Supply-Chain Security Will Take More Than RFID
Companies struggling with to secure their supply chains without breaking the bank are looking to the government for guidance. Worldwide shipping standards to facilitate data sharing are needed to improve security, manufacturers, tech companies, and analysts said Tuesday at a gathering in New York sponsored by Unisys. Supply-chain participants need to stop looking at security as an expense and understand the costs associated with security failures, attendees added.
"The lack of sharing of information among [supply-chain] parties is the greatest area of vulnerability," said Rick Kessler, president and CEO of Horizon Services Group. When ports and shippers fail to communicate effectively, ships get stacked up waiting for a place to dock. This in turn creates road and railway bottlenecks, which could lead to the sort of disorder on which terrorists prey. The sooner companies can share information with each other, the more secure and efficient the supply chain will become, he said.
The tools are available for supply-chain participants to analyze containers, collect the data, and distribute that data to their partners. Service provider Science Applications International Corp. has a project in Hong Kong where gamma radiation devices scan cargo for radioactivity; shippers pay $10 per container for the service, said Stephen Flynn, director of the Independent Task Force on Homeland Security Imperatives and a retired U.S. Coast Guard commander. The cost to build these scanning devices and the supporting IT infrastructure is about $1.5 million, Flynn said, and the cost to build such an infrastructure globally would be between $500 million and $700 million. These costs should be weighed against the cost of shutting down the supply chain due to terrorist threat, real or perceived, he said.
There's no single technology available to solve supply-chain security problems, attendees said. There's too much hype around RFID technology, Kessler said. "RFID isn't the silver bullet to solve [the supply-chain security] problem."
Instead, RFID will be most effective when used with other technologies, such as global-positioning systems that can be used to track container locations and electronic label seals that indicate a container's contents and whether it has been tampered with.
"RFID is just a tagging technology," said Unisys president and chief operating officer Joe McGrath. "It's the system, not the system's components, that solves the problem." Such a system would include RFID tags, electronic seals and other tracking devices, network support, and implementation and back-end infrastructure and would cost about $4 billion to construct worldwide.
Companies are looking for a security solution that creates confidence in their buyers without becoming an economic burden to the supplier, Flynn said. Only a certain part of the cost for security can be passed along to the consumer. "People are only willing to pay so much for a product," he said.
The cost of not securing a supply chain could ultimately carry an even greater price. "Our challenge is to make sure the products in the supply chain are real products," said Ron Bone, senior VP of supply-chain solutions at McKesson. "Our greatest vulnerability is the shutdown of the supply chain in an emergency. We're a just-in-time business, so all the work we do is almost in real time." McKesson must be ready to supply medical products to disaster scenes, which puts additional pressure on its supply-chain logistics.
"We need a global [security] standard across all areas of the supply chain," Bone said. "It's good business, not just a cost issue."