Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
In the bustling Indonesian seaport of Surabaya, a truck driver with ties to al Qaeda turns into an alley and backs his rig up to a nondescript warehouse. His cohorts pry open the door of a container filled with designer sneakers and thrust a lead-shielded dirty bomb inside. The driver heads for the dock, where the container is loaded on a feeder vessel for the first leg of its voyage to the United States.
Some weeks later, the Chicago-bound container enters North America via the Port of Vancouver. Noting that it originates from a company that has joined the Customs-Trade Partnership Against Terrorism, U.S. Customs inspectors at the port wave the container through without inspection. It's loaded directly on a railcar for movement to a Chicago distribution center (the dirty bomb's lead shield prevents detection by the radiation pOréals deployed along the U.S.-Canadian border). When workers at the DC go to open the container, a device on the door triggers a violent explosion, releasing a cloud of industrial-grade radioactive material in the process.
That's the scenario that keeps Stephen E. Flynn awake at night. It may be a hypothetical account, Flynn said in testimony to the House Armed Services Committee this spring, but it's nonetheless plausible. That grim scenario is also what compels Flynn, a retired Coast Guard commander and senior fellow at the Council on Foreign Relations (CFR), to spend his days trying to convey the urgency of the port security problem to Congress and the American public.
Five years after the World Trade Center attacks, U.S. ports remain a security risk. Just about everyone who deals with security issues agrees on that. As a nation, we have yet to come up with an effective means of protecting our seaports, some of which are secured by nothing more than a chain-link fence. Perhaps more to the point, we have yet to find a way to ensure that none of the millions of containers entering the country each year harbors chemical, radiological, biological or nuclear weapons.
While everyone agrees port security is important, there's little consensus on what it will take to prevent terrorists from smuggling a dirty bomb into the country via an ocean container. Or how effective security programs implemented over the last five years have been. Or how to secure the vital cooperation of other nations. In the meantime, the debate continues. In fact, the issue of port security came to the fore just recently. In late September, Congress passed the SAFE Port Act of 2006, which among other measures, increased federal funding for port security, mandated nuclear and radiological container screening at 22 ports, and launched cargo-scanning pilot programs at overseas ports.
Are we safe yet?
If security efforts have fallen short, it's certainly not for lack of trying. In the last five years, the U.S. government, international organizations and the private sector have all taken steps to boost security. Ports have spent millions of dollars on security upgrades. Congress has passed legislation aimed at protecting U.S. ports and waterways from terrorist attacks, including the 2002 Maritime Transportation Security Act (MTSA). The International Maritime Organization has adopted security requirements for its 159 participating governments, which have now been codified as the International Ship and Port Facility Code (ISPS). And U.S. Customs and Border Protection (CBP) has established the Customs-Trade Partnership Against Terrorism (C-TPAT), a strategic plan aimed at getting U.S. companies to police their own supply chains.
But their efforts have met with decidedly mixed reviews.
Port executives would argue that the nation has made headway. In a statement last month on the eve of its annual meeting, the American Association of Port Authorities said, "In the nearly five years since 9/11, America's seaports and the federal government have joined forces to make major gains in fortifying and hardening port facilities against intruder attack. With the combined efforts of public ports, initiatives of federal agencies within the Department of Homeland Security such as the U.S. Coast Guard and Customs and Border Protection (CBP), ports are significantly safer now than prior to 9/11."
The CBP hews to the party line as well. Last spring, Deborah Spero, who was acting commissioner of CBP, told those attending CBP's C-TPAT conference, "Together, we have worked to strengthen the global trading systems and have made our nation's cargo more secure. And the result is that America is safer."
Others, however, have reservations. That became clear from a report released last month by the Lyndon B. Johnson School of Public Affairs at the University of Texas. Conducted for the Congressional Research Service, the study, titled "Port and Supply Chain Initiatives in the United States and Abroad," examined port and supply chain security initiatives around the world. Though the report did not attempt to assess the efficacy of the programs, it did present viewpoints critical of the existing security initiatives. "Our research found an abundance of conflicting views on both ISPS and its domestic counterpart, MTSA," the report said. MTSA, according to critics, does not address real security risks while substantially increasing the workloads of port security officers. ISPS also came in for criticism much of it centered on its implementation, which was termed inconsistent at best.
Targeting the supply chain
The mixed reviews in the LBJ study, though, appear positively optimistic compared to the grim perspective offered by Flynn, who is one of the foremost critics of port security policy. In his testimony this spring, Flynn was blunt in his assessment of the state of port security. "[T]he security measures currently in place do not provide an effective deterrent for a determined terrorist organization intent on exploiting or targeting the maritime transportation system to strike at the United States," he told the committee. (Flynn's testimony is taken from a transcript on the CFR Web site. He could not be reached for comment.)
And the heart of the problem, he contends, is the supply chain. "[T]he threat is not so much tied to seaports as it is to global supply chains that now operate largely on an honor system because the standards are so nominal and the capacity for agencies like the Coast Guard and Customs is negligible," he said. "Based on my experience and research on this issue for nearly 15 years, I believe that the greatest vulnerability that will involve the maritime sector and our seaports is overseas within the transportation system before a container reaches a loading port."
Flynn went on to say that if something like his hypothetical dirty bomb scenario did occur, the consequences would go well beyond the mayhem caused by the explosion. It would also shake the American public's faith in the risk-management system currently in place. "All the current container and port security initiatives would be compromised by the incident," he said. "There will be overwhelming political pressure to move from a 5-percent [container] inspection rate to a 100-percent inspection rate, effectively shutting down the flow of commerce at and within our borders."
But that can all be avoided, he said. With international cooperation, the security problem can be solved. What's required, he said, is a program of mandatory cargo scanning. To that end, Flynn urged U.S. authorities to work closely with overseas terminal operators to create a system that scans every container destined for the United States before it leaves a loading port.
The scan debate
Is something that ambitious possible? Technologically, maybe. For the past two years, the Port of Hong Kong has scanned every single container entering two of its terminals, which are among the world's busiest. The Integrated Container Inspection System, sponsored by the Hong Kong Container Terminal Operators Association, uses three types of imaging to screen trucks and containers. As the vehicles pass through two giant pOréals, they're first scanned for radioactivity. They then undergo gamma ray scanning to generate a radiographic image of the container's contents and optical character scanning to read the container's ID number so it can be checked against cargo manifest data.
Would it work here? Flynn believes it would. He told the committee that four terminal operating companies handle 80 percent of the containers headed for the United States, and that if they imposed a fee of $20 per container, it would pay for installing and operating a scanning system worldwide.
But winning cooperation from widely divergent port operations will be no easy task. For one thing, many overseas players already resent what they see as heavyhanded attempts to secure their cooperation with U.S.-centric port security initiatives. In interviews with port officials around the world, researchers for the LBJ study heard complaints that U.S. security initiatives were being forced on other nations. And for many overseas ports, security simply isn't the top priority. "One of the most striking findings ... is the fundamental incongruity between the maritime security priorities of the U.S. and those of other countries," the report said. Terrorism was not a primary security concern for any of the port officials interviewed, who were much more focused on smuggling, fraud and human trafficking.
Even on the home front, the notion of 100-percent scanning has many opponents, including a number of shippers. In a letter urging Sen. Susan Collins, chair of the Homeland Security and Government Affairs Committee, to oppose any legislation requiring the scanning of all U.S.-bound containers, Sandy Kennedy, president of the Retail Industry Leaders Association, argued that 100-percent scanning would "impose immense costs on our economy and foreign relations without improving the security of our international trading systems." She cited a June 2006 study by RAND Corp. that concluded that 100-percent scanning would delay the movement of cargo containers by 5.5 hours per container.
C-TPAT doubts
Stepped-up container scanning is only one potential solution to the security problem, of course. In his congressional testimony, Flynn also proposed a second measure: tightening C-TPAT. Noting that Customs had only 80 inspectors to monitor compliance of some 5,800 C-TPAT certified companies, he urged Congress to require independent audits of the security plans developed by importers.
Flynn is hardly the only critic of C-TPAT. Some C-TPAT members themselves have reservations about the program. As part of the LBJ school study, researchers conducted a survey of National Industrial Transportation League members on the program (about 80 percent of the respondents were C-TPAT members). That survey revealed at least some disenchantment with the program. "[I]ndustry respondents believe that it is not operating efficiently," the report said. "In fact, most private-sector representatives feel that C-TPAT is an inadequately funded and managed program that requires costly, if not cost-prohibitive, security measures."
Those who responded to the survey acknowledged that they saw promise in the program for balancing security and trade growth. But they also criticized it for being highly bureaucratic. Further, the program was termed "virtually useless without foreign participation."
Despite all the disagreement over how to approach the problem, this, at least, is certain: security efforts will go forward. Leigh Boske, who headed the LBJ school study, was at pains to stress that in an interview. "It is too easy to begin with criticism and end with criticism," said Boske, who is associate dean and a professor of economics at the school. But those critical comments are just a small part of the picture. "That is not reflective of what foreign public officials or the private sector believe," he stated. "They believe in security."
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”