By now you’ve all heard the news that broke on Friday about package bombs shipped from Yemen involving FedEx and UPS planes (among others) bound for the US. This incident is a sobering reminder that terrorism remains a supply chain risk. It also shows that terrorists apparently love logistics too, but not for the reasons UPS sings about in its new publicity campaign.
Logistics is what powers global commerce; throw sand (or bombs) in its gears and you slow economic activity down. Logistics is also very complex—it involves the synchronization of activities and the exchange of information between many different parties, often located in different countries. Translation: logistics involves a lot of moving parts, each one a potential mode of failure from a security standpoint.
The investigation has just begun, so I’m sure more details will emerge in the days ahead. But here are my two quick takeaways from the information available so far:
- Despite all the investments companies have made in “visibility” and “track and trace” technology, many black holes still exist in global logistics.
- There was a breakdown in the security process, but implementing 100 percent cargo inspection won’t necessarily solve the problem.
The path of a package, or any shipment, from origin to destination often resembles a random walk, with multiple parties involved. “How did this international shipment get here?” is not always an easy question to answer. Here is an excerpt from a CNN article published this morning that illustrates this point:
Authorities believe an explosive device found at the United Kingdom’s East Midlands airport flew from Yemen to a Persian Gulf state, then to Cologne, Germany, the official said. The device was then transferred onto a UPS plane.
Investigators are still attempting to retrace the route of the Dubai device, according to the high-level official. Some believe it went to Doha, Qatar, on Qatar Airways, where it spent the night before traveling to Dubai the following day. However, it does appear the devices did fly on commercial passenger planes, the high-level official said.
Qatar Airways, which said earlier Sunday that it had flown the device from Yemen to Dubai for FedEx, is no longer certain that is true, a senior airline source said. The airline is investigating the possibility that the explosives flew on another airline after finding inconsistencies in information it was given, the source said.
In short, after more than two days, investigators are still trying to piece together the movements of these packages. In the same spirit of “Staple Yourself to an Order,” that famous HBR article by Benson Shapiro and co-authors, companies should pick one of its international shipments and see how long it takes them to identify its path from origin to final destination and all of the parties involved. I’m willing to bet it would take most companies at least a few days to obtain this information, and some companies would just give up.
There was a good article in yesterday’s Wall Street Journal about the current state of air cargo security (“Focus on Cargo Security Steps”). After the 9/11 terrorist attacks, virtually all of the funding for air security was focused on passenger screening. While steps have been taken to improve cargo screening, many challenges still remain. For example, as the WSJ article highlights, “there is no approved technology to screen cargo once it is loaded on pallets used to ship cargo in wide-body aircraft. That makes up 75 percent of passenger plane cargo.”
No doubt, this incident will renew calls to implement 100 percent screening of all air cargo as quickly as possible. But as I argued last December in “100% Cargo Inspection: A Means to What End?” increasing inspections is not a silver-bullet solution and it is apt to provide a false sense of comfort. The overriding goal should be to develop more transparent and better designed and controlled end-to-end global supply chain processes. For example, the sharing of timely, accurate, and complete information between all relevant parties in the supply chain is absolutely critical. This includes enhanced collaboration between intelligence communities. It was, after all, intelligence officials from Saudi Arabia that alerted US authorities about the packages and provided the tracking numbers.
Do you agree with my points? What impact will this incident have on logistics moving forward? Post a comment and share your viewpoint!
It is always easy for any group that does not understand the “unintended consequences” of their actions, like the Congress, to offer a sub optimal solution that is hard to implement, slows down commerce and does not give us 100% assurance it solves the problem. If I were DHL, FedEx and/or UPS, I would not accept packages origining or destining for Yemen. Yemen has been a problem for a long time and the only pressure we can put on the country that might work is economic. Nothing else seems to have worked in the past.
Adrian,
Do you think some of this increase (upgrades and first time purchases) is due to cash rich companies putting that money to work?
Also, when do you think TMS vendors will get their SaaS pricing in line so they can offer a full service product that doesn’t cannibalize their annual maintenance fees? Otherwise, I can’t see why they would provide a robust SaaS solution.
Jilly,
Thank you for your comment. I assume you meant to post this comment in response to my TMS piece yesterday, not this posting?
Historically, companies decide to invest in a TMS, whether upgrades or first time deployments, when (1) a crisis hits that impacts their cost or service performance (e.g., capacity constraints in 2004, fuel prices in 2008) or (2) they need to scale their transportation operations and their choice is either to hire a lot more people or invest in technology (most of them choosing the latter).
I’m not sure I understand your second point. SaaS vendors don’t charge maintenance fees; just subscription fees. Did you mean when will traditional TMS vendors (those that charge license and maintenance fees) get their prices in line? It is very difficult for traditional software vendors to convert to SaaS, especially if they are publicly traded. Simply put, SaaS puts an immediate dent on their revenues and financial model. More importantly, a SaaS business model requires a different corporate culture than what you typically find in a traditional software company. To paraphrase the CEO of Descartes, you have to shift from a culture of selling [a product] to a culture of [ongoing] service.
I hope this answers your question.
Adrian