Daily Archives: April 23, 2009

What Comes After Just-in-Time? (Inventory Management)

The World Trade Magazine recently published a very good article that noted that the new premiums placed on cost control, speed-to-market, and credit as a result of the global economic crises are in direct opposition to the need for inventory buffers when sourcing globally … creating a dichotomy between the goals of minimizing inventory (the goal of Just-in-Time) and maximizing supply chain resiliency (through reduced risk). As a result, it noted that change, a constant in the supply chain, is coming and that we probably need to be asking What Comes After Just-in-Time?

So it gathered a panel of eight practitioners and asked the question. Most of the responses, as one might expect, centered around risk management, finance management, and better visibility. Only one pointed out that, in the purest sense, there’s nothing better than just-in-time — because in an optimal scenario, if you need a widget for manufacturing, you’re never waiting for the widget, but it also never sits in inventory. It arrives just-in-time. There’s nothing beyond just-in-time, it’s the perfect supply chain model in theory … the problem is that it’s original implementation didn’t account for all of the risks that have materialized in today’s global supply chains since it’s initial definition and implementation in a market where supply was local, reliability of delivery was more predictable, and financing was easier to obtain.

The model just needs to be extended to take into account the risks and incorporate the appropriate responses to changes in the global market. And this, as a third contributor pointed out, requires more real-time information and visibility into your supply chain. Just plug the holes and deal with the risks, and you’ll find the model will work as well as it always has.

Entry Visibility: Your Trade Visibility Success Depends On It

A little over a month ago, I told you that You Need Trade Visibility, which helps you track your products from the time they leave a supplier’s warehouse until the time they reach your end customer, because it helps you to:

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

And to highlight the last point, I pointed out how

  • A Global Data Mining study across 5 companies with 3 Billion to 31 Billion in revenue found over 150 Million in duty savings alone.
  • Most companies spend hundreds of thousands of dollars in manual filing costs a year for shipments that can be processed for pennies by global trade management solutions.
  • Most trade cycles are 65% longer than they need to be. Each day “in transit” costs roughly 0.5% of the total shipment value and costs an average company 5% of the value of an average shipment.

A key component of trade visibility is entry visibility. An entry visibility solution allows a company to manage the trade compliance process associated with the import of goods that starts when they leave a foreign supplier’s warehouse and ends when they reach their (initial) destination. It ensures that all the regulatory, compliance, and documentation requirements are met in an accurate and timely fashion at the lowest possible cost and prevents costly fines and delays.

Accuracy and timeliness are critical because:

  • An average international transaction could require as many as 35 documents across 25 parties complying with over 600 regulations and more than 500 free trade agreements.
  • Most companies are losing millions in overpayments due to misclassifications:
    • U.S. Customs estimates that between $1.5 and $2.3 Billion of the $20 Billion collectively paid by over 300,000 importers is likely an overpayment (due to a misclassification).
    • A recent Aberdeen Study on Global Trade Compliance Priorities found that the wrong duty was paid on 11% of international shipments.
  • Most companies are losing millions through Free Trade Agreement mismanagement.
    • A recent study quoted by Aberdeen found $17 Million in savings through better utilization of trade agreements across five companies.
    • Black and Decker was able to increase its NAFTA savings by 240%, from $3 Million to $7 Million over 4 years through better FTA management.
  • Inefficient administration of customs processes will cost you 7% of total trade value.
    • A United Nations study estimated that lost opportunities end up costing the global economy over $420 billion annually.

That’s why it’s important to implement an Entry Visibility solution, as it will reduce filing costs, enforce compliance, reduce data synchronization complexity across your supply base, generate the proper import packets, and provide the “Reasonable Care” required by the Mod Act. Furthermore, with a SaaS-based entry visibility solution, such as the solution offered by
Integration Point, you can be up and running in a matter of days, auditing every entry, and eliminating costly overpayments due to misclassification errors.

For more information on how Entry Visibility can save you time, money, and compliance headaches, check out Integration Point‘s new white-paper on Closing the Loop with Entry Visibility.