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Are New US Security Precautions Hurting Business? - 2002-03-09

Are the security precautions implemented in the aftermath of September 11 adding crippling new costs to corporate budgets? Economists are beginning to worry about the impact airport waits and delivery delays could have on economic growth.

Time means money, says economist Mark Zandi of the consulting group Economy-dot-com. And since September 11, every business traveler is having to spend an extra hour at airports going through security checks.

There are 17 million U.S. business travelers flying each month, and the government estimates average hourly output per worker at $40.

So, Mr. Zandi figures, airport delays are costing U.S, businesses $680 million a month, or $8 billion a year. "If business people are stuck at an airport trying to get through security, they're not productive," he says. "Any one individual hanging out for an extra hour doesn't mean a lot. But when you add it up over millions of people over numerous days, that costs the economy some real money."

Globalization the free flow of capital and merchandise across borders has been a key source of economic growth in recent years. Mr. Zandi wonders how badly stepped up customs checks will hinder that flow. And will transportation glitches force retailers and manufacturers to keep more inventory on hand because of the diminished speed of delivery systems? "One of the ways the economy has improved its efficiency is holding less inventory. It costs money and energy and time and productivity to hold stuff in warehouses and on store shelves and if you have to hold more of that than otherwise would be the case it weighs on the economy," he says.

But Norman Black, spokesman for the United Parcel Service or "UPS" insists advances in logistics management are enabling his company to deliver the goods on time. "We're back exactly where we were on September 10," he says. "If you give us a package and say you want it there at 10:30 the next morning, we'll get it there the next day at 10:30 in the morning."

Mr. Black says information technology enables UPS to give customs officials advance notice about packages, thereby speeding up cross-border deliveries. "In many countries around the world, we're collecting information from our customers in advance on what's going into this box [that is being sent]. And that information is then electronically shared with customs officials," he says.

Mr. Black predicts new technology will be developed to compensate for security delays. Economists like Mark Zandi say developing the technology will take time… and time is money.