logistics partners are prone to make opportunistic and subjective decisions.

In real life managers must be able to dynamically adapt logistics processes to unexpected harmful events, last-minute changes and rearrangements with very limited information about the situation and consequences of their decisions. One-sided simplifications are natural responses to reduce responsibilities of the company. The paper presents two cases where logistics risks are transferred at the expense of other supply chain partners. In the first case logistic company implements a camera surveillance system in own warehouses in order protect the company against inappropriate security claims (e.g. due to damages during transportation). In the second case a leading wholesaler creates strict rules how suppliers are allowed to deliver shipments in warehouses and how the wholesaler penalizes non-compliant deliveries. In both cases risk transferring strategy leads old maid game, not to mitigation of overall supply chain risks. The strategies may even increase risk and reduce motivation to collaborate in the supply chain network.

The paper illuminates possible unexpected and unwanted outcomes in the CORE project. Simplifications and narrow approaches are known to reduce supply chain resilience. First, they may lead to the loss of crucial information. Second, partners may be prone to pay more attention to own tasks and less to interdependencies with other partners. The CORE work packages that produce only technological solutions to meet minimum legislative data sharing requirements are vulnerable to the risk. The same vulnerability concerns organizational designs, where a focal company acts as a supply chain orchestrator and defines one-sided technical specifications for other trading partners. The comprehensive approach would increase visibility in the whole end-to-end supply chain and increase motivation for collaboration between partners.

Reference: D. Ekwall, F. Nilsson, 2008 “Using business complexity to handle supply chain risk: Dealing with borders of cargo liability”. In proceedings of Nofoma 2008, Helsinki

 

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Managing the Unexpected – Sustained Performance in a Complex World (CORE1208)

Summary: The book highlights characteristics of organizations that are capable to improve efficiency and manage their risk in challenging operative environments. According to the writers these high reliable organizations pay especially attention to small failures, real-time operations, alternative pathways to keep going and mobilization of expertise. The book presents how quality and continuous improvement philosophy eroded in manufacturing company causing a recall of 10 million vehicles and how they recovered from the crisis. The book can be purchased here www.wiley.com.

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Full review: Logistics networks are prone to disruptions and inefficiencies due to inconsistencies in organizational structures and cultures, human nature to searching simplified answers to complex problems and lack of collective commitment and competence necessary to sustain performance under trying conditions. The book describes characteristics of mindful organizations that are capable to perform reliably in complex environment. These organizations have unique culture, capabilities for self-design, networks build on expertise, hybrid structures with special attention to redundancy and continuity, special training and routines to maintain situational awareness, mind-sets to make sense out of emerging patterns, relational strategies to adapt to local environment and efficient information processing.

The CORE project aims at utilizing real-time data in order to increase visibility over movements of shipments. This is expected to improve abilities to re-plan resources if required due to detected risks or unexpected disruptions. The paper give advises how to create an infrastructure that supports sense making, continuous organizing and adaptive management in complex environment. The infrastructure make possible to convert observations of anomalies into explicit event types, categories, routines, instructions and roles. During the process abstract management concepts get refined organization specific meanings. However, sense making, continuous organizing and adaptive management prerequisite honesty and transparency in reporting and willingness to base actions on them. Besides, observations must be integrated into reports without underestimating or belittling observations that have no immediate explanations. The book can be used as user manual how organization can make most use of new data in order to respond earlier and adapt to unexpected situations.

The CORE project itself is a complex project comprising over 60 partners, 22 work packages and hundreds of interrelated tasks. The CORE management pays special attention to ensure sustained performance. First, consortium members work with concepts that enable them to cluster observations from real-time case and identify emerging patterns (sustained awareness). Second, partners have a variety of technological and operational expertise from academic, governmental and private sector. Respectful interaction and heedful interrelating support creation of shared understanding in non-obvious cases and their explanations (sustained surfacing). Third, ambiguity is implicitly or even explicitly acknowledged and accepted to be part of the project. However, ambiguity does not stop the work. It is an active part of problem solving (sustained organizing). Forth, when the CORE demonstrations progress, new details and nuances are discovered. Concepts and case studies are continuously updated (sustained updating). Fifth, tasks and problems are ambiguous, that creates often discomfort among partners. That creates a strong propensity to simplify problems and find or even create traditional solutions. CORE Management team avoids making rigid decisions, but they give directions, which by definition are dynamic, open to improvement, self-correcting, responsive and transparently reasoned (sustained agency). Sixth, human beings tend to simplify their interpretations and underestimate how much crucial information is then lost. In addition, we tend to pay more attention to own tasks and less to interconnected tasks of other partners. CORE partners are experienced to align tasks in a way that they maximize common good (sustained variety). Seventh, the CORE project highlight continuing adaption that reduces need to make radical changes. The CORE management team encourages partners to update their conceptions through paying closer attention to demonstrations. Bsides, management team facilitates respectful interaction through workshops.

Reference: Weick, Karl E. & Sutcliffe, Kathleen M. (2015). Managing the Unexpected: Sustained Performance in Complex World. 3rd Edition.

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Supply chain security culture: measure development and validation, 2009 (CORE1200)

Summary: Supply chain security culture (SCSC) is as an overall organizational philosophy embracing norms and values that keep employees vigilant when performing supply chain security practices. The article presents a scale that makes possible to gauge supply chain security culture and its correlation to organization’s ability to respond to unexpected disruptions. Employees are asked to assess two topics: security strategy of the company and impacts of significant supply chain breech to business operations. According the study improved supply chain security culture makes company more resilient against major disruptions. This research helps executives to justify their expenditures on security efforts. The reviewed document can be purchased here: http://dx.doi.org.

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Full review: Researchers have stressed the importance of having an organizational culture that highlights proactivity and vigilance toward supply chain security breaches. In security-focused supply chain management environment workers are empowered to detected and handle supply chain security threats without seeking formal permission from supervisors and managers. Company security strategy gives specific attention how SCS concepts are embedded into firm processes and procedures. Alignment with organizational culture and business or corporate-level strategies is believed to result in enhanced organizational performance. In addition, organization culture encompasses supply chain continuity management. The paper presents a scale for measuring supply chain security culture defined as the overall organizational philosophy that creates supply chain security as a priority among its employees through embracing and projecting norms and values to support secure activities and to be vigilant with security efforts.

The study makes possible to assess how implemented FP7-CORE security technologies, tools and practices influence on supply chain resilience based on the perception of company managers and employees. The article gives also guidelines how to develop survey forms and protocols in order to assess the influence of implemented security measures on other KPIs such as supply chain visibility and reliability. The survey tools based on perceived operational and organizational changes complete toolbox to measure impacts of introduced security interventions.

Reference: Zachary Williams, Nicole Ponder, Chad W. Autry, “Supply chain security culture: measure development and validation”, The International Journal of Logistics Management, Vol. 20 Iss: 2, pp.243 – 260

 

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Enhancing security through efficiency focus- Insights from a multiple stakeholder pilot implementation (Sternberg et al. 2012)

Summary

Efficiency and security are said to be opposing goals of logistics operations: when security goes up, efficiency decreases, and vice versa. Yet, it is suggested that information technologies could improve efficiency and security simultaneously. Sternberg et al. (2012) investigate this hypothesis: whether and to what extent increased attention to efficiency results in improved security in carrier operations in a seaport context. In a longitudinal case study, they research carrier operations in connection with port terminals carrying out Roll-in Roll-out (RoRo) operations on trailers at the port of Gothenburg. They find that investments in new ICT solutions, in fact, remove some of the barriers to higher efficiency and improve security against cargo theft and terrorism. In particular, they report that ICT investments increased efficiency in terms of reduced waiting times and increased ability to plan port operations (pre-arrival notification) and fast positioning of trailers in a port. The new ICT solutions also increased security in terms of more secure document handling (decreases the risk that sensitive information falls into the hands of criminals), better anomaly detection (helps customs identify trailers that are most likely tampered in-transit) and increased visibility. The abstract is available at: http://onlinelibrary.wiley.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

This article is relevant for CORE demonstrations that focus on sea port operations (WP10-11 and WP13-15 and WP17). The research shows how a ‘common information sharing platform’ – an electronic and highly automated communication network among LSPs, carriers, ferry operators, port operators and authorities – increases logistics efficiency and security performance simultaneously. The main components of this platform include information sharing through a common information area, real-time geographical position of truck and trailer, identification technology in truck, RFID tags on transport units and RFID readers mounted on terminals, electronic manifest, and electronic container seals. More specifically, Sternberg et al. (2012) observed that adoption of a set of IT-enabled SCS solutions eliminated logistics efficiency and security issues simultaneously:

  • Real-time geo-positioning of trucks and trailers enabled the port operator to allocate a vacant spot for a trailer prior to its arrival, which reduced the waiting time at the port entrance. The real-time information enabled also customs to detect anomalies in shipping schedules and routings that would imply a heightened risk of smuggling.
  • RFID-based identification of drivers, trucks, and trailers automated and accelerated the access formalities at the port entrance and increased reliability of driver authentication.
  • Digitalization of cargo manifests eliminated the time-consuming manual document handling and reduced the risk of unauthorised access to confidential information.
  • E-seals enabled customs officers to identify intact containers and spare them from time- consuming inspections.

Reference

Sternberg, H., Nyquist, C., & Nilsson, F. (2012). Enhancing Security Through Efficiency Focus—  Insights from a Multiple Stakeholder Pilot Implementation. Journal of Business Logistics, 33(1), 64-73.

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Global supply chain design considerations: Mitigating product safety and security risks (Speier et al. 2011)

Summary

There is a broad consensus among supply chain professionals that supply chain disruptions are very bad for business: supply chain glitches commonly lower operational performance and reduce shareholder value. Regardless of this, there is surprisingly little research on supply chain design strategies that have the highest potential to mitigate the risk of disruptions. Based on interviews with 75 US-based managers, an industry survey and a case study, Speier et al. (2011) identify types of SCS strategies and examine how contextual factors influence business managers to select a set of SCS design strategies. They argue that the depth and breadth of security initiatives depend mainly on top management mindfulness, operational complexity, product risk and coupling. The abstract is available at: http://www.sciencedirect.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

The paper of Speier et al. (2011) is quite theoretical and it has therefore only a limited impact on CORE work. It is useful for people for the CORE demonstrators to be aware of various supply chain design strategies and factors that support their selection. All in all, the paper introduces an interesting table that shows what supply chain factors typically affect selection of certain supply chain design strategies (see table below). The paper also includes a useful discussion about the nature of supply chain security risks. The authors point out that supply chain security covers risks of contamination, damage and destruction of products or other supply chain assets, and that these risks may arise from intentional or unintentional activities.

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Reference

Speier, C., Whipple, J. M., Closs, D. J., & Voss, M. D. (2011). Global supply chain design considerations: mitigating product safety and security risks. Journal of Operations Management, 29(7), 721-736.

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Supply chain efficiency and security: Coordination for collaborative investment in technology (Lee et al. 2011)

Summary

Information technologies often provide significant benefits for companies in terms of better logistics efficiency and security. But despite of this fact, many companies in the logistics sector have not adopted such technologies to a high extent as one would expect. In their research paper, Lee et al. (2011) investigate coordination problems and related incentive mechanisms between manufacturers and retailers in a two-echelon supply chain, when companies are investing in ICT technologies that have potential to improve both logistics efficiency and security. Using mathematical modeling, they find that relative strengths of efficiency and security concerns result in different coordination problems when implementing a technology. To increase overcome coordination problems and reach the optimal level of ICT investments, the authors propose imposing penalties on parties, that are responsible for security breaches, and introducing tax incentives. They conclude that IT-based supply chain security solutions have a high potential for increasing both security and logistics performance through higher supply chain visibility. The abstract is available at: http://www.sciencedirect.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

Lee et al. (2011) consider the SCS performance rather narrowly as the organization’s ability to locate and eliminate the source of a product contamination. This is a rather unorthodox approach: scholars commonly consider SCS performance in terms of capability to prevent, detect and recover from crime that takes place in the supply chain context. But regardless of the narrow scope, the paper provides useful information how about to protect cargo from hostile tampering cost-effectively. This is particularly relevant for the CORE demonstrator with fast-moving consumer goods of Procter & Gamble (WP17). Also partners involved in the development of educational and training material are going to benefit from the findings of this research paper.

Reference

Lee, J., Palekar, U. S., & Qualls, W. (2011). Supply chain efficiency and security: Coordination * for collaborative investment in technology. European Journal of Operational Research, 210(3), 568-578.

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Controlling access to pick-up and delivery vans: the cost of alternative measures (Haelterman et al. 2012)

Summary

The situational crime prevention theory suggests that preventive security measures often backfire. For this reason, it is problematic that many managers do not have a holistic picture which kind of considerations should precede selection of implementation of security measures. A paper by Haelterman et al. (2012) tests the practical feasibility of a new management model that is designed to highlight the most promising preventive security measures given a set of preconditions and costs. The authors apply this model in the context of pick-up and delivery van operations at a Belgian branch of a major express courier company. Such transport operations are subject to risk of theft and terrorism, especially if unauthorized people managed break into pick-up and delivery vans. To test the management model, the authors collect views of of supply chain practitioners in two expert panels and through a survey. Their analysis covers a broad array of preventive security measures including key card, audible alarm, silent alarm + GPS, notification on vehicles, awareness training, no company logos, formal instructions / compliance checks & sanctioning, double drivers, over security escorts. The abstract is available at: http://link.springer.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

The research of Haelterman et al. (2012) sets a solid theoretical basis for practical supply chain security work. All CORE work packages that cover aspects of road transport benefit from the analysis of this research paper. The research shows that a set of preconditions influence outcomes of preventive security measures: availability (legal, infrastructure), practicability (perceived), required knowledge, required expertise, user awareness, user belief, use commitment (anticipated), and co-operation. Security measures also incur different kinds of costs: financial costs, ethical/social cost (labeling, distrust, civil liberties, inequalities), aesthetical cost. Finally, as the theory on situational crime prevention suggests, security measures may result into various reverse effects, including crime displacement (geographical, temporal, target, tactical, crime types), escalating effects (e.g., use of violence), creative adaptation, and enticement effects.

Reference

Haelterman, H., Callens, M., & Vander Beken, T. (2012). Controlling access to pick-up and delivery vans: the cost of alternative measures. European Journal on Criminal Policy and Research, 18(2), 163-182.

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The displacement effect in cargo theft (Ekwall 2009)

Summary

Cargo theft has always been a problem for shippers and logistics service providers. Even so, regardless of the persistent efforts to reduce cargo theft, crime continues to strive. This classic supply chain security paper by Daniel Ekwall analyzes and explains why cargo theft continues to occur in the transport network despite all implemented countermeasures. Focusing on Swedish transport and logistics facilities, the Ekwall’s research builds on interviews with six subject matter experts, survey with four terminal operators, and macro-statistics from TAPA (Transported Asset Protection Association). The paper finds some evidence on crime displacement in terms of method (modus operandi): cargo thieves target increasingly cargo in-transit because logistics facilities are nowadays better protected. However, displacement is likely to be partial in contrast to complete displacement. This means that absolute theft risk can be reduced. Download the abstract here: http://www.emeraldinsight.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

The Ekwall’s research gives an interesting overview on criminological theories underpinning supply chain security research. The theoretical outlook provides the foundation for the CORE work and all CORE work packages can therefore benefit from the analytical discussion and findings of this research paper. The main lesson is that criminals and terrorists are calculating antagonists who adapt their behavior in response to information on risks and rewards of crime opportunities. More specifically, Ekwall argues that professional cargo thieves seem to target increasingly “cargo on wheels” instead of warehoused goods. He explains this shift in the behavior with the fact that, facility security has improved relatively more than in-transit security over the past decade. However, he stresses that it is hard to establish a causal relationship between security interventions and changes in criminal behavior. He holds further that if displacement occurs, it is likely to be partial rather than complete.

Reference

Ekwall, D. (2009b). The displacement effect in cargo theft. International Journal of Physical Distribution & Logistics Management, 39(1), 47-62.

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Estimating the Operational Impact of Container Inspections at International Ports (Bakshi et al. 2011)

Summary

The US government is pushing a new 100 % screening regime for US-bound containers in foreign ports to mitigate the risk of weapons of mass destruction entering US soil. The 100 % regime, however, is a major concern for foreign port operators because the current Container Security Initiative (CSI) regime seems not to be scalable for high inspection rates. The paper of Bakshi et al. (2011) simulate impacts of two container inspection regimes (the CSI and a new one) in terms of port congestion, handling cost and dwell time. To carry out the simulation, the authors use discrete event queuing network simulation with real container movement data from two of the world’s busiest container terminals. The analysis shows that cargo inspections many times disrupt optimized logistics processes at seaports. In particular, inspections extend the transportation leadtime because shipments lose time as they (i) are moved to an inspection site, (ii) queue for inspection to start, (iii) pass inspections themselves. Download the abstract here: http://pubsonline.informs.org.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

This paper is highly relevant for CORE demonstrations that involve screening in seaports (WP10-11 and WP13-15 and WP17). The research illustrates the impact of the security integration on speed, cost, and predictability of the seaport logistics. Bakshi et al. (2011) observe that security inspection at port entrances (quayside for ships and city-side for trucks) with drive-through inspection portals, does not delay nor divert the routine container handling process, in which a crane unloads a container from a ship or a truck and deposits it to a stack where the container waits until it is its time to leave the port. But if a container is inspected a few hours prior its scheduled departure, as is currently done under the US Container Security Initiative (CSI) regime, the routine handling process gets disrupted, (see Figure 6). Remarkably, the only value-adding security activity “non-intrusive inspection” (11) requires three preceding activities (8P10) and another three following activities (12-14), none of which add value from security or service standpoints. Other valueless activities, which do not appear in the illustration, include searching of the shipment selected for screening and verification of its documentation. The extra activities consume time and money but add no value to the shipping service. The first approach with drive-through portals eliminates the non-value adding supportive logistics activities (8-10 and 12-14) and therefore enhances logistics speed and efficiency without necessarily lowering the security level.


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Reference

Bakshi, N., Flynn, S. E., & Gans, N. (2011). Estimating the operational impact of container inspections at international ports. Management Science, 57(1), 1-20.

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Supply chain security orientation: conceptual development and a proposed framework (Autry and Bobbit 2008)

Summary

Even though supply chain security has become an increasingly important managerial domain, there is little understanding about what security aware firms are, what enables and drives security awareness, and what are the outcomes of supply chain security (SCS) orientation. Autry and Bobbit (2008) set out conceptualize, validate and operationalize the construct of SCS orientation. Based on 31 interviews with US-based managers, they conclude that SCS orientation comprises four general categories of security solutions: security preparation and planning, security-related partnerships, organizational adaptation and security-dedicated communications and technology. The authors write that these security solutions “could result in supply chain risk management-related efficiencies, such as decreased lead times to customers, greater product reliability, waste reduction, and increased delivery reliability, due to the lessened need for operations workers to perform security-related tasks such as redundant container checking, securing shipments, or other similar tasks.” The abstract is available at: http://www.emeraldinsight.com.

Review by Toni Männistö (CBRA) based on his doctoral thesis.

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Full review

The CORE demonstrators could a learn lesson from the research paper of Autry and Bobbit (2008) that organizational commitment to security plays a critical role in the fight against supply chain crime. Ideas and findings of the research paper also contribute to the development of the CORE educational and training material (WP19). The article shows that top management support, employee security attitudes, employee integrity/loyalty are key internal factors that strengthen the SCS orientation. External contributing factors include political political/legal factors/support, partner cooperation, and partner support. Strong SCS orientation is expected to translate into higher business performance, customer satisfaction and supply chain chain continuity.

Reference

Autry, C.W. & Bobbitt, L.M., 2008. Supply chain security orientation: conceptual development and a proposed framework. The International Journal of Logistics Management, 19(1), pp.42–64.

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