Daily Archives: February 25, 2009

Anti-Trends from the 21st Century Supply Chain

Kinaxis on Response Management, on its 21st Century Supply Chain blog, recently published it’s anti-trends for the down economy.

  • Procurement practices will become more adversarial in 2009
    as cash-strapped buyers try to force suppliers to accept longer payment terms (instead of adopting good supply chain finance)
  • Integrated Business Planning will remain a wish
    due to a lack of incentives for Finance and Supply Chain to cross the divide
  • Western brand owners will lose market share
    as Asia emerges from the global slump sooner than the west, Asian contract manufacturers will establish their own brands to beef up production

These are certainly well thought. I urge you to read the original post in full.

You Need Trade Visibility

A trade visibility solution is a key component of a supply chain visibility platform that allows a company to track its products from the time they leave a supplier’s warehouse until the time they reach the end customer. Trade visibility is important for a number of reasons:

  • It helps you understand the factors that impact costs, cycle times, and service levels,
  • It helps you identify minor issues before they turn into major problems,
  • It helps you enforce compliance, and, most importantly,
  • It keeps you from flushing millions of dollars down the drain.

An average multi-national needlessly spends millions of dollars a year that it doesn’t have to as part of it’s global sourcing operation. Millions that could be identified, and saved, if the company implemented a good end-to-end trade visibility solution — which, today, would cost that same company well under a million dollars a year due to the low license costs of the new SaaS offerings on the marketplace, their quick set-up times, and the fact that additional personnel do not have to be hired to maintain them.

How much can you save? It depends on how much you are spending, and how bad your processes are, but consider the following:

  • A Global Data Mining study across 5 companies with between 3 Billion and 31 Billion in revenue found over 150 Million in potential duty savings alone just through better classification.
  • Prior to using the Integration Point Denied Trade Screening Solution, Eastern employees used to spend 15 to 25 minutes per shipment in an error-prone manual process. Now they can screen shipments in under a minute. That’s a process savings of almost 96%, and a savings of several hundred thousand dollars per year in needless labor.
  • Most companies spend hundreds of dollars in manual filing costs per shipment which can be processed for pennies by global trade management solutions. That’s hundreds of thousands of dollars of savings per year for your average multi-national.
  • Most trade cycles are at least 65% longer than they need to be. Since each day “in transit” has a cost that is roughly 0.5% of the total value of the goods, and since global trade visibility can shave up to 10 days off of the cycle for your average multi-national, that’s an average savings potential of 5%, or 5 Million on a 100 Million shipment.

And that’s just the tip of the ice-berg. Non-compliance costs can add up even faster.

  • Recent amendments to the IEEPA increased the increased the civil penalty for a “person to violate, attempt to violate, or cause a[n export] violation” to “an amount not to exceed the greater of (1) $250,000; or (2) an amount that is twice the amount of the transaction that is the basis of the violation.” This means that a 10 Million dollar shipment found in violation can result in a 20 Million dollar fine.
  • Violations of the FCPA, whether or not they are intentional, can also cost you millions of dollars.
  • U.S. Customs has historically collected $7 for every $1 spent conducting an audit when prior disclosures, underpaid duties, liquidated damages, and penalties are summed up.

And that’s not all.

For a full, in-depth discussion of Why You Need Trade Visibility, check out the latest Sourcing Innovation Illumination, sponsored by Integration Point. I thoroughly believe it’s worth a few minutes of your time.