Supply chain management can go a long way in determining the fate of a business. Just ask any businesses that were impacted by the disruption of seafood supply during the BP oil spill in the Gulf of Mexico.
And yet according to a story in last month's Supply Chain Digest, research shows that large companies encounter a major supply chain disruption every four to five years on average. That's why businesses have been taking even greater strides to protect their supply chains since the 9/11 terrorist attacks, according to three Iowa State University College of Business professors who have studied supply chain security and its effectiveness in businesses nationwide.
Their new study of managers from 69 companies, which will be published in an upcoming issue of the Journal of Business Logistics, found that having a clear strategy is far more valuable in perceived effectiveness than either availability of resources or management support. So don't just throw money at the security problem, they say.
"We definitely thought we would find results saying, 'the more resources you have, the better you're going to feel about perceived effectiveness,'" said Bobby Martens, an ISU assistant professor of supply chain management and lead author in the study. "One of the things that this perhaps says is that companies may be struggling more with how to deploy those resources to enhance their supply chain security."
Martens collaborated with fellow Iowa State supply chain management professors Mike Crum and Dick Poist on the study.
The researchers first identified businesses to survey from among the membership of both the National Cargo Security Council and the Warehouse Education and Research Council. Their final sample of companies included manufacturers (35), wholesale distributors (23) and retailers or direct-market companies (11). Approximately half of the respondents had food-grade product.
Martens says they surveyed the perceived highest ranking official in the company who had knowledge of his or her firm's supply chain.
"There's been a lot of theory and thought on what factors influence the establishment of effective security for the supply chain, but it's never been empirically tested – in any way like we did, at least," Martens said.
"One of our major findings was the role of internal and external integration in security – that is, how firms include other areas within the organization when developing their security plans and how firms work with their suppliers, customers and other supply-chain entities," he continued. "The more companies exhibited internal and external integration, the happier they were with their security."
The researchers also found that "proactive motivation" had a significant influence on companies' satisfaction with their supply chain security.
"Effective security initiatives more often than not produce non-security benefits for the firm as well, such as improved operating efficiencies and more dependable and responsive service to customers," said Crum, who also serves as associate dean of graduate programs in the College of Business. "A good example of this is increased visibility and better monitoring activities across the supply chain."
The study's results also showed how firms involved in the food industry perceive their supply chain security to be less effective than firms operating in other industries. And the researchers point out in their paper that the nature of food does, in fact, present some unique challenges. They also conclude that food firms may have higher standards or expectations for security.
"Breaches of food supply chain security or compromises to their products' integrity potentially have far-reaching consequences," Poist said.
The researchers conclude that proactive security planning – driven by both security and non-security benefits – appears to be the most effective method to secure supply chains. The planning should incorporate supply chain partners, including suppliers and customers. Such external integration is consistent with some key government security initiatives, such as the Customs-Trade Partnership Against Terrorism.
The authors also found that government has a substantial influence on supply chain security. They wrote that government initiatives that provide incentives – such as loans, tax credits and/or grants for specific initiatives, including capital security improvements and employee security training – may more effectively enhance security.
