Last month, I advertised the Global Data Mining Webinar in my post Global Trade Metrics Benchmarking, which I followed a few weeks later with Catching up with GDM: Don’t Underestimate Trade Compliance. In the latter post, I noted that Global Data Mining not only found that error rates in global trade processes approach 10% to 20% and effective control of global trade processes is often 100 to 200 times worse when compared to accounts payable processes within a company but that in a recent analysis of the trade data for five organizations with 66B in revenue, they found direct-compliance related savings opportunities of $262.1M, including $161.5M at a single $3B apparel company. Considering that they were only scraping the surface with their analysis, this should give you something to think about.
The webinar, which is now available for download, was very well attended and discussed the huge savings opportunities on the table for those companies heavily involved in global trade. Considering that a simple thought experiment, as described in an article by Matt Gersper of Global Data Mining and Marisa Brown of APQC (which is enclosed below in its entirety), indicates that at least 90% of shipments in an average organization are affected by at least one issue that delays the transaction and erodes expected profits, the savings opportunities from effective global trade management probably extend far beyond the benefits described by Aberdeen in their studies, which include The CFO’s Agenda for Global Trade Benchmark Report, Global Trade Management Strategies, and Global Trade Management in 2007: Benchmarking Trade Compliance, Global Supply Chain Visibility, and Risk Management Practices.
However, what I want to point out is that Global Data Mining and AQPC are teaming up for an in-depth study of global trade metrics, as described on the Global Trade Measurement: Driving Supply Chain Optimization page on the AQPC web-site. The study, which is currently seeking participants, aims to define a strategy to establish collective goals for all global supply chain stakeholders, map and analyze the global supply chain flow, identify points of breakdown, and establish metrics and measurements for global trade. Unfortunately, sponsorship of this study is not cheap ($14K for APQC members, $20K for non-members, with a $2K discount if you commit before the end of the month), but considering the quality of work that is available for free on the Global Data Mining Publications Page and the reputation of APQC, I’m sure that the study will deliver on its promises and that the advertised benefits will be realized.
As a disclaimer, I’d like to note that, at the present time, neither myself, nor my company, have any association with Global Data Mining or AQPC. I Am promoting the webinar recording and the upcoming study, and reprinting the article below, because I believe that, relative to the number of e-Sourcing and e-Procurement solutions and knowledge-bases out there, there is a lack of trade management and analysis solutions, and that companies are losing significant amounts of cash in their global trade operations due to the constantly increasing levels of complexity being introduced with enhanced classification requirements (such as the HTS revisions that occurred early this year), free trade and tax requirements (such as the VAT changes that just occurred in China), and security requirements (such as the Automated Commercial Environment and Container Security Initiative in the US) and the lack of processes, technologies, and benchmarks to help companies improve their operations. On a related note, over on the e-Sourcing Wiki, I’d like to point out the new Global Sourcing Primer subsection, which, by the end of the year, is slated to have wikis on the basics of global trade, customs and security, free trade, regulatory compliance, and supply chain finance, in addition to the current wikis on Low Cost Country Sourcing and Supply Risk Management This should prove to be a good resource as well. As a further disclaimer, I will be authoring or co-authoring many of the initial releases of most of the wiki-papers.
GDM and APQC Launch Ground Breaking Study of Global Trade Metrics
“I’ve always struggled to find metrics that can help me quantify the value that a global trade compliance operation brings to its organization,” says Beth Peterson, President of BPE, a consulting firm facilitating global trade compliance, automation and strategy for multi-national shippers. Many corporate executives are struggling with the very same question.
More than 150 global traders from 24 countries recently registered to attend a webinar hosted by Global Data Mining (GDM) and APQC to learn about a ground breaking global trade consortium benchmarking study. They gathered to consider the opportunity to participate in the study designed to help organizational leaders measure performance in global supply chain processes and tap vast financial rewards that lie in global trade process optimization.
APQC, a member-based non-profit research and education organization, has a long and distinguished history of helping companies around the globe discover effective methods of improvement, broadly disseminate findings, and connect individuals and the knowledge they need to improve. Over a 30-year period, APQC has conducted more than 6,000 benchmarking studies and has a deep history of existing supply chain research. Once APQC learned about the incredible inefficiencies in global trade processes, they quickly determined this would be an important study to take on.
Global trade remains one of the last corporate frontiers where upgrading and optimizing business processes can drive very significant financial and operational gains, giving corporations an additional strategy to create competitive advantage and add significantly to their bottom line. Yet standardized metrics for measuring performance in global trade processes have eluded this $10 trillion industry leaving business executives in the dark.
There has been a quiet evolution from domestic sourcing of raw materials from domestic suppliers to increasingly complex, global supply chains. The size and financial significance of this shift has caught many executives by surprise. Cross-border global transactions have grown from $3 trillion in 1990 to $10 trillion in 2007 and, according to a recent McKinsey report, are expected to grow to more than $70 trillion by 2025. 
In the face of increasing government regulations and with logistics expenditures at a staggering 9.9 percent of US GDP and rising, only 7 percent of executives are fully satisfied with their global trade programs. The other 93 percent may be shocked to learn that error rates in global trade processes often exceed 20 percent. In a recent thought experiment conducted by GDM and APQC, it was estimated that more than 90% of all international shipments have mismanaged “hand-offs” that slowed the transaction and added “hidden” costs to the importing company.
Imagine that your organization has the ability to precisely measure performance in eight major “hand-offs” in your international supply chain.
1) Once a purchase order is created, your systems can measure if the supplier filled the order complete and on-time.
2) It can measure if the foreign in-land transportation delivered the goods the to foreign port on-time.
3) The system can track the activity in the foreign customs process and determine that the goods cleared with no delays.
4) You can measure if the international transportation delivered the goods to the domestic port on-time.
5) The system can measure if the goods cleared domestic customs with no delays.
6) You can measure if the domestic in-land transportation delivered the goods to your warehouse on-time.
7) The system tracks if receiving was complete and damage free.
8) And finally, your system can report if all customs declarations were complete and accurate creating no post-entry consequences.
Further, imagine that your company-wide performance across all eight of these major supply chain activities averaged 80%. In other words, 80% of the time, the activity was completed on time and according to expectations set by your company. The result of this level of performance across 10,000 transactions would be that only 1,678 transactions would be completed according to expectations and that 8,322 would incur some problem or problems slowing the transaction and adding unintended costs to your organization. We call the performance metric across these 8 supply chain activities The Supply Chain Performance IndexTM. The formula reads:
A June 2007 article by the Global Economy reported that “in the first quarter of 2007, only 47% of container vessels globally arrived at the ports on time, the lowest level on record.”
When we insert this data into our thought experiment, the level of performance across 10,000 transactions would now have more than 9,000 or 90% of the shipments with some problem or problems slowing the transaction and eroding expected profits.
What could possibly cause such poor performance? Each stakeholder is acting with incomplete information and in self-interest rather than in the best interest of the supply chain itself, acting independently rather than collaboratively. Other factors that contribute to mismanaged supply chain hand-offs include language differences between the stakeholders, cultural differences, differences in industry jargon, breakdowns in communication and failure of the importer to set and control expectations for each activity within the supply chain. Inefficient supply chains cost corporations millions of dollars in unexpected “hidden costs” severely impacting company profits.
Financial opportunity also abounds on the plus-side of managing an international supply chain by effectively managing the proliferation of Free Trade Agreements, improving sourcing options, and implementing new supply chain finance programs for international suppliers. Leading executives are beginning to use data mining and metrics to identify significant financial and operational opportunities within their global supply chain. One leading Industry analyst, Beth Enslow of the AberdeenGroup and GDM recently collaborated on an extensive data mining project for the International Compliance Professionals Association (ICPA). The project included five Fortune 500 companies and identified more than $500 million in potential savings.
In a separate Aberdeen study (the CFO’s Agenda for Global Trade Benchmark Report), Beth Enslow concluded, “A $1 billion company can free $10 million to $40 million in cash by better controlling its basic global trade processes.” How large is the opportunity for your company?
Have you ever wondered … ?
- How effective are my global trade operations?
- Is there a way to effectively measure its performance?
- How much does it contribute to or detract from the company’s bottom line?
- What are my competitors doing?
- Are others using global trade to a competitive advantage?
“Global Trade Measurement: Driving Supply Chain Optimization” is APQC’s newest consortium benchmarking study designed to answer these questions and give executives the measures and metrics needed to assess current performance and implement strategic changes to tap the vast opportunities that lie in global trade process optimization.
The study was developed with the collective intelligence of your peers. GDM and APQC used a collaborative process called “voice of the customer” interviews to compile the thoughts and expertise of leading trade professionals. Over a recent four week period, we conducted 15 interviews with trade professionals from a wide variety of industries and experience. Many represented well-known Fortune 500 companies that have been struggling to measure performance in their global trade processes. The results of our interviews focused the scope of our study in these primary areas:
- Define a strategy to establish collective goals for all global supply chain stakeholders
- Map and analyze the global supply chain flow (current state)
- Identify points of breakdowns
- Establish metrics and measurements
APQC’s research follows a disciplined and well-tested four-phased methodology: plan, collect, analyze, and adapt. During the plan phase, the project team reviews research to identify potential best-practice organizations and screens willing organizations to learn about innovative processes or approaches used to measure global trade process performance.
Companies participating as study sponsors will participate in a virtual kickoff meeting to review best-practice candidates and select the organizations that they wish to study as best-practice partners.
In the collect phase, best-practice partners host virtual site visits to address qualitative questions around the study scope areas and to share lessons learned and critical success factors. Additionally, all study participants will complete a quantitative survey. The data is aggregated to provide a gap analysis between the sponsoring organizations and the best-practice partners. APQC has a strong adherence to a Code of Conduct that ensures that all data shared during a research project is kept strictly confidential.
The APQC team, along with the study’s subject matter experts, then analyzes the quantitative and qualitative data and prepares in-depth profiles on each best-practice organization.
The adapt phase of the study includes the Knowledge Transfer Session, the concluding event for the study. This session is an action-packed, face-to-face, interactive meeting open to all study participants and their leadership teams. Events at this session include a networking reception, presentations by the subject matter experts and best-practice organizations, panel discussions, and breakout sessions.
A previous participant shared this about his experience:
– Patrick Powaser, Occidental Petroleum Corp.
Companies joining this exciting industry study will realize benefits for their staff members who participate as well as for the company itself.
Benefits for Study Participants
- Learn proven, actionable best practices
- Gain access to organizations
- Influence the study’s direction
- Interact with peers
- Gain access to world-class knowledge
- Involve your colleagues, senior executives, and process champions
- Receive a detailed final report
- Acquire a set of tools to effect change in your organization
Benefits for Participating Companies include the ability to implement study results and the potential for improved outcomes such as:
- Accelerate the supply chain
- Increase corporate profit
- Decrease cost of goods
- Improve global trade compliance
- Drive executive decisions
- Establish competitive advantage
|Deadline to receive Early-bird discount||Aug. 31, 2007|
|“Meet the sponsors” conference call||Sept. 27, 2007|
|Study kickoff conference call||Oct. 24, 2007|
|Best-practice partner virtual site visits||Nov – Dec 2007|
|Knowledge transfer session in Houston||Feb. 27-28, 2008|
In addition to GDM providing subject matter expertise and thought leadership during this study, Beth Peterson will also be serving as a Special Adviser. Beth has more than 21 years experience in the logistics and international transportation business, and is a licensed customs broker and CBP ACE Trade Ambassador.
This is your opportunity to make your mark on our industry and make a significant impact on your company. Join this global trade consortium benchmarking study today. For more information please contact Matt Gersper at mattgersper<at>gdmllc<dot>com, or Gerry Swift at gswift<at>apqc<dot>org or visit www.apqc.org/studies/gt.