Managing the Global Supply Chain (Collection) (FT Press Operations Management)

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These relatively modest differences may reflect a variation in response pool, or a trend toward using more automation at slightly smaller DCs. With space utilization during peak season, average peak utilization came in at It is fairly commonplace, explains Saenz, for dock areas to become congested, especially with the shift toward more frequent less-than truckload LTL and parcel carrier pickups, and adaptation to DC layouts over time.

Dock area congestion is a key indicator of a well-planned and operated facility, and is critical to the throughput of a facility. Last year, Given unemployment rates that are at or near historic lows this past year, and the difficulties in training temporary workers on proper warehouse procedures, it may be that slightly more companies are looking to automate some tasks, or looking to recruit more full-time workers.

This year the survey introduced some questions about pay increases and how to cope with rising pay rates. As noted, one approach to mitigating the risk of not being able to find enough labor is to use more automation. Other findings in the survey also reflect the use of more automation, although some tech findings—such as warehouse management system WMS use—declined a bit versus For example, with materials handling systems, manual approaches are still widely used. On balance, there were plenty of findings that affirm rising technology use.

While such data issues might seem to be a minor IT housekeeping concern, accurate weights and DIMs are essential to the functioning of proper slotting and warehouse automation such as sorters, shuttles, and ASRSs, in addition being needed by many WMS solutions, notes Derewecki. Saenz agrees on the importance of data to fully reap the benefits of technology. Many factors must come together for DCs to function well in this current climate, says Saenz. Having enough capex, applying more technology, figuring out how to attract enough labor, are all part of the mix, he concludes.

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Critical service providers hacked : Operation Cloud Hopper, a major hacking campaign stretching from around to , reportedly compromised some of the largest global cloud service providers to steal information from their clients. Note: These are just a handful of high-profile examples to illustrate the scope and magnitude of the challenge and its different permutations and by no means represent an exhaustive list. Although uncertainty about the scope and origin of interventions will likely persist, increased awareness of the potential consequences is generating some favorable dynamics.

Technology developers and suppliers, buyers, governments, and nongovernmental organizations are undertaking various initiatives to prevent and manage supply chain problems through both unilateral and collaborative efforts.

Most of these initiatives focus on requirements, standards, and guidelines to enhance supply chain integrity, as laid out in sophisticated supply chain risk management practices. But while these efforts are beneficial, they heighten concerns about the broad balkanization of the supply chain and focus mainly on the management of risks associated with accidental flaws or vulnerabilities in hardware and software. No similar, comprehensive effort has thus far tackled deliberate interventions by states and corporations—a deficiency that will become more problematic in the coming years.

There are at least seven clear reasons why governmental supply chain manipulations will remain, or become increasingly, attractive: These incentives—as well as inevitable flaws in hardware and software—mean that supply chain interventions will persist and total trust in the integrity of products and services will not be achieved.

But given the potential destabilizing consequences that supply chain untrustworthiness could impose on national and global economies, governments and corporations have objective interests in taking complementary steps to enhance supply chain integrity and mitigate the adverse impacts of manipulations. It also offers ways to encourage governments and corporations to adhere to these obligations, as well as measures to discourage all others from impeding them. The proposed obligations are divided into four mutually reinforcing categories: trust, accountability, transparency, and receptivity.

Broad adherence to them will go a long way toward rebuilding confidence in the integrity of this supply chain. These obligations, and the ways to anchor them and incentivize and verify compliance with them, are the culmination of extensive interviews with current and former senior government officials and the legal and security officers of leading ICT vendors in multiple countries, including the United States, Europe, China, and Israel. In turn, the legal and security officers interviewed highlighted the need for incentives that would reward those who abide by the obligations and penalize those who do not.

The central concerns then became how to verify that the commitments are being fulfilled, how to assess and attribute allegations of supply chain manipulations, and who should do it.

Operations management

In sum, the obligations, incentives, and verification arrangements proposed in this paper grew organically from many iterative engagements with leading technical and policy experts from government and industry. The result is a rather complicated, nuanced package of proposals. While a simpler package would be desirable in many ways, it would not realistically meet the core needs of the various stakeholders. This could be fulfilled by either refraining from conducting systemic interventions in the supply chain or at least minimizing the negative consequences of interventions by narrowing their scope and building safeguards into them.

Such policies and actions would complement policies and requirements that states already pursue to enhance their own procurement processes or to inspire others to follow. There is a key distinction between discrete and systemic interventions. A discrete intervention, such as placing an implant in a single piece of industrial control software destined for a specific target, could meet a significant national security need and have a relatively limited and predictable effect. There are gray areas, of course, such as when interventions affect all copies of a product that is intentionally offered only to a limited clientele or when interventions affect a limited production run destined for one customer or customer state.

The commitment of even a few governments that would otherwise have the motivation and ability to carry out systemic interventions would make a real difference. Their agreement would go a long way toward addressing customer and vendor concerns and, in turn, make the opposing position of other governments increasingly less tenable. It would be relatively easy to verify compliance by demonstrating that an intervention is not systemic.

Eschewing systemic interventions while allowing discrete ones could strike a welcome balance. National security interests could still be pursued through discrete interventions, while refraining from systemic ones would serve the commercial and public interests in uncompromised systems. Many governments have existing legal arrangements for information sharing that allow them to acquire similar kinds of intelligence without having to compromise products.

These could be refined to meet both the intelligence needs of governments and the transparency needs of corporations. Furthermore, regarding the parameters of discrete interventions, current legal information-sharing arrangements between corporations and governments already abound. They could be further refined, working out appropriate modalities and mechanisms for making such intervention requests acceptably transparent. One issue to consider, however, is the possible distinction between interventions in the domestic and international supply chains. Some governments may consider it essential and reasonable to intervene in their own domestic supply chain.

These governments may legally or otherwise compel suppliers and service providers operating in their sovereign domain to cooperate, as they do, for example, in requiring them to reveal source code or retain data. This obviously diminishes overall trust in their supply chain and makes it especially difficult for compliant corporations to expand into the international marketplace. Competitors will make a significant effort to verify adherence to these commitments. Regardless of whether states refrain from using systemic interventions, the international system would greatly benefit from establishing operational and technical safeguards to minimize the adverse, unintended effects of interventions.

Operational measures could include refraining from interventions in products designed for sensitive sectors or applications for example, software or hardware intended for medical applications. States could also renounce, or at least severely restrict, interventions in operational technologies that support critical infrastructure for example, nuclear power plants, and water supply systems or disrupt and degrade financial transaction.

Ideally interventions should not be designed to introduce self-replicating, self-propagating, or deep persistency features into ICT products and systems. These consequences, in turn, threaten the reputation and brand value of all the companies affected. If states refuse to rule out self-propagating, self-replicating, and deep persistency features because of their intelligence appeal, they should at least commit to build in safeguards that seriously constrain and mitigate their adverse effects.


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Very specific targeting parameters could ensure that any malware intended to alter the performance of a system could only be triggered by precisely defined circumstances in the target environment. Stuxnet, for example, was programmed to stop replicating after June 24, Other feasible safeguards include a kill switch to immediately terminate its adverse effects as well as the development of a parallel ready-to-introduce fix that could quickly eliminate the vulnerability being exploited.

This could also enable the intervention to be terminated, withdrawn, or patched once its utility expires or when the consequences of its introduction prove to be excessive. To enhance trust and accountability, supply chain interventions could require senior-level approval. Before an approval could be granted, however, a competent authority would need to 1 assess the likely security and economic consequences and potential collateral damage and 2 ensure that safeguards have been built into the operation.

This process would be analogous to the U. Vulnerabilities Equities Process, which determines whether and when vulnerabilities discovered in products are disclosed to vendors for patching or reserved for exploitation to conduct cyber operations. Such a process is both critical and viable even among states that are reluctant to formally set up, let alone publicly admit, they have in place a review process of this nature.

Inherent uncertainties surround the effects of any intervention and make it difficult to accurately predict the potential consequences. Naturally, all parts of the process would have to meet secrecy and compartmentation requirements; any external oversight mechanism would have to be largely confined to verifying that the interventions comply with the relevant policy guidelines and that the assessment of the interventions has been carried out methodically and consistently.

Regardless of the specific procedures governments establish to review and approve interventions, they must assess the potential broad consequences from the micro to macro level—including implications not merely to the affected consumers and the specific corporate brands and their employees and shareholders involved, but also for national reputation, and even the functioning of the international trade and security systems.


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The global WannaCry and NotPetya attacks were enabled in part by an exploit reputedly developed by the U. National Security Agency NSA and leaked by a hacker group called the Shadow Brokers, demonstrating the risks inherent in creating cyber tools even in the most closely guarded context. Such tools can be even more worrisomely employed through software update mechanisms.

Additionally, governments should conduct follow-up, periodic assessments to evaluate the benefits, risks, and other consequences of sustaining the action, particularly in light of the original requirements, evolving circumstances, and accumulated effects. Explicit approval should be required for any extension or expansion of an intervention. In general, actions that violate the confidentiality of information are less destabilizing than those that affect the actual performance of systems.

In general, merely encroaching on the confidentiality or even availability of systems would probably not trigger the immediate anxiety and prospects of retaliation that qualitative substantive manipulations would produce. This holds especially true if the interventions are undertaken clandestinely and carried out in a targeted fashion. Similarly, significant difference exists between the potential adverse effects inherent in denying access and availability of systems, compared with manipulating data integrity and the algorithms that process and control its employment in various systems.

Granted, some of the distinctions here are a matter of nuance, as even the loss of availability of ICT services could affect the integrity of a service for example, if financial market trades were delayed by even a fraction of a second. But the general principle still applies.

Supply chain optimization book

These considerations lead to another procedural recommendation. Namely, the approval process proposed above should recognize the distinctions between different types of interventions into the supply chain. It is vital for governments not to underestimate the potential blowback that would ensue not only when these operations trigger their intended effects but also when such activities are discovered or even widely believed to occur.

Moreover, prudence would require that any proposed operation manipulating systems, algorithms, and data integrity require elaborate senior-level interagency and inclusive consideration of its potential effects.

Managing the Global Supply Chain (Collection)

The benefits for both governments and corporations are self-evident. Governments could potentially minimize conflicts with the corporations and gain some invaluable technical and operational knowledge. Corporations could sensitize governments to some of the risks involved, as well as work out some arrangements to prevent unintended consequences for the individual corporations involved.

In high-risk scenarios, corporations could be given a hearing to make their case to the government why such behavior should be constrained or be ruled out. Although the idea of consultations may be contentious, corporations are not oblivious to the reality that governments have legitimate national security reasons to collect information by leveraging or even creating in extreme cases vulnerabilities in the supply chain.