Supply Chain Security: Agency Theory and Port Drayage Drivers

Abstract

Supply chain security presents numerous challenges to governments interested in defending against terrorist threats. While most approaches stress technological solutions, scholars and policy-makers tend to overlook economics, labour market issues, and industrial relations. Applying agency theory from behavioural economics, this article analyses threats to the US supply chain and opportunities for efficient solutions. Using data from a sophisticated web-based survey of owner-operator cost-of-operations, it shows that drayage drivers are among the lowest paid truck drivers and workers in the US. We provide evidence that low pay is associated with both safety and security risk. Low-wage labour and subcontracting present challenges to US and foreign supply-chain security because the market attracts workers who have few other employment options. In this environment, principals and agents currently make inefficient and inequitable contracts because markets do not reflect the complete costs associated with low-probability/high-impact events like cargo theft and transport security.