Terrorists, Cargo Security & the Supply Chain — Why We Have Our Hands Tied

Spend Matters welcomes another guest post from NPI, a spend management consultancy focused on delivering savings in the areas of IT, telecom, transportation and energy.

When Yemen Al-Qaeda operatives attempted to ship bomb devices to two Chicago synagogues, it did more than just heighten the fears of Americans; it exposed a nasty and terminal flaw in Homeland Security: cargo inspection. Critics of the Transportation Security Administration and Department of Homeland Security blamed a lack of cargo inspection for the scare. And, well, they're right. But what many don't understand is that our hands are tied.

Take note: It cost Al-Qaeda a mere $4,200 to expose a problem that will cost billions of American dollars to fix.

The TSA is required to screen 100 percent of all cargo loaded onto passenger planes, but that's only 20 percent of all air cargo being transported. The stuff that's placed on FedEx and UPS planes gets handled quite differently through what's called the Known Shipper Program. This program allows carriers and freight forwarders to accept shipments only from those com¬panies designated by Customs and Border Protec¬tion as "known" shippers. As one could imagine, the defining and validation processes within the Known Shipper Program aren't exactly foolproof. Even the Department of Homeland Security's Inspector General last year commented that the TSA lacks the ability to sufficiently define and verify known shippers.

So, why not just screen everything? For starters, it would be massively expensive and time-consuming. Consider that $254 billion worth of cargo entered the L.A Customs in 2009. Who would pay for that? The government? You and me? Probably both.

It would certainly add cost and delay to the supply chain, resulting in higher consumer prices, increased shipping costs and business losses for many supply chain organizations. Those shippers that currently account for the 20 percent of cargo shipped on passenger planes are already indicated their interest in shipping via cargo planes, which are subject to fewer regulatory requirements. This will hurt an already struggling passenger aviation industry, which currently relies on cargo for 20-25 percent of its profit.

There is no easy fix. When it comes to cargo security, terrorist organizations have tremendous leverage. But, whatever the solution may be, supply chains must be ready for a major cost impact. The question is a matter of when, not if.

-- John Haber, EVP of Transportation, NPI

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