Chain of Thought

Tom Ridge: "Homeland Security is About Logistics."

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The results of MH&L's salary survey will be out soon. Wherever you fall in comparison to other professions, you probably deserve more. Material handling and logistics are more critical than ever to this nation's security. Of course, my being editor-in-chief of a magazine called Material Handling & Logistics, you might expect me to be a blowhard about what you do.

John Nofsinger says he's seeing higher ranking corporate types registering for this year's ProMat, the big material handling and logistics show and conference coming to Chicago's McCormick Place March 21-24th. Of course his being CEO of Material handling Industry of America, ProMat's producer, you might expect him to tout the importance of what you do, too.

So if you're looking for some compelling non-biased source to prove to your superiors your true strategic worth, listen to what Tom Ridge, former governor of Pennsylvania and former secretary of Homeland Security, says about your job:

“Logistics not only combats terrorism but as you try to build economic resiliency and reduce risk to the supply chain, you do the same for America.”

That's the message Ridge says he'll deliver during his keynote address at ProMat. Today, as founder and CEO of Ridge Global, LLC, a Washington, D.C. based security consulting firm, Ridge has a unique perspective on the state of U.S. security. I had the opportunity to interview Gov. Ridge in advance of the ProMat conference, and he shared several interesting insights about how this country's security intersects with that of its supply chains, particularly in light of the recent citizen's revolution in Egypt. Here are some highlights from our conversation.

MH&L: What role did logistics professionals play during your tenure with the Bush Administration, particularly after September 11?

Ridge: America's prosperity and its security are interlinked. One of the unique roles those responsible for logistics play is security of the supply chain and building the resilience necessary to protect our flow of goods. People in the supply chain arena have to apply the same mindset of philosophy I did as Secretary of Homeland Security: what are the risks of business interruption?

President Bush called me in shortly after 9/11, and said ‘Tom, we brought security up at our borders with friends in Canada and Mexico and we brought commerce to a screeching halt. Do something about it.' So we built a smart border agreement with both Canada and Mexico.

MH&L: Give us an example of how corporate and national security are intertwined.

Ridge: I visited a GM assembly plant in Flint, MI after 9/11. They ordered their seats from a supplier in Ontario. It's a JIT world, so they put the chassis on the assembly line and toward the very end of the line they inserted the seats. An assembly line comes to a grinding halt if semi trailers are stuck on the bridge or in the tunnel trying to get into Flint because we've ramped up security so high. It shows that in doing the kind of things we need to do to enhance our security and protect ourselves against a potential terrorist attacks, we have to be mindful that we also have an economic dimension and we have to find the right balance. We could check every bloody truck coming over the border and you know what that does? You push that traffic back days. That shuts the assembly plant down. It's a classic example that our economy and our security intersect at our borders.

MH&L: What were your thoughts during the recent revolution in Egypt? Any lessons to be learned?

Ridge: I've heard that from 8-10 percent of the world's commerce goes through the Suez Canal. I suspect a lot of it is oil, but there are choke points around the world. Let's talk about piracy. What if something's floating around in that part of the world that's ultimately destined for the U.S. or part of your supply chain? What does that do to your business? Think about the batteries that power your radio. There are 15 sources of metals and ingredients in those little batteries. The interconnectedness of our world makes us vulnerable to attack because the forces of globalization that drive our economy are the same ones that can be responsible for preparing and executing a terrorist attack.

Geopolitical risk is probably one of the most significant risks companies face. For example, I'm on the board of Hershey's. They get a lot of cocoa beans from the Ivory Coast. With all the instability over there you could see a spike in cocoa prices, and that's a risk for Hershey's, Godiva and Mars. I see Egypt as the most immediate and dramatic example of the vulnerability of supply chains to disruption based on political events. There are many other potential causes for disruption that you might be able to identify and remediate, and perhaps mitigate, but you can't control the political calculus in some parts of the world where raw materials are being assembled. Now that the military has taken over in Egypt I don't think we have to worry about the Suez Canal too much, but I'm sure there was some apprehension within the shipping companies and their clients in the event the canal was closed for any length of time.

MH&L: You were also once on the board of Savi Technology, which is famous for Radio Frequency Identification. What did you gain from that experience?

Ridge: Savi did a lot of logistics work for DoD. I lost touch with them after Lockheed Martin acquired them, but RFID active and passive tags are one of the 21st century innovations that are applied specifically by companies to build resiliency in the supply chain. Remember the cargo planes that were carrying packages originating in Yemen that were grounded? We often take globalization of shipping and air cargo for granted, but it is a point of vulnerability for both terrorism and for other kinds of disruptions that can impact profitability, brand, and even have an impact on employees and customers. These men and women responsible for material handling and logistics have a far more complicated job today than they ever have, and they'll never be able to eliminate the risk associated with these supply chains. They'll just have to manage it the best they can.

MH&L: Will technology help us deal with some of that uncertainty you mentioned?

Ridge: We certainly don't have the technology for 100% scanning and detection. Of particular concern is radiological and nuclear matter. There are a couple companies trying to build the technology of detection that could be applied outside our borders. Anyone who has been in the military knows you try to push your borders out as far as you can. You want to make our borders the last line of defense, not the first. So you say to yourself for security purposes what can we do in China or Africa or South America to eliminate or reduce the possibility of a terrorist attack? How about foodstuffs? How about automotive parts from around the world?

I visited an automotive company many years ago and they had a pretty good handle on the first tier supplier in terms of quality, but you get down to the second through fourth tiers and they don't really have much transparency into that world. Think about Mattel and that Christmas recall. What kind of transparency and risk mitigation strategies have they built into their logistical chain to say that that little backroom shop in some town in China is complying with all of our safety standards from the consumer protection agency? The same with food. The soundness and security of the supply chain is far more complicated than it has ever been.

MH&L: Do you feel companies are making the necessary investments in their supply chain security?

Ridge: Frankly I don't think a lot of companies view investing in resiliency and security as anything other than an expense rather than an investment. They might have made modest progress, but I've talked to enough corporate security officers and they're not solely concerned about terrorist attacks. They're talking about the vagaries and uncertainties of having their supply chain extended all around the world. I never got the sense that too many of them feel that they get the financial support they should. One of the most interesting things that has been developing over the past year or two is that more publicly traded companies either through their audit committees or risk management committees are beginning to take a look at operational risk, including the supply chain and putting pressure on management to identify potential disruptions that could affect the company.

MH&L: Could the same be said about the challenge of getting sufficient investment in this country's infrastructure?

Ridge: The Eisenhower Administration showed foresight in building the interstate highway system for defense purposes. That's how we are connected. However, sadly, we have never viewed our transportation system from a strategic viewpoint. I don't think we appropriate dollars based on need as much as we do political preference. We are the only industrialized country in the world that does not pay for our roads and bridges based on a single source of gas tax. I've seen figures lately that 52-53% of the dollars we use for our highway programs come from when you and I go to the pump and the rest is just borrowed money just like every other program. In the 21st century, if we are to remain competitive, we have to understand there is huge cost dislocation based on waiting times trying to get from Canada into Detroit. The cost associated with broken vehicles and blown tires and detours around antiquated bridges and roads should be of great concern to America and we should do something about it.

MH&L: How did you address that issue during your tenure with the Bush Administration?

Ridge: We were having a lot of difficulty getting to a JIT world and there were a lot of people complaining about unnecessary delays in Detroit. I give great credit to then Canadian Deputy Prime Minister Anne Mclellan. We met in Detroit in 2004 and we announced a ‘25% Challenge.' We wanted to make dramatic improvements in reducing transit time for a truck or car crossing the border. We wanted a 25% reduction in that time and we actually got a 35-40 percent reduction because we worked with the private sector on logistics with regard to the times of day they'd be making their shipments. We worked with customs and border protection to keep additional gates open at different times and saw that with thoughtful engineering we could have the same level of security but facilitate commerce more effectively by just reengineering how we were doing both. Someone told me the cost of an idling truck could be $150 an hour. That's a lot of money. Anything you could do to reduce wait time is a plus. At the borders you want to do it but not at the sacrifice of additional security measures. It's a constant challenge, and I have great respect for logistics managers because they have to deal with the same kind of issues I did. Their world's a little more complicated because our government is now looking to them to help from a security viewpoint as well.

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Tom Andel

Editor-in-Chief Tom Andel oversees the strategic development of MH&L and MHLnews.com, bringing 30+ years of thought leadership and award winning coverage of supply chain, manufacturing logistics...

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During his career Dave Blanchard has led the editorial management of many of Penton Media’s best-known brands, including the company’s flagship title, IndustryWeek, as well as Logistics...
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