Today, I had the pleasure to welcome Mr. Michael Dougherty, the assistant secretary of homeland security for border, immigration and trade policy at my First-Year Seminar on “International Trade: Washington Insiders”.
Now, we all know how complex the screening of vast quantities of imports and exports can become. Thank you, Secretary Dougherty!
Calmly in July, a party leader from the Czech Republic visited Washington to hold discussions with the White House and Republican members in Congress on the basis of shared values, including peace in Europe. At the recommendation of senior national security officials, he has reached out to his neighboring countries, to the east and the west. His aim: to link Europe and the U.S. in a pragmatic formula to secure energy independence in Ukraine and provide economic opportunities for the Czech Republic.
Firms worldwide have been exposed to the vicissitudes of terrorism, which often aims to disrupt the flow of supply and demand in order to damage economic systems. Logistics systems, the true soft spots of vulnerability for both nations and firms, are often the targets of attacks. For instance, in the issue of seaports, some 95 percent of all international trade shipments to the United States arrives by sea and is then transferred to truck and rail. In most instances, the containers are secured by nothing more than a low-cost seal that can be easily broken. Similar to imported merchandise, exported products also need to be protected by companies as they leave the country in order to prevent terrorists from contaminating shipments with the goal of destroying foreign markets together with the reputations of the exporting firms.
Security measures instigated by governments will affect the ability of firms to efficiently plan their international shipments. There is now more uncertainty and less control over the timing of arrivals and departures. There is also a much greater need for internal control and supervision of shipments.Security measures for international shipments affect the ability of firms to efficiently plan their distributions. Increased inspections of containers, new security programs to protect ports, and other new protective policies and decreasing the efficiency and effectiveness of international shipping and logistics. Consequently, the costs of
Security measures for international shipments affect the ability of firms to efficiently plan their distributions. Increased inspections of containers, new security programs to protect ports, and other new protective policies and decreasing the efficiency and effectiveness of international shipping and logistics. Consequently, the costs of value chain and supply chain activities have increased substantially. There is now more uncertainty and less control over the timing of arrivals and departures. Companies may be inclined to produce more essential products themselves locally instead of relying on outside producers to deliver those products on time.
Similarly, costs may rise if companies choose to purchase goods from suppliers located in close proximity or from suppliers that are more familiar – and therefore more safe – in order to reduce their vulnerability. Companies may also increase their inventory holdings in hopes of protecting against delays caused by sudden heightened security measures against terrorism. Holding more inventory or drawing goods from more than one source will increase the ability to meet the customers’ demand at ties when an outside producer is unable to deliver on time. Flexibility of supply chains is therefore a necessity when logistics security is at risk from terrorism.
Firms with a JIT regimen are exploring alternative management strategies because the proves of moving goods has become more expensive. Some firms are considering replacing international shipments with domestic ones, where transportation via truck would replace transborder movement and eliminate the use of vulnerable international transportation.