Supply Chain Security – Challenges, Mitigations and Current Status

by Hariesh Manaadiar, Founder at Shipping and Freight Resource and Features Editor – OceanFreight at CargoNOW

Supply chain involves the movement of various types of goods from a diverse pool of suppliers, some local, some international, all aimed at getting the goods to the right place at the right time at the right price to enable manufacturing, production, and consumption.

These goods are sometimes moved at unprecedented speeds across several borders using several modes of transport using both manual and digital means, both of which have their own issues in terms of security.

Supply chain security has been paramount for all stakeholders in the chain. As per the BSI and TT Club Cargo Theft Report 2023, cargo theft continues to pose significant risks to supply chains worldwide with the increasing complexity and sophistication of criminal tactics.

As per the report, Cargo theft happens in various forms, including theft from facilities, hijacking, and theft from vehicles with food and beverages, electronics, and automotive parts being the top commodities targeted in 2023 for their high value and market demand.

Some of the risk mitigation strategies and enhanced security protocols used by businesses to deter theft and aid in the recovery of stolen goods include investing in advanced security technologies, Artificial Intelligence (AI), GPS tracking, electronic seals, and surveillance systems.

As the modern world evolves digitally, the implementation of these digital technologies also makes them vulnerable to cyber threats and associated security threats.

The threat landscape in supply chains

Cyber threats are called the “silent saboteurs,” and as per the World Economic Forum’s Global Cybersecurity Outlook survey, cyber threats continue to escalate, with 72% of respondents reporting an increase in cyber risks.

Cyber threats perpetuated by cybercriminals include ransomware attacks, data breaches, deepfakes, and phishing scams, and the increase in supply chain breaches can be seen as a shift in the cybersecurity landscape.

A single cyber attack has the potential to impact operations, create shipment delays, and expose sensitive customer data leading to extortion among other consequences.

AI is a double-edged sword in this case because on one hand, while AI-powered security tools can help in detecting and neutralising threats quicker than humans can, on the other hand, cybercriminals are also using AI to create sophisticated attacks which have the potential to bypass traditional security measures.

Physical challenges in supply chain security

Supply chains are also vulnerable to physical security challenges, including cargo theft, counterfeiting, and political instability. The recent trade restrictions and trade wars are also seen as a physical challenge, which some unscrupulous elements may use to circumvent lawful regulations.

While surveillance, geofencing, and real-time tracking driven by AI can provide better visibility, it also requires robust cybersecurity measures to prevent hacking or manipulation of the systems used.

Ethical and compliance challenges in AI adoption

Although AI is a powerful tool, it is not infallible, and one of the main concerns in the adoption and dependence on AI is the potential AI bias and decision-making risks that may be associated with this bias.

As per IBM, “Artificial intelligence (AI) systems use algorithms to discover patterns and insights in data, or to predict output values from a given set of input variables. Biased algorithms can impact these insights and outputs in ways that lead to harmful decisions or actions, promote or perpetuate discrimination and inequality, and erode trust in AI and the institutions that use AI.”

When using AI-powered decision-making in the supply chain, it is important to ensure fairness, transparency, and accountability to avoid supply chain disruptions due to flawed algorithms.

So what are the mitigation measures against technology-driven security threats?

The short answer is AI. Similar to human-driven mitigation measures that have been used for centuries for human-driven criminal activities, AI-powered risk mitigation measures can help in addressing the supply chain security issues.

AI has in fact brought a new level of sophistication to risk management in supply chains, such as predictive analytics, which has the potential to predict risks (human- or technology-driven). These systems analyse massive amounts of data based on historical events and incidents including geopolitical developments, weather patterns, criminal incidents, fraud detection, transactional anomalies, and market fluctuations to predict these risks.

Strengthening supply chain security

Businesses can also use the below techniques to strengthen their supply chain security:

Enhance supply chain visibility

Use visibility platforms to track and monitor shipments in real-time. These platforms may or may not be powered by AI, but work mostly using IoT devices, GPS, telematics, and other modern technologies. The end-to-end visibility that these platforms provide powered by real-time data analytics helps businesses to make informed decisions about their supply chain and mitigate security risks before they escalate.

Invest in cybersecurity

Businesses should consider investing in cybersecurity solutions which do not depend just on AI but also other threat detection systems available. AI-powered authentication tools and automated response mechanisms are some such investments that are essential to ensure cybersecurity.

Build resilience, not reliance

Supply chain resilience is another key factor to consider so that businesses don’t just build reliance on AI and other technologies. Businesses need to develop contingency plans in case these technologies fail or are compromised. Business leaders should ensure that they invest in AI training programs to ensure that employees understand its capabilities and limitations and use it in the right way.

Mix and match

Human oversight of operations still remains a key element in supply chain and businesses should have a good mix and match of human and AI-powered processes to ensure that businesses do not fail totally due to cybersecurity issues. Regular audits, transparency reports and collaboration and interaction with regulatory bodies can also help businesses identify any risks or threats they might not have thought of.

Collaborate

No business can operate in isolation and collaboration among supply chain stakeholders is key to ensuring better security control that align with industry standards. Collaborating with and adopting standards that initiatives such as DCSA, BIMCO, ICC DSI, and the FIT Alliance have created within the global trade, shipping, and logistics space can help shape best practices for the industry to benefit from shared knowledge.

Prevention of fraud and counterfeit

As the proliferation of counterfeit goods and brand fraud continues to pose significant risks to both consumers and brands, targeted security measures can protect consumers and businesses from this scourge.

AI combined with blockchain technology can be used to create immutable records of the origin of a product and track its journey through the value chain making it easier to verify its authenticity.

AI-powered image recognition tools can also be used to analyse products at the various points of its transit to identify discrepancies or symptoms that could indicate counterfeit items. It can flag products that do not match certain key tracking metrics etc which allows businesses to take corrective action.

Conclusion

AI is transforming the world we live in at an unprecedented rate, bringing great opportunities to improve efficiency, transparency, and risk management. But it also introduces new vulnerabilities that businesses need to be prepared for.

AI is here to stay and is evolving at a fast pace, and it is a given that its role in the supply chain and its security is set to grow. The challenge is not just about adopting AI, but in doing so in a responsible, secure, and strategic manner.

The key to moving forward in this domain lies in taking a balanced approach of leveraging the strengths and benefits that AI offers while implementing robust safeguards against its risks. Businesses need to invest in cybersecurity, governance, and proactive risk management so that they are better equipped to navigate security threats if it does happen.

About the Author

Hariesh Manaadiar

Founder at Shipping and Freight Resource and Features Editor – OceanFreight at CargoNOW

Hariesh Manaadiar is a subject matter expert in the field of shipping, freight, logistics and trade active in the industry for over 35 years. Hariesh shares his knowledge and experience through his Shipping and Freight Resource which he founded in 2008. He has a Masters in Shipping and Logistics, is a Fellow of the Institute of Chartered Shipbrokers, qualified in Digital Trade Strategy and Digital Supply Chain Management and holds a Diploma from the London School of Journalism.