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Supply Chain Security Benefits Far Outweigh Costs

August 7, 2006

Stanford University study confirms that companies that invest in security measures can expect significant collateral rewards.

ARCwire -- The Manufacturing Institute, the research and education arm of the National Association of Manufacturers, released a new study by Stanford University that confirms companies that invest in supply chain security measures can expect substantial benefits that far outweigh the costs of the security expenditures.

Eleven major manufacturers and three logistics providers that import into the U.S. and are considered innovators in supply chain security in their industry participated in the study. These innovative companies all received the expected security benefits from their investments, such as reduced vulnerability to global acts of terrorism, natural disasters and energy shortages, but they also documented for the first time significant collateral benefits.

The companies that were able to quantify their benefits, on average:

  • Reduced their customs inspections by 48%;
  • Increased the automated handling of their imports by 43%;
  • Saw a 29% reduction in transit times;
  • Improved their asset visibility in the supply chain by 50%;
  • Improved on-time shipping to customers by 30%;
  • Reduced time taken to identify problems by 21 percent;
  • Reduced theft in inventory management by 38%;
  • Reduced excess inventory by 14%; and
  • Reduced customer attrition by 26%.

Adrian Gonzalez, ARC Advisory Group, commented, "The findings of this research are consistent with ARC's position, which was presented in its August 2004 Strategy Report 'Linking Supply Chain Security with Sarbanes-Oxley and The Bottom Line.' We stated at the time that 'Security cannot be viewed as a standalone initiative. It must be embedded within supply chain processes, across the entire source, make, and deliver spectrum. Implementing process controls improves both the security and the financial integrity of supply chains.' As in 2004, everybody agrees that trade security is important, but in the absence of clear government mandates, nobody has wanted to pay for it yet."

Anybody interested in obtaining a copy of ARC Strategy Report Linking Supply Chain Security with Sarbanes-Oxley and The Bottom Line can contact Elizabeth Morris at emorris@arcweb.com.

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