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Securing the Containerized Supply Chain

Wednesday 20 October 2010, 3.30pm-5.00pm
NAB 2.14, New Academic Building

Dr Nitin Bakshi
Assistant Professor of Management Science and Operations
London Business School

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To mitigate the threat that terrorists smuggle weapons of mass destruction into the United States through maritime containers, the U.S. Bureau of Customs and Border Protection (CBP) inspects containers either upon entry to domestic ports, or at the international port of origin itself. In this talk I will focus mainly on inspection policies followed at the US-domestic ports, followed by a brief discussion of another research project that deals with container inspections at international ports. Inspection-driven congestion is costly, and CBP provides incentives to firms to improve security upstream in the supply chain, thereby reducing the inspection burden at U.S. ports. We perform an economic analysis of this incentive program, called Customs-Trade Partnership Against Terrorism (C-TPAT), modeling in a gametheoretic framework the strategic interaction between CBP, trading firms, and terrorists. Our equilibrium results highlight the possibility that a properly run program can efficiently shift some of CBP’s security burden to private industry. These results also suggest that CBP may have the opportunity to use strategic delay as an incentive for firms to join. Analysis of comparative statics shows that, with increasing capacity, membership in C-TPAT systematically declines.

Nitin Bakshi