Innovators in Supply Chain Security: - IBM

One of these companies already had a robust security system in place for at least 10 years, and so
hasn’t experienced any fundamental shift in its security practices or in the impact they had on its
business following 9/11. The major benefits they could report as a result of their C-TPAT certification
were fewer and less intrusive inspections at the ports, which also provided less opportunity for damage
to the imported goods. Two other companies pointed out that most of the benefit areas investigated
in the study have been a subject of long-established company practice for efficient business processes.
Therefore, obtaining the C-TPAT certification did not result in sizable cost savings because most of
the major process obstacles had already been improved by that time. The benefits they have cited
are ``Front of Line” priority inspection, as well as the ability to join the FAST program, where C-TPAT
is a prerequisite. In addition, one of these two companies mentioned that they expect the C-TPAT
implementation to heighten security awareness throughout the company, and to consequently result
in a better terrorist security incident reporting.
The remainder of this section describes the benefits reported by the other eight participating manufacturers.
The discussion is organized by the five benefits sections in the questionnaire.
Inventory Management and Customer Service
Participating companies reported a number of improvements in their inventory management practices
due to their security investments, which also had a positive impact on the service provided to
their customers:
• INTERNAL INVENTORY MANAGEMENT OPERATIONS: In the receiving process of incoming material, 38 percent
of companies reported a reduction in incorrect quantity received. In addition, 38 percent
of companies were able to reduce their inventory levels, and all of these companies expect to
see further reduction in inventory in the future.
• PRODUCT SAFETY/GENUINENESS: Better security practices allowed the companies to be more successful
in protecting their products; 75 percent of companies reported a reduction in theft/loss/pilferage;
50 percent of companies saw a reduction in tampering; and 25 percent of companies were able
to reduce the magnitude of damage to their goods. Furthermore, 38 percent of companies were
successful in reducing the magnitude of fraud, while 25 percent were successful in reducing the
magnitude of counterfeiting.
• CUSTOMER SERVICE: Service level to customers was improved in a number of ways; 38 percent of
companies improved their reported on-time deliveries. In addition, 13 percent of companies
reported an increase in item fill-rate and a reduction in each of the following areas:
– the number of back-orders;
– the frequency of cancelled orders; and
– defective products delivered.
• COST SAVINGS: 38 percent of companies reported cost savings associated with improved inventory
management, but only one of them was able to quantify those benefits, and estimated a 5-10
percent cost savings.
Charts 1a and 1b show the average percent improvement related to inventory management
and customer service, based on data provided by those companies that were able to quantify
the magnitude of benefits they realized (not all companies that reported benefits were able to
quantify them). Based on Chart 1a, the most significant levels of improvements were related to
theft/loss/pilferage (38 percent) and tampering (37 percent), which is logical since these benefits
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