Monthly Archives: May 2008

Twitter

To the tune of Strutter by KISS.

I know a thing or two about it
I know it’s only for the brief
It lets you send texts to the masses
As long as you can speak in tweets

Everybody says its looking good
But I know they’ve misunderstood
Twitter

It claims to be web 2 point zero
But I know its just web point one
You send a text and it says maybe, Nero
Then the next one causes Rome to burn

Everybody says its looking good
But I know they’ve misunderstood
Twitter

I know a thing or two about it
I know that it’s not for the wise
Spend your whole life speaking sound-bites
Like celebrities high as a kite

Everybody says its looking good
But I know they’ve misunderstood
Twitter
Twitter
Twitter

10+2 Readiness … Beware! It’s strategic, not tactical …

Today’s guest post is from Matt Gersper of Global Data Mining, LLC.

As president of Global Data Mining, I have the opportunity to speak daily with a broad range of clients from many diverse industries, all involved in international trade.

On January 2, 2008, US Customs & Border Protection (CBP) published in the Federal Register a notice of proposed rulemaking for Importer Security Filing and Additional Carrier Requirements, commonly known as “10+2”. Since then, I’ve watched companies react to 10+2 in three distinct ways.

A very small minority of our clients have responded by funding a cross-functional team to study the issue and develop an enterprise-wide strategic solution to meet the new requirements and optimize global trade business processes while they are at it. These best-in-class companies are way ahead of the 10+2 curve.

I have noticed the remaining companies seem to fall into one of two groups. There are companies heading full speed for a cliff and completely unaware of it; and there are companies heading full speed for the same cliff, but at least they are aware of it.

The “aware” group has a chance to use this dramatic change in customs regulations as a catalyst for process improvement and to remain competitive with the best-in-class group. I fear any companies that remain unaware will suffer mightily when 10+2 goes into effect.

The reason even “aware” companies are heading towards disaster is while their leadership may be alert to the newly proposed customs regulations; they mistakenly believe it can be managed tactically by their trade compliance department when in actuality it will require an enterprise-wide strategic solution.

It is important for senior management of US importers to understand the significant impact 10+2 can bring to their companies and develop an enterprise-wide strategy to prepare for it!

Let me explain.

CBP is proposing to require your company to transmit an Importer Security Filing twenty-four hours prior to loading a U.S. bound vessel. The filing must contain 10 data elements including 3 new data elements not currently required for US bound imports. The existing 7 data elements will need to be reported a lot sooner in your supply chain than is required today. This is not a small change. It will require a considerable re-engineering of corporate processes and systems.

These are the data elements that will be required, their typical source and responsible parties:

Data Element Source Responsible Party
Manufacturer name and address Procurement/Sourcing Importer
Seller name and address (New) Procurement/Sourcing Importer
Buyer name and address Procurement/Sourcing Importer
Ship to name and address Procurement/Sourcing Importer
Container stuffing location (New) Supplier/Forwarder Supplier/Forwarder
Consolidator (stuffer) name and address (New) Supplier/Forwarder Supplier/Forwarder
Importer of record number Trade Compliance/ Import Importer
Consignee number(s) Trade Compliance/ Import Importer
Country of origin Trade Compliance/ Import Importer
Commodity HTSUS number Trade Compliance/ Import Importer / Broker

Creating an effective solution to the proposed 10+2 regulations is beyond the scope of the trade compliance department. It will require an enterprise-wide, strategic solution. Here are three examples to clarify my point.

 

Example One: The typical vendor master file in a corporate ERP system defines “Manufacturer” or “Supplier” as the party to which the company makes invoice payments. If a supplier has ten different factories that may fulfill an order, the proposed 10+2 regulations will require the name and address of the actual factory that fulfilled the order. This granularity of data, and the functionality to differentiate at the specific factory level, does not exist in many ERP systems today.

Example Two: One importer I recently spoke with is changing the way his company selects freight forwarders in foreign countries in order to manage the requirements of the Container stuffing location and the Consolidator (stuffer) name and address. They feel the 10+2 regulations requires a much closer relationship with fewer forwarders to assure all data elements, especially the two mentioned herein, will be accurate and complete in time to transmit the Importer Security Filing.

Example Three: Today, the assignment of the fully qualified Harmonized Tariff number (US-HTS) is frequently made after the generation of the commercial invoice and before the shipment enters a US port. The assignment of the US-HTS is often made manually by a broker. In order to achieve the requirements of 10+2, importers will need to create and maintain a Parts Master File complete with fully qualified US-HTS numbers assigned to every item. This data will need to be integrated into the software that will be used to electronically transmit the Importer Security Filing twenty-four hours prior to loading the U.S. bound vessel.

Each of these examples requires re-thinking and re-engineering current business processes. The scope of these projects extends beyond the responsibility and authority of the trade compliance department as cross-functional participation is required of the procurement, logistics and information technology departments at a minimum. Some projects will also involve third parties. Executive leadership should take notice. Lack of understanding and funding today may lead to dire consequences tomorrow.

The proposed 10+2 regulations state, “If the principal fails to comply with the proposed Importer Security Filing requirements, the principal and surety (jointly and severally) would pay liquidated damages equal to the value of the merchandise involved in the default”. If you have a $250,000 shipment that is in violation of the new regulations, you could be fined $250,000. Furthermore, the prospect of “scrambling” for data at the last minute will slow your supply chain, squander already limited resources, and erode profits from your bottom line.

However, 10+2 can be a hidden opportunity for strategic thinking companies. Optimizing currently inefficient business processes to meet the 10+2 requirements in the most direct, effective manner possible can improve supply chain performance, and potentially deliver a positive return on investment.

More effective management and visibility of additional trade data can:

  1. Improve supply chain planning
  2. Improve supply chain speed
  3. Reduce inventory requirements
  4. Improve visibility and controls of international transactions
  5. Create competitive advantage

One supply chain study has estimated the cost of each additional day ëin transit’ is equal to Ω of one percent of the value of goods. Improving supply chain speed by just one day would be worth $500,000 per year for a company importing $100 million annually.

I strongly advise executives of companies importing into the US to study the impact the newly released Importer Security Filing Proposal may bring to their companies. Best-in-class companies are funding cross-functional teams to develop a strategic enterprise-wide solution, using 10+2 as a catalyst to optimize currently inefficient processes, and creating competitive advantage in the process. Once you know the terrain, and have a good map of the road, you too can be traveling safely and efficiently down the new 10+2 highway.

Thanks, Matt!

Matt can be reached at mattgersper <at> gdmllc <dot> com

Success Breeds Failure (Unless You Are Constantly Re-inventing Yourself)

As I indicated last week, the best presenter at this year’s 41st Annual Supply Chain & Logistics Canada Conference on Creating a Resilient Supply Chain was Jim Tompkins’ (CEO of Tompkins’ Associates) who gave the keynote and a presentation on Bold Leadership for Organizational Acceleration.

In addition to his great advice to Kill the Left-Suckers, he also made another great point – that success breeds failure. Peak-to-valley is the natural order in business, and if you think you’re going to stay at the top by doing what you did to get there, you’ve got another thing coming. If you want to stay at the top, you have to re-invent yourself the minute you get there – and not one minute later.

He also exposed some of the great myths of leadership – of which there are quite a few. These myths include:

  • Leaders create organizations that run like clock-work
    Only old analog clocks run like clockwork – and how many of those do you see these days?
  • Leaders are renegades that do things differently from others.
    Renegades tend to be loners – kind of contradictory when you think about what a leader is supposed to do.
  • Leaders are interested in immediate results and not the long term.
    No, that would be short-sighted wall street.
  • Leaders can predict the future.
    Not even futurists can predict the future on a small scale.
  • Leaders are machines that process and analyze spreadsheets.
    No, that would be misfit managers.
  • Leaders don’t rock the boat.
    Uhmm … have you ever been on a boat?
  • Leaders are compelling and fascinating people who can charm people into doing anything and everything.
    Just because some of our leaders today are sleazier than con-men doesn’t mean that they’re all grifters.
  • Leaders are into command and control.
    Leaders are into success … and that doesn’t come from hoarding.
  • Leaders lead from ivory towers.
    No, that would be academics … and considering no one in industry tends to listen to them anyway, are they really leading?
  • Leaders are among the few.
    Maybe, but it doesn’t have to be that way.

Although it’s hard to define a true leader, you can define what leaders do, and they:

  • challenge the process
  • inspire a shared vision
  • enable others to act
  • model the way
  • encourage the heart as well as the head

A Strategic Sourcing Plan Outline

I didn’t go to ISM, but I did check out some of the materials that have been appearing on the ISM site, and one abstract in particular that caught my attention was Strategic Sourcing Plans Made Easier with a Take-Away Outline by Robi Bendorf of Bendorf & Associates.

The abstract starts off by noting that the development and implementation of formal detailed strategic sourcing plans for major spend categories has been and will continue to be an essential element of top-class supply management operations – yet most supply management organizations do not have them. Noting that it is generally easier to define plans and procedures when you have a draft to start from, the abstract provides an example of a step-by-step procedure for the development of formal sourcing plans and a detailed outline of what should be in the plan.

The plan outline is worth reviewing, because it outlines what you have to think about in order to develop a good plan. At a high level, the plan outline presented is as follows:

  1. Category Description
  2. Current Business Strategy for Category Utilization
  3. Strategic Sourcing Team
  4. Category History
    • Total Annual Volume
    • Historical Price Changes
    • Lead Time History
    • Cost Improvement History
  5. Current Supplier Overview
    • Supplier Financial Data
    • Quality
    • Delivery
    • Innovation
    • Supplier Relationship
  6. Current Process Overview
    • Supplier Segmentation
    • Supply Chain Map
    • Supplier Selection
    • Contracting Method
    • Ordering Process
    • Performance Measurement
    • Inventory
  7. Supply Market Overview
    • Marketplace Suppliers
    • Marketplace Buyers
    • Competitor’s Sources
    • Market Trends
    • Major Raw Materials
    • Cost Drivers
    • Company Bargaining Power
    • Market Indexes
  8. Cost / Value Analysis
  9. Plan Objectives
    • Short Term Objectives
    • Long Term Objectives
    • Relationship to the Corporate Business Plan
  10. Implementation Strategies
  11. Action Plan

This is a great overview as it demonstrates that a lot of factors need to be considered in the formulation of a plan even at the category level. Without a thorough understanding of the category, the sourcing team will not be able to determine the appropriate cost / value tradeoff and create a supply management plan that will simultaneously achieve cost reduction and avoidance while achieving the business strategies outlined in the corporate business plan.

Understanding Your Carbon Footprint

I know this post is going to draw the heretics out of the woodwork, but after Jim Tompkins, one of the best presenters at this year’s 41st Annual Supply Chain & Logistics Canada Conference on Creating a Resilient Supply Chain was Ron Dembro’s (CEO of Zerofootprint) presentation on Measuring corporate footprint, offsetting, and what you can do to combat climate change.

Although I agree that offsetting should be a last resort, and question just how effective some of the initiatives out there are (and what percentage of the donation actually goes to renewable energy projects versus administrative expenses and executives’ pockets), I see how it could be an effective tool to get industry to control their emissions. Plus, I was impressed with the fact that the speaker admitted that offsetting should be the last resort – not the first.

The presentation also had some good statistics and points-of-fact that highlighted the fact that Gore’s “inconvenient truth” is really an “inconvenient half-truth” and that although we should be willing to take responsibility for our actions, as individuals, there’s only so much we can do to offset the carbon and Greenhouse Gasses being pumped into the atmosphere as a result of our material world focus. When 40% of total GHG emissions are a result of energy consumption to heat, light, and cool buildings (and the water they consume), and the vast majority of that is for commercial buildings (and poorly designed warehouses in particular), when two coal-burning factories in china pump out more emissions into the atmosphere than could be saved if every house in North America switched to fluorescent bulbs, and when private transportation (i.e. our vehicles) account for less than 3% of emissions, how much do you think we’re really going to accomplish by “flicking off”? (That doesn’t mean we shouldn’t do our part, because responsibility in the home will lead to responsibility in the work place – and 1/3 of gas consumption in vehicles is due to idling, but it does mean that the whacko environmentalists should either educate themselves and get their facts straight or go home.)

What we need to do is design our buildings, our manufacturing plants, and our energy producing factories more efficiently. According to a recent study, 48% of total energy consumption and associated GHG emissions can be eliminated just through better design – which is even more positive than the McKinsey findings I recently quoted. And I have to agree. Think of your average bare-bones box-design metal warehouse and the amount of energy that goes into heating it in the winter or cooling it in the summer because the hot, or cold, air leaks out of it almost as fast as it’s pumped in. Then think about the number of poorly insulated and designed office buildings on the grid (with an entire wall of windows facing the east and air conditioning on 24/7 even though they’re mostly empty at least 12/7) that consume oodles of energy from a grid that burns coal when it could be capturing sun, wind, or wave power instead. All of a sudden oil, gas, and even coal (as long as the plants have appropriate filters and the coal is clean) becomes a lot less of a problem because we need less of it, get more bang for every gallon of it, and the resulting carbon emissions and GHGs would be at 1985-1990 levels, which we know the planet can handle reasonably well (as it did then), as long as we don’t keep cutting down forests on a massive scale without replanting (as many countries are still apt to do).

He was also kind enough to point out that even though Canada is the 4th largest offender in emissions (after Australia, the US, and the United Arab Emirates), that we can’t do anything about 25% of our emissions – because they are as a result of the tar pits, a natural phenomenon (and, as a result, if we want to be more environmentally conscious, we really have our work cut out for us). However, that doesn’t excuse us because we do lead in waste per capita (with the US #2 and Australia #3 – but not for long, as they are introducing innovative waste processing), and there’s no excuse for that. (I hope the rest of the country takes BC’s lead and introduces carbon taxes. I know it sounds like it’s not going to do much if its accompanied by tax breaks in other tax categories, but once industry sees how much it is paying in carbon tax, it will see the tax saving opportunities associated with reducing carbon, and will actively work towards reducing energy consumption – as that will deliver a significant return both in terms of lower energy costs AND reduced taxes.)