VERA – Forward Visions on the European Research Area

VERA is funded by the European Union's FP7 programme for research,
technological development and demonstration under grant agreement no 290705

Transportation and Logistics 2030: securing the supply chain

Code: D06

Primary project information

Lead: EBS Business School, Supply Chain Management Institute,
Additional project partners: NONE
Type of activity: Report, Real-time Delphi & scenarios
Date conducted: Dec 2009 - May 2010
Date of Publication: 2011
Duration: 6 MONTHS
Summary: Overall, 104 experts assessed 16 projected futures in terms of probability of occurrence, impact on the transportation and logistics (T&L) industry, and desirability of occurrence. By deriving conclusions organised around four general themes, possible scenarios for the future of logistics were drawn. The purpose was to identify key developments in the T&L industry by the year 2030. In addition, the effects on the transport infrastructure environment from a governmental and an engineering and construction industry perspective were assessed and opportunities for governments were derived.
Financed by: PricewaterhouseCoopers, Germany
Budget: N/A
Research area/market/industry/sector: Transport, logistics, urban, rural, sustainability
Main report (full title): Transportation and Logistics 2030 Vol. 4 securing the supply chain

GRAND CHALLENGES

Economic Challenges: Total direct costs of piracy in 2010 are estimated to be between US$ 7 billion and US$ 12 billion.1 And when you look at the indirect costs too, the figure is much higher. Piracy damages the tourism industry, causes losses in revenues for canal fees and the costs “loss of use” and “loss of man-hours” while ships and their crew are held hostage are also significant. Many shipping companies are now either hiring special security, working together with UN troops or altering their shipping routes. Terrorism remains a concern too, particularly since there are a number of locations that are particularly crucial to the smooth flow of supply chains – and therefore potentially most vulnerable to attack. Logistics hubs and gateway regions are one concern.cyber attacks designed to induce physical damage will be an increasing threat for the transportation and logistics industry. Greater investment to secure technologies from cyber attacks will be absolutely mandatory.(Final rep.p.7-8) the total number of supply chain related attacks has increased steadily over the past decade, reaching 3299 attacks in 2010 (see Figure 1a), despite the sharp increase of security measures and control systems put into place after 9/11. Countries and companies are still struggling to come to grips with attacks and supply chaindisruptions. Current systems aren’t secure enough to protect the flow of global supply chains. We believe that this trend will continue in years to come, which means man-made attacks and supply chain disruptions will increase. (Final rep.p.12) rising unemployment and an enlarging gap between rich and poor countries and individuals will drive even greater numbers of attacks on supply chains.Not all the experts agree. The relaxed group considers an increase in attacks as not very likely. In contrast to the concerned group, they argue that supply chains are already sufficiently secured against attacks, and they believe security levels will get better still. New and innovative technologies will be available to better track the movement of physical goods and spot irregularities in supply chains quicker. (Final rep.p.13) Our expert panel was asked to discuss whether logistics hubs and infrastructural nodes will become preferred targets of terrorist attacks in the future. Experts don't all agree. 'Concerned' experts say they will indeed incerase. 'Relaxed' experts are more optimistic based on the promises from new security technologies and regulations and cooperation with government. (Final rep.p.18)
Economic Challenges Shortlist: increasing threats to security of supple chains due to piracy and terrorism; inefficient systems and measures to tackle increasing trend of attacks to supply chains but not all experts agree that the threats will increase and systems won't improve their effectiveness
Societal Challenges: The Delphi panel foresees that definitions of ‘privacy’ will become looser in favour of better protection, particularly where individuals are concerned. While many would prefer to maintain data privacy, they are ready to sacrifice it when there’s a documented need, such as preventing terrorist attacks. For individuals, data privacy is a personal issue. But in supply chain management, the issue is more about the relationship between commerci entities, rather than data on individuals. Some experts raise concerns that the public won’t raise issues around data privacy until they begin to be confronted with negative aspects of security measures, such as permanent surveillance. They see the need for new technological systems and enhancements which ensure the confidentiality of data while at the same time not jeopardising security and trade. (FInal rep.p.24)
Societal Challenges Shortlist: increased need for security vs. privacy issues
Technical Challenges: NATO believes that cyber attacks are the “battlefield of the 21st century”.42 IT systems are becoming more interdependent, as companies connect across their supply chains. While this increases information flow and efficiency, it also means that one successful cyber attack could have disruptive, unpredictable, devastating effects on other systems and companies and cause long-lasting consequences to economies.43 Large economies such as the US and Germany have already established national cyber security divisions which are designed to counteract cyber attacks. (Final rep.p.22)
Technical Challenges Shortlist: Far reaching impacts of cuber attacks due to increasing systems' interdependence;

Summary of relevant aspects

Background information: Freight and passenger transport facilities are frequently the target of attacks, whether the motive be political or purely for profit. Natural disasters like the devastating earthquake and tsunami in Japan show us only too clearly just how vulnerable our transportation and logistics systems are, when, for example, key commercial harbours are taken out of commission; not to mention the far graver human suffering such events can cause. And with electronic data exchange becoming an ever more critical part of interlinked value chains, worries about data security and industrial espionage are becoming more pronounced. The world is becoming smaller. Supply chains of today’s companies have globalised due to increasing efficiency in transport and logistics. 90 percent of the entire global trade flows through only 39 bottleneck regions. All prognoses indicate that global trade will increase in the future and along these so-called gateway regions. But the world is still a dangerous place: Since our global economy is strongly dependent on certain hubs it is unthinkable what would happen if there was a terrorist attack on just one of them. And exactly that is where the problem lies and what this study addresses: As long as it remains unimaginable in our minds, it remains dangerous. This study boldly thinks ahead to where, until now, our thoughts have not yet dared to venture.
The study also observes the new face of danger: cyber attacks. Today, entire countries are already exposed to permanent virtual attacks. Every two seconds, the German Internet is attacked. Logistics, as driver of globalisation, will become the focus of offenders in the years to come. A hacker could infiltrate the flight control system, for example, and randomly let airplanes fall from the sky. Or re-set the tracks in rail traffic and let trains crash… What would we do then?
Based on the opinions of leading experts for supply chain security from academia, business practice, technology development and politics, the study proves: It isn’t enough to simply react. Supply chain security is not crisis management. Supply chain security is proactive: It hinders attacks before they happen. Supply chain security will have failed if such catastrophes start to occur. Moreover, the study demonstrates that the future belongs to secure supply chains. However, the one who would like to achieve this security with modern technology builds on sand. The best scanner for explosive agents is useless if the security personnel is not well-trained or if the communication processes within the supply chain do not function.

Scenarios

Actions/solutions implied: We believe that transportation and logistics companies will need to take security concerns into account when choosing transport routes. They’ll need to take a close look at how dependent their business is on particular logistics hubs or chokepoints, and then assess how they can reduce the impact of threats to particular locations. Transportation and logistics companies will also need to be prepared to respond quickly if risk levels change. Even without disruptions, more security will mean longer transport times. That could have a far-reaching impact. In some cases business models based on time-critical deliveries may be squeezed out of the market. Companies have to find the right combination of preventive and reactive measures to achieve the optimal level of supply chain security. We believe that companies need to consider the possible, not just the probable. Executives should keep an eye on so-called wildcard events too. That means looking at the possible financial impact, the relative vulnerability of their business model and their company’s ability to react to low-probability, high impact events.(Final rep.p.7-8) Transportation and logistics companies will need to work together with governmental institutions to develop new security standards that are not only effective, but also efficient. (final rep.p.9) Supply chains and transport systems need to incorporate measures to secure human lives and transportation infrastructure into their design. Freight screening, risk profiling of employees and the use of trusted shippers are some of the options that can help. (final rep.p.11) Increased security means additional time for verification, searches, audit and the like. The experts argue for the development of new performance criteria too. Once shipping times increase, logistics service providers may look to shift the focus from delivery times to other aspects of customer service. For example, they may develop new service offerings around ‘secure’ delivery. And delivery to countries facing a severe threat may become a specialised service that only some carriers are willing to offer. Nonetheless, time will still be a critical parameter for efficient logistics, so any security measures that companies implement will need to be as quick to execute as possible. (Final rep.p.21) Companies will need to increase investments in security programmes and IT personnel to secure their technologies from cyber attacks and to minimise the risk of major incidents. (Final rep.p.23) Governments are expected to reduce their executive power and focus on their legislative roles. Transportation and logistics companies embrace the opportunity to improve their own security measures on their own terms. (final rep.p.26) Technology alone can’t secure the supply chain. People are needed too, to provide human intelligence and good governance. Companies should work together with standard setters to develop generally accepted security principles.
Who benefits from the actions taken?: Transporation and logistics companries

Meta information

Time horizon: 2030
Methods: - desk
- research and the results of a Delphi
- survey among 80 selected subject matter
- experts from 25 countries around the
- world, including both emerging and
- mature economies & scenarios.
Target Group: transport and logistics industry
Objectives: to investigate threats on supply chains and their impacts as well as help transport and logistics industry to improve security strategies
Countries covered: Represented Countries by Delphi panellists: Australia, Austria, Bahrain, Belgium, Canada, China, Czech Republic, Finland, France, Germany, India, Ireland, Italy, Malaysia,Netherlands, Oman, Russia, Singapore, South Africa, South Korea, Sweden, Switzerland, UK, Ukraine, USA.
ERA actors/stakeholders mentioned: transport and logistics industry' governments
Geographic scope:

Entry Details

Rapporteur: Effie Amanatidou
Rapporteur's organization: UNIMAN
Entry Date: 24.08.2012