Security in Physical Distribution - Causes, mitigation measures and an investment model

Sammanfattning: Recent statistics and terror events testify an increased vulnerability of distribution networks. Antagonistic threats as theft, counterfeiting, contamination and terror are burdening supply chains with unexpected costs in form of lost cargo, production downtimes, lower customer satisfaction, and higher transportation costs. Society is also worried about the possibility for terrorists to exploit supply chains to smuggle terrorists or weapons for mass destructions. Despite many governmental initiatives, very little is being done by supply chain and logistics managers. Previous research points out globalization, JIT, weak prosecution of criminals so as lack of business cases as the main causes hindering higher security in distribution chains. However some of these trends, as globalization and JIT, cannot be reverted. At the same time, the weak prosecution of criminals shouldn’t hinder stakeholders putting security measures into operation. This report performs an explorative study to understand the main reasons affecting the vulnerability of physical distribution chains. Main actors are identified and their interaction phenomena are hypothesized as barriers and driving forces of security in physical distribution. Results show that it can be hypothesized that other causes, besides those identified by previous research, may actually be significant factors of the vulnerability of distribution chains. A total of 38 barriers and only 17 driving forces are identified as factors affecting security in physical distribution. Some of these include the impotence of the law enforcement agency in allocating enough resources to combat freight crime, absence of security clauses in standard contracts, complexity of legislation, etc. These barriers may force the identified system to find its equilibrium point into a state condition where actors are not properly working with security. The hypotheses found in this part of the research have not been validated. However they highlight the importance for collaboration and working by transforming the barriers into driving forces that could turn the present state condition into a new equilibrium state in which stakeholders will handle security in a proper manner. In addition, this study includes a survey to identify available measures to secure distribution networks. 25 security routines, 14 security management strategies, and about 28 generic security technologies are described. Finally, an investment model is developed, based on the Quantitative Risk Assessment approach, impacts’ judgments performed by a panel of security experts, System Reliability Analysis, and Monte Carlo Simulation. It is then applied to calculate the NPVs and B/C ratios (Net Present Values and Benefit-Cost ratios) to demonstrate the profitability of a limited set of 511 technical security systems (nine single technologies and their combinations) against road transportation cargo threats. Several technologies turned out to have rather short payback time, but they are still not widely used. This confirms the importance and existence of other relevant barriers that are hindering the enhancement of security in distribution chains.