|
|||
| |
05.2007 |
||
| COUNTERMEASURE SPENDING DILEMMAS |
|||
Written by Dan Purtell, President, Supply Chain Security Division, First Advantage Corporation http://www.fadv.com. The rising costs associated with funding security countermeasure programs designed to protect in transit cargo make it difficult to calculate return on investment (ROI). One such countermeasure, security escorts for lorries, presents decision makers with a particularly difficult question. Do I escort shipments or should I seek a cheaper but effective security solution? As we’ll see, corporations should consider shifting from escorts to telematics tracking in countries that present average supply chain cargo risks. With the exception of a handful of countries, global losses due to cargo theft remained flat in 2006. Our benchmarking and association with TAPA (www.tapaemea.com)indicate 86% of cargo theft occurs in the trucking mode. Within trucking, increases with high end security countermeasures such as security escorts have climbed steadily in 2005 and 2006. Higher labor rates and increased costs associated with fuel are the primary drivers in these cost increases. Today’s static cargo loss rates coupled with higher escort costs is causing the ROI pendulum to swing into a money losing scenario for escorts in many countries. In the late 1990’s, we first started looking at the rate of return and ROI associated with security countermeasure spending. In some of the highest risk countries, security spending was approximately 30% - 40% of the transportation bill. As an example, if transportation shipping costs to move cargo from the U.K. to Belgium were $1,000, security spending typically added another $300 to $400. This rate of security spending was justified and necessary in order to prevent loss in these markets. |
|||
 |
|||
Loss rates associated from cargo theft declined from 2002 – 2005 and since then have been relatively flat. The dilemma corporations face today is to determine if the successes associated with their previous year’s countermeasure programs still provide a positive ROI with today’s flat or declining risks. Attempting to find the sweet spot in which security countermeasure spending is less than or equal to what a corporation would lose without security escorts is more difficult identify today, especially in countries where risk has declined or security spending has increased. Security escorts of high value loads have proven to be an effective security countermeasure particularly in high risk countries. Regularly used by high tech and pharmaceutical companies, escorts provide a level psychological deterrence that greatly reduces truck hijackings and parked lorry theft exposures. Even though escorts are occasionally defeated, ROI can still be financially demonstrated and security spending is justified. A red flag should go up if you discover that escort costs are approaching the same level of spending as your trucking transportation costs. Very few countries support a positive ROI under this scenario (for every $1 spent on transportation - $1 is spent on security escorts). Brazil, Mexico, Russia and South Africa are a few countries where equal spending may be justified. However, if you’re spending equally on escorts and transportation in countries such as the United States, United Kingdom or Germany, I would suggest you analyze this decision due to a potential negative ROI situation. The answer to the security escort spending dilemma is ripe for a technological solution. A lorry tracking and alarm system provides a level of deterrence and detection necessary to prevent cargo theft in most countries and serves as an effective back-up to escorts in the few countries that justify this countermeasure. Many technological solutions have been introduced, but today the market remains largely fragmented so ask the experts. The United States desperately needs a solution as escort spending is nearly equal to the costs of trucking! The risks within the U.S. do not justify this level of spending and companies are seeking alternative protective programs. Firms that are considered leaders in supply chain security are using Telematics tracking as a solution and our studies have substantiated a high ROI factor associated with this technology. Securing shipments the same way in every country will cause corporations to overspend in low risk countries and under-spend in high risk countries. As we’re seeing with escorts, many corporations are over protecting shipments in low to medium risk countries where alternative countermeasure programs should be considered. |
|||
© Copyright 2007 EUROWATCH.
Articles on this site contain data which remain the property
of EUROWATCH. Neither the articles nor the contents of the document
may be reproduced, redistributed or otherwise re-transmitted
in any form whatsoever without prior written authority.
|
|||
 |
|||