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Risk Assessment of Maritime Supply Chain Security in Ports and Waterways View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Plymouth Electronic300 Archive and Research Library Int. J Sup. Chain. Mgt Vol. 7, No. 6, December, 2018 Risk Assessment of Maritime Supply Chain Security in Ports and Waterways Saeyeon Roh#1, Jason Tam#2, Sung-Woo Lee*3, Young-Joon Seo†4 #Plymouth Business School, University of Plymouth, United Kingdom [email protected] [email protected] *Port & Logistics Research Division, Korea Maritime Institute, South Korea [email protected] †School of Economics & Trade, Kyungpook National University, South Korea [email protected] (Corresponding Author) Abstract—Seaports and waterways are crucial for US estimated that the cost of the new security international trade, and damage to them may cost measures would reach approximately 151 billion millions to the global economy. In the past, Malaysia USD per annum [2]. Furthermore, some of these has been threatened and attacked by terrorists, and initiatives require close collaboration with foreign pirates have hijacked ships near the coasts of the manufacturers and logistics providers to develop Strait of Malacca and the South China Sea. Such acts secure global supply chains. Under such can negatively affect the country’s maritime supply chain. This paper analyses the risk to Malaysia’s circumstances, balancing security and efficiency is maritime supply chain security in ports and necessary, and this has generated some problems waterways by applying a risk assessment matrix. The for managers of domestic and international markets findings show that Malaysian ports are vulnerable to and businesses. Most managers are still very unsure attacks and crime due to various factors. Also, about the actions needed to enhance their Malaysia’s waterways may always be at risk given the respective logistics security programmes [3]. country’s geographical location and status as one of The current rise of global competition in the the most important trade routes in the world. Mitigating the risk to ports and waterways can be maritime industry requires much attention from accomplished by investing in more advanced security port risk managers due to the increase in terror equipment, eliminating corruption, and increasing the threats. Proper management of security has become military presence in the Strait of Malacca. This study a competitive advantage for companies. Moreover, may be able to help to increase ports’ policy-makers’ reducing unexpected losses to maximise overall preparation and decision-making. benefits has also been a factor in securing a Keywords— Maritime supply chain, Seaport, Maritime competitive advantage. Seaports and the maritime Logistics, Risk management, Security, Waterways. industry are regarded as supply chain components with high uncertainty [4]. A port disruption is defined as an occurrence which causes 1. Introduction interruptions to the flow within the transportation system, which may eventually halt the movement The terror attacks of September 11, 2001, were a of cargo [5]. Such events may cause long delays in wake-up call for governments, prompting them to cargo flows at seaports, which will have unpleasant strengthen their security in airports and seaports. effects on various elements of the supply chain. The attacks resulted in the closure of US airspace Port Klang and the Port of Tanjung Pelepas are and seaports and caused all airplanes to be Malaysia’s two major ports. Both are strategically grounded, halting the movement of goods. In located on one of the busiest sea routes, the Strait general, the disruption in the supply chain caused of Malacca, which links Northeast and Southeast problems for businesses. For example, Ford Motors Asia to Western Europe, Asia and North America. was forced to stop production and assembly lines as This route is very dangerous as it is threatened by lorries loaded with components were delayed at the pirates, who can create supply chain disruptions. Mexican and Canadian borders [1]. The Trans-Pacific Partnership (TPP), set up by the After 9/11, the US government launched several US and nine other countries including Malaysia, initiatives, such as the Container Security Initiative intends to lower trade barriers to promote and ease (CSI), Customs-Trade Partnership Against the import and export of goods and services. The Terrorism (C-TPAT), Free and Secure Trade and agreement itself could cover almost 40% of the Operations Safe Commerce to tighten and secure global economy. There is a need to determine the its borders. Even though these initiatives were usefulness of the implemented security initiatives beneficial to trade security, the international in terms of their completion and efficiency [6]. Any community became quite concerned about how burdensome customs or security measures can they would impact trade efficiency and cost. The influence port operations and maritime supply ______________________________________________________________ International Journal of Supply Chain Management IJSCM, ISSN: 2050-7399 (Online), 2051-3771 (Print) Copyright © ExcelingTech Pub, UK (http://excelingtech.co.uk/) 301 Int. J Sup. Chain. Mgt Vol. 7, No. 6, December, 2018 chain efficiency, leading to vast contraction in means having a secure supply chain, leading to the efficiency and trade [7]. smooth movement of goods and proper operation This research examines risk reduction efforts in of global business. ports and waterways intended to protect Malaysia’s The importance of many Asian ports in today’s maritime supply chain from terrorism and piracy. global trade landscape illustrates the need for Furthermore, it assesses the risks to Malaysia’s security. Asian countries must comply with various maritime supply chain security and suggests mandatory international requirements in regard to various improvements. Section 2 reviews the port security, and one of them is the International relevant literature. The methodology is presented in Ship and Port Facility Security (ISPS) Code [18]. Section 3, whilst Section 4 lists the main findings. The ISPS Code, adopted by the International Concluding remarks are found in Section 5. Maritime Organisation (IMO) right after the September 11 attacks, is now the most important international regulation which emphasises the 2. Literature Review importance of maritime security and provides better protection for port facilities and ships against Managing supply chain risk involves identifying terrorism [19]. The main purpose of the ISPS Code and minimising vulnerabilities by negotiating is to help address weakness or vulnerability in between members of the chain. Global logistics maritime supply chain security which is due to the will always be exposed to collaboration costs, lack of preventive measures as well as slow ineffective execution, poor-quality products, supply responses after an attack; there is basically an and demand risks and environmental risks [8]. ineffective and poor crisis system in place [20]. There is always a trade-off between security and The code guides and addresses maritime security efficiency; therefore, security interruptions have and supply chains, including ports under the ISPS always occurred at various points within the supply Code. The main objectives of the code are 1) chain process, which decreases its efficiency [9]. identifying and detecting any potential security Willis and Ortiz [10] suggested five capabilities— risks; 2) implementing security measures; 3) reliability, efficiency, transparency, resilience and collecting and providing information in relation to fault tolerance—that help create a high level of maritime security; 4) providing a reliable method security in the global supply chain. Supply chain for assessing any maritime-related risk; 5) security takes into account both information and developing a detailed security plan in the presence physical flows from the origin point to the of a variable security level; and 6) establishing customers [11]. Supply chain security management roles and security in relation to security for ship is defined as a function of procedures, policies and companies, contracting governments and port forms of technology. It protects the assets of the operators. supply chain (e.g. facilities, equipment, personnel Malaysia implemented the ISPS Code back in and information) from thievery, damage and 2004, with 500 ships and 80 port facilities having terrorism by preventing any unauthorised people, to comply [21]. Legislation regarding the contraband or weapons from entering the chain implementation of the code has been incorporated [12]. Supply chain security involves using policies, into the ‘Merchant Shipping Ordinance’ and the procedures and modern technology to prevent Malaysian Marine Department, which is the illegal acts such as robbery, terror threats and designated authority, has recommended that each unauthorised acts within the process [13]. port establish its own security committee. Another As for the maritime industry, its supply chains are international regulation created with the security of very prone to terror attacks and other forms of supply chains in mind is the C-TPAT, which is a disturbance due to their complexity and open voluntary/government program that works together nature, both nationally and globally [14]. Any form with Customs and Border Protection (CBD). Both of disruption within the maritime supply chain will focus on gathering sufficient information on have negative implications for the global/local various
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