DR. Yi-Chih YangDepartment of Shipping and Transportation

Management National Kaohsiung Marine University

Content1.Introduction2.Literature Review

2.1 Risk Management2.2 Container Security Initiative

3. Research Methodology3.1 Risk Management Matrix3.2 Assessment Factors3.3 Questionnaire design

4.Empirical Analysis4.1 Profile of questionnaire respondents4.2 Basic statistical analysis4.3 Significant difference analysis4.4 Risk Management Matrix

5. Conclusions

1. introduction• The US has substantially strengthened national security

measures in the wake of the devastating 911 terrorist attacks, and its Container Security Initiative (CSI) requires that that inbound container or cargo from foreign commercial ports be pre-inspected.

• The initial stage of CSI called for implementation at the world's twenty largest ports, and implementation has now been expanded to the world's sixty largest ports, including the ports of Kaohsiung and Keelung in Taiwan.

Flowchart of maritime supply Chain

Source：OECD(2003), Security in Maritime Transport: Risk Factors and Economic Impact, http://www.oecd.org.

1. introduction

Saxton,J2002

• It has been suggested that investment in the United States dropped by 0.2% of GDP because of the ongoing threat of terrorism.

Haralambi-des, He2002

• Argues that the risk brought by route control and distortion of inter-port fair competition will inevitably have the largest impact on ports in developed countries .

HO, M. W.,HO K.H.2006

• Ho and Ho claimed that the process of risk management can be divided into risk identification, risk analysis, and risk control.

Johnston, VR

2004

• CSI requires the pre-inspection of high-risk containers, but the majority of containers need not be considered security threats .

1. introduction

The purpose of the paper is to:

(1)Review supply chain risk management definitions and concepts.

(2) Determine the impact of CSI on the shipping industry

(3) Identify CSI-related risk assessment factors affecting the shipping industry

(4) Suggest risk management alternatives for the shipping industry and relevant government agencies.

2. Literature Review 2.1 Risk Management

• Risk management strategies include those to remove, reduce, avoid, and transfer risks

Clark, RC, Pledge, M and Needler, HMJ. 1990

• In particular, security and fire safety risk implies failure to protect facilities and personnel from acts perpetrated by criminals, terrorists, and disgruntled personnel.

U.S. DEPARTMENT of TRANSPORTATION

MARITIME ADMINISTRATION, 1998

• Schmid et al. defined the main elements of risk management as risk identification, risk assessment, risk analysis, risk reduction, and risk monitoring.

SCHMID, C., DART, P., JOHNATON, L.,

STERLING, L. and THORNE, P. 1999

• Supply chain vulnerabilities may occur at the commodity, supplier, supply chain partner, supply chain facility, cargo transporter, personnel, and information levels .

HARLAND, C., BRENCHELY, R., WALKER, H. 2003

• Most companies are not familiar with the real purpose of supply chain security

HARLAND, C., BRENCHELY, R., WALKER, H. 2003

2. Literature Review• Norrman and Jansson state that the Ericsson Company's risk

management procedures include risk identification, risk assessment, risk handing, and risk monitoring.

NORRMAN, A., JANSSON, U.

2004

• The five risk management procedures.SUNG, M, J. 2005

• Risk Management can be broadly divided into risk identification, risk analysis and risk control .

HO, M. W., HO, K. H. 2006

• Tang argued that SCS involves adopting policies, procedures, and technologies to protect supply chain property against robbery, damage, terrorist threat, and to hinder introduction or unauthorized smuggling of illegal goods, personnel, or WMDs in the supply chain.

TANG, C. S. 2006

• SCS therefore involves commodity security, shipping security, port security, and personnel security.

SARATHY, R. 2006

2. Literature Review 2.2 Container Security Initiative

• Since shipping containers may be used to transport nuclear weapons and explosives, shipping-related facilities must implement security risk management mechanisms.

HUTCHINS, G. 2003

• Port security measures require cooperation between private industry and public regulators with respect to development, financing, and implementation of various security plans and agreements

AMERCIAN ASSOCIATION OF

PORT AUTHORITIES,

2004

• FIATA has also leveled the criticism that CSI causes a great deal of inconvenience for freight forwarders, after the legal deadline has expired, private information service providers may sell the information to any interested parties .

OECD, 2004

• Carriers must request shippers to pay additional costs of 25 dollars per one B/L. Barnes and Oloruntoba claimed that while it seems as if various security measures will diminish shipping terror activity at the cost of a small bit of performance, when conducted improperly.

BARNES, P., OLORUNTOBA, R.

2005

2. Literature Review 2.2 Container Security Initiative

• Cui noted that after the US implemented CSI, the Korean government conducted a review of new CSI-related venture business models

CUI, C. X. 2006

• Liu notes that Japanese research on the impact of US 24-hour rule found that it extends lead time and increases transport cost.LIU, L. B. 2007

• As the Korean government implements container inspection in accordance with CSI standards, other governments or industries encountering similar issues must reflect on the considerations.

CUI, C. X. 2007

• From a negative impact angle, the Japan External Trade Organization (JETRO) found that the requirement that high-risk containers exported to the US must be inspected results in delayed cargo loading.

JAPAN EXTERNAL

TRADE ORGANIZATIO

N, 2008

3. Research Methodology 3.1 Risk Management Matrix

3. Research Methodology 3.2 Assessment Factors

Risk assessment factors connected with CSI and the 24-hour rule

3. Research Methodology 3.2 Assessment Factors

3. Research Methodology 3.2 Assessment Factors

3. Research Methodology 3.2 Assessment Factors

3. Research Methodology 3.3 Questionnaire design

Risk frequency and risk severity scales

4. Empirical Analysis 4.1 Profile of questionnaire respondents

Survey response rate

4. Empirical Analysis 4.1 Profile of questionnaire respondents

Overview of respondent attributes

High percentage of the respondents

4. Empirical Analysis 4.2 Basic statistical analysis

Top 3 factors of the perceived level of risk severity

A6 A2 B8

The top 3 of the perceived level of risk frequency

B5 B4 A6

4. Empirical Analysis 4.3 Significant difference analysis

ANOVA analysis did not reveal any significant differences in perceived risk severity and frequency for different job title or working experience

ANOVA analysis of risk severity and frequency by type of business

4. Empirical Analysis 4.3 Significant difference analysis

4. Empirical Analysis 4.3 Significant difference analysis

4. Empirical Analysis 4.3 Significant difference analysis

4. Empirical Analysis 4.4 Risk Management Matrix

Risk Management Matrix for the CSI

High risk level

4. Empirical Analysis 4.5 Risk Management Alternatives

Risk Management Alternatives for CSI and the 24 hrs Rule Risk

Our recommendation

5. Conclusions• This paper proposes that an optimal alternative is avoidance & non-

insurance transfer.

The findings of this study can be summarized as following:

Firstly, to keep the balance between the efficiency of maritime logistics and supply chain security is of vital importance to trading countries dealing with security risk issues .

Secondly, more serious threat to the social order and traditional industry in Taiwan than the smuggling should be amended in light of the domestic operating environment.

5. ConclusionsThirdly, transmit data has become very expensive for small and medium-sized companies. If appropriate transmission software can be designed by the government, and a free version issued to relevant firms, this would greatly assist ordinary users.

Fourthly, shippers recommend that the U.S government maintain the principle of confidentiality in formal communication channels with Taiwan custom offices and administrative organizations.

Fifthly, shippers can rely on large and medium-size shipping companies or forwarder to send data, resolving the problem of different security transmission system standards.

Finally, the government should consider encouraging private firms to design and market relevant security hardware and software, which could generate new security business models and create security-related employment opportunities.

Thanks for your attention

Q&A