your supply chain

1YOUR SUPPLY CHAIN WHITE PAPER

Moving Towards Trusted TradeWho Do You Trust? Anyone?

You got up that morning, tore open the plastic wrapping surrounding your newly issued uniform, carefully ironed out the new uniform creases, put it on, still warm, paused for a few head turns in front of the mirror, and headed off to work, proud of your new look. Mere hours later you, and your co-workers in their new uniforms, were covered in a body rash and gasping for breath, victims of the hazardous formaldehyde in your uniform.

That’s what happened to energy company workers in Australia in 2007 when they received new uniforms. The uniforms came from their normally reliable supplier—an Australian clothier whose products were made by their business partner overseas. What the Australian importer didn’t know was that the clothing company had outsourced some of their work to a third party who used formaldehyde in the production of the uniforms.

YOUR SUPPLY CHAIN:

KEEP IT SECRET,KEEP IT SAFE


Moving Towards Trusted Trade

That same year a women’s wear company based in the U.S. similarly sold undergarments laced with formaldehyde. Almost every week we learn of product recalls associated with lead, cadmium, melamine, antifreeze and other hazardous materials being included in food, hygiene, toy and other products sold in the United States.

Are these just random instances where foreign corporations are being irresponsible because they can make more money using cheaper substitute materials? That seems to be the consensus. But what if at least some of these are calculated attempts to judge what and how products are tested and verified when they enter the U.S.? Perhaps some of these events are much more nefarious than we think. The equivalent in the IT sector would be inclusion of malicious code in shipped software or hardware that could compromise either corporate or national defenses.

Do you know where your products come from? Who handled them? Who provided the raw materials and the components? Who knows that you ordered them and exactly what you are expecting in that order—and where it is shipping to? Today, you and your organization may be the last to know the answers to these questions. Not knowing is dangerous. Just ask the energy workers in Australia.



Insecurity in the Supply ChainThe elongation of supply chains in recent years has made them brittle (see graphic). The farther away from the buyer, the less is known about the product, who is involved in making it, and what really goes into it. For some products, Gandalf’s advice to Frodo regarding the One Ring, “Keep it secret, keep it safe1” is a necessity—but how can you hope to keep the product safe when you don’t know who manufactured the product, what the product is made out of, or where the product is? Supply chains were once about a buying organization purchasing a product made by one company—often a conglomerate that provided everything contained in the product.

The advent of specialization allowed for cheaper manufacturing but introduced the need for multiple companies to work together to produce the various parts that go into a product along with someone to assemble it. Now there are very complex relationships among manufacturers, the companies they outsource to and all the companies that provide each of them with the raw materials and components they use. What once was a single link truly has become a multi-link supply chain with spider web-like relationships among the players.

1 J.R.R. Tolkien’s The Lord of the Rings: The Fellowship of the Ring

Brittle Supply Chains: Easily Broken, Difficult to Repair

Corporate leaders have found that managing hundreds of foreign suppliers and, in turn, their suppliers, has proven to be difficult and has led to “brittle” supply chains. The challenges for government regulators, corporations and U.S. consumers include:

Distance

Differing laws within all countries involved in the supply chain

Foreign political uncertainty

Unreliability of foreign IT infrastructures (rolling power outages in China, for example)

Unreliability of foreign physical infrastructure (trucks, trains, ships, ports, etc.)

Lack of security throughout the various suppliers, carriers and ports

Goals of banks and factoring agents not in alignment with U.S. national nor consumer interests

Vulnerability of ships at sea (to terrorists, pirates, etc.)

North American goods increasingly coming through Mexican ports instead of U.S. ports

Potential drug cartel involvement

Further reduction in control over goods headed to U.S.

It is hard to find a reliable replacement when a supplier is lost



Today, it is not enough to know that you ordered something and it is supposed to be shipped in 15 days. You need to know more and you need to know it quickly as your organizational situation can change at a moment’s notice. Unfortunately, the IT infrastructure necessary to keep a watchful eye on these complex supply chains has yet not been put in place. Most supply chain management systems only see into the first link of the chain—and leave buyers blind to their vendor’s suppliers. This, despite the fact that federal agencies like the Consumer Product Safety Commission (CPSC) have the authority to demand deep supply chain insight from any retailer or supplier if a consumer-oriented product is found to have hazardous material in it.

Better accuracy and visibility to events and data in the supply chain are critical components of developing and maintaining trust in trade. Tools exist today that can enable a more complete and timely view of supply chain information. Unfortunately, most organizations haven’t deployed them. Consequently, orders are rarely delivered “perfectly2” and the accuracy of supply chain information is constantly being questioned. Today, most companies seem to prefer to pay the penalties for inaccuracy (including fines, increased insurance premiums, and lawsuits associated with hazardous products) rather than try to coordinate and understand their supply chains better.

1 The high-tech industry, for example, considers an order “perfect” if it meets these criteria: Delivered On Time Delivered to the Right Location Delivered Complete The Product is Damage-free Product functions as expected



National Security PerspectiveFor the sake of national security—both from the homeland security and a military perspective—this “pay the fine” mentality needs to stop. The CPSC initiative to gather a chain of custody information on products deemed hazardous should be one of the drivers towards a more trusted supply chain. DoD also needs to ensure all items it purchases are delivered “perfectly,” and this should be a second driver. Higher insurance costs for insecure supply chains should be a third. And higher government fines for importing hazardous products should be a fourth. Interestingly, better information actually leads to better supply chain performance, so companies deploying and utilizing such systems will likely see improvements in stakeholder equity as well3.

If we can get more consistently accurate and reliable information, and get it delivered when and where we need it, all our supply chains will function more efficiently and we will lower the risks associated with global trade. Ironically, as we do that—as we get our supply chain information more accurate and our visibility more insightful—we introduce a Perfection Paradox: the greater the accuracy of information in the supply chain, the more we make that supply chain an enticingly accurate threat vector for those with malicious intent.

Still, we cannot continue to perform inefficiently. Rather, we must embrace the Perfection Paradox and improve the visibility into our supply chains while concurrently improving the IT infrastructure that controls access to supply chain information so we can ensure not just a “perfect order” but a “trusted order.”

3 The AMR Research (now part of the Gartner Group) Supply Chain Top 25 is released every year. This list represents the global companies with the best performing supply chains. Every year the companies on this list—on average—significantly outperform the rest of the stock market.



Supply Chain InsightTo achieve the perfect order, we must provide more meaningful insight into our supply chains. To do this we need some tools and processes. These include:

INFORMATION AUTOMATION: Information about products should be synchronized utilizing proprietary commercial catalogs or industry standard synchronization engines—like that provided by the GS1 organizations. This makes sure that product information, upon which trade is based, is consistent and the same across actors in the supply chain. Multiple industries acknowledge that bad data is one of their top two or three issues. This solves that problem.

DOCUMENT AUTOMATION: The messages of trade (design diagrams, contracts, purchase orders, invoices, electronic funds transfers, shipping notices, shipping status updates and more) need to be automated. Every step of the process needs to be automated so that keying and re-keying errors are eliminated and everyone is utilizing the same information. This also increases the speed of transacting business and provides an easily audited transaction history.

TRANSACTION VISIBILITY: The movement of these automated documents is valuable not just from a historical perspective. In fact, there is more value in knowing—in real time—the status of a transaction. Implementation of transaction visibility tools will let appropriate parties know the status of any order at any step of the process and make it easier to change when necessary.

LOGISTICS VISIBILITY: Similar to transaction visibility, logistics visibility provides real-time insight into the actual movement of goods through the shipment process. A limited set of tools are available for small package delivery from UPS and FedEx, but much more robust solutions are available and should be deployed. These provide information on when a shipment leaves the factory, what carrier it is on, where the carrier is at any given time, and—when paired with sensor technologies—important information about the container the product is in. Sensor technologies can relay container status such as temperature, humidity, whether the container has been opened, and more.

Deploying these technologies will enable greater accuracy between buyers and sellers. Deploying them across multiple tiers of the supply chain—for instance between the seller and its suppliers as well—allows for visibility stretching the entire length and breadth of a transaction. Such information—spread across the entire supply chain and made available to all appropriate actors—will help set and meet expectations and, certainly, foster greater trust.



Trusted TradeHowever, the very nature of increasing accuracy and better setting and meeting expectations will make all that supply chain information much more valuable to outsiders as well. Whether corporate spies, terrorists or others harboring ill-will, the information in a more perfect order becomes more vulnerable. Bad data is less desirable—and less useful—than good information. This means we need to deploy a means of reducing the risk that good information brings with it. And that means turning perfect orders into trusted orders.

Applying Trusted Computing technologies for device integrity, data protection, network authentication, and secure domain separation can go a long way towards addressing the Perfection Paradox by improving the security of the information supply chain. Trusted Computing technologies ensure that the computers we use, the networks they connect to, and the disk drives we store supply chain data on are free from malware and worthy of our trust. The end result is assurance that our supply chain information is not only accurate and available, but it is also safe. We can then answer Gandalf’s return visit question to Frodo “Is it secret, is it safe?” in the affirmative.



About DMIDMI is a leading IT solutions and business strategy consulting firm. DMI provides services and solutions in Strategic Consulting, Desktop Management, Network Management, Enterprise Applications, and Cybersecurity. We are one of the fastest growing companies in the industry, with over 500 employees and 50 civilian, defense, and intelligence agency clients. The hallmark of our business is dedication to exceptional customer service and we’re proud of our Dunn and Bradstreet Open Ratings quality and satisfaction rating of 94/100. Our record of repeat business is enviable by any standard. DMI is headquartered in Bethesda MD, with satellite and project offices throughout the world.

At DMI, we focus on “enterprise transformation”—the strategic application of innovation to create newfound economies, efficiencies, savings, and value for our government and commercial clients and their customers. We offer market-making thought leadership and the proven ability to deliver solutions to the most vexing problems facing enterprises today.

We have a dedicated Innovation Office designed to seek and bring new concepts and technologies to our clients. In the summer of 2011, we opened a state-of-the-art DMI Innovation Center in the heart of Washington, D.C. At the DMI Innovation Center you can learn, experience, and get your hands dirty with an increasing array of new technologies and solutions like many of those described above. See secure mobility in action. Learn what’s possible with Trusted Computing. And soon, experience the future of integrated, automated cybersecurity monitoring operations. You are cordially invited.

For more information about Trusted Trade, securing your supply chain, increasing visibility into your supply chain or perhaps helping to improve your perfect order deliveries, contact Bryan Larkin at

DMI: [email protected] or 518.312.2952.

DMI One Rock Spring Plaza6550 Rock Spring DrBethesda, MD 20817

DMInc.com [email protected]

©2012 Digital Management, Inc. All right reserved.

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