Securing the supply chain

Seeking to shore up security weaknesses, feds have changed reporting requirements for goods headed toU.S.ports. Now chief technologists must extend supply-chain functionality to better account for cargo integrity

Seeking to shore up security weaknesses, feds have changed reporting requirements for goods headed toU.S.ports. Now chief technologists must extend supply-chain functionality to better account for cargo integrity

Robin Kirby, director of business systems design at ocean shipping giant APL Logistics, has become a soldier in the feds’ war on terrorism. Sweeping new security measures for supply-chain information sharing kicked in earlier this month, pushing Kirby and other chief technologists in the shipping market to fire on all cylinders — including extending supply-chain functionality to meet the U.S. Customs Service’s new CSI (Container Security Initiative) that will ensure 5.7 million sea containers are not exploited by terrorists.

First announced in Feb. 2002 in response to the Sept. 11 terrorist attacks, CSI aims to tighten reporting requirements for cargo coming into the United States. The initiative’s first step is Custom’s 24-hour Advance Cargo Manifest Declaration Rule, affecting ocean-going cargo — approximately 90 percent of the world’s cargo moves by container. Land and air shipments will likewise be subject to the regulations by Oct. 1, 2003. Under the CSI plan, Customs is also enlisting international ports to comply with tighter security practices and will set rules for maintaining the integrity of cargo at a later date.

The new rules will force the supply chain toward far greater functionality. In essence, say chief technologists, they will be required to extend and improve the data sent to an increasing number of customers, suppliers, and shippers comprising the enterprise supply chain.

“The new rules are a very big deal,” says Jeff Woods, senior analyst of supply chain management at research and consulting company Gartner in Stamford, Conn. “They will require [shipping enterprises] to re-examine their data quality and reporting around many functions in the supply-chain system.”

New horizons

CSI’s 24-hour rule requires shippers to provide Customs with bills of lading that detail the cargo to be provided 24 hours before it is loaded on the ships. Until now, carriers could send data to Customs as many as two days after leaving port. The onus now falls on ocean carriers to reach down the supply chain and get manifest information from the shippers much earlier in the transportation operation.

“One of the biggest challenges for us is on the [supply-chain] process side,” says Kirby, of Oakland, Calif.-based APL, a subsidiary of Singapore’s Neptune Orient Lines and one of the United State’s largest shippers. “The customers need to get data into us earlier in the process,” she explains.

It’s a big change, Kirby says. “Until now, the first glimpse of manifest information came after the vessel sailed. Shippers in Asia, Europe, and Latin America [now] have to get information to us by our cutoff time. If they don’t make the cutoff, the cargo will not board.”

To meet the regulation’s requirements, APL and other carriers are extending the electronic-commerce technologies that are already deployed to include their customers. APL has enhanced its HomePort portal, a transactions-based Web site to enable customers to more easily transfer shipping information. APL customers are given the capability to manage their shipments by gaining updates or “visibility” into their own supply chain through HomePort, Kirby says.

Customers can use a customized HomePort portal to review shipping documents (bills of lading), and submit instructions and changes electronically. They can also print final documents at their own premises, rather than having to courier copies of the document among multiple parties.

APL also works on supply-chain development with IT services provider Covansys, in Farmington Hills, Mich., along with FreightDesk Technologies, in Dunn Loring, Va., are offering software and services to help update logistics management. Supply-chain information will also be extended through the GTN (Global Transportation Network) portal created more than two years ago by APL, 12 other ocean carriers and GT Nexus, the software provider.

The site, built on J2EE architecture and powered by BEA WebLogic and Vitria’s BPM (business process management) software, handles bookings, rates, and other shipping functions as well as support for EDI and XML customer integration.

John Gurrad, vice president of e-commerce and business planning at Concord, Calif.-based MOL America (the U.S. operating arm of Mistui O.S.K. Lines in Japan, one of the world’s largest shipping companies) says he’s set up links between the company’s custom site and the GTN portal.

“We’ve been redesigning our site to handle to the same [supply-chain] applications for our customers to submit bookings and shipping instructions,” Gurrad says. “Like many carriers, we have ways to allow customers to fax us or to file electronically. Exporters are encouraged to use the GTN portal because the portal was already there. They can just go online and start inputting information.”

By land and by air

While ocean carriers worked furiously to comply with Custom’s Feb. 2 deadline to provide manifests prior to arrival at port, air- and land-freight carriers are in the midst of upgrading their supply-chain systems to meet their Oct. 1 mark.

The regulations for air and land shipping require Customs to be informed of imported cargo eight hours before it is shipped. This time frame leaves a very short window of time between making a decision to ship goods and conveying the information to the government, says Ron Berger, managing director of IT at Emery Forwarding, part of Redwood City, Calif.-based Menlo Worldwide, a transportation services company providing air freight and project management services. The company saw revenues of nearly $3 billion in 2002.

“The rules will have a significant impact on supply-chain requirements,” Berger says. “It amounts to a huge compression of time, especially if it applies to goods coming into the country from Mexico or Canada. The real crisis is, how fast can we get information forwarded to Customs?

“One of the things that is going to have to happen is that the supply chain providers and customers are going to have to see a great deal more integration between systems,” Berger adds.

Ironically, Berger thinks companies such as his can adapt to the changes because the industry itself undergoes constant changes to its shipping technology infrastructure.

“I don’t think we’ll have to do that much work,” Berger says, noting Emery has been retooling its technology infrastructure on a yearly basis. The company uses a custom-built technology platform, and works with SITA, an air freight service provider of supply-chain applications that includes shippers, carriers of all modes, ground handlers, brokers and freight forwarders, and logistics services providers.

Much of the impact will be felt further down the chain — with the manufacturers and customers that ship goods. Berger says it will really be up to his company’s customers shipping goods to make plans earlier. But, he adds a note of caution, in a fast-paced market like air freight, with its overnight and expedited services, such changes will have an impact.

“This will push back customers farther in the supply chain,” Berger says. “They may have to ship earlier or make some changes in the way service is offered for air cargo. … Everybody knows that faster reaction time is important in supply chain and some of these regulations are going to drive that to happen.”