Category Archives: Global Trade

Relevant Content is Still a Major Cornerstone of Any Compliance Effort

Not long ago we asked if you, or Ecovadis, could solve the compliance challenge before it cost your organizations tens or hundreds of millions of dollars. The biggest reasons for lack of compliance are still lack of knowledge, policy, visibility, analysis, and procurement technology and the fixes are still knowledge, policy, and appropriate technology.

One of those technologies is a Procurement Marketplace that can steer (or force) buyers to buy the right products from the right (and approved) suppliers (which can be an integrated catalog management solution that takes advantage of your supplier master, community intelligence provided by the vendor, and integrated risk information from third parties).

Another of these technologies is still supply chain visibility technology that lets a company monitor what is going on in the supply chain and evaluate a potential supply base before making a decision.

A third technology, and one we should not forget about, is import/export/trade management software that helps the organization identify the regulations it must comply with, collect the necessary information, produce the required documents, make sure the documents get to the proper authorities complete and on-time, and track all of the associated certifications and insurance certificates that go with the products and the supply base.

A good trade solution will address, at a minimum, import/export requirements, ECCN (Export Control Classification Number), custom security programs, FTA/FTZ/SEZ (Free Trade Agreements/Free Trade Zones/Special Economic Zones), country of origin, DPS (denied party screening), entry visibility, and HS (Harmonized System) codes / HTS (Harmonized Tariff Schedule) codes — and keep up with the never ending onslaught of tariff changes and temporary product bans that are result of the trade war. Essentially it will help a company determine all of the export requirements, all of the import requirements, produce the necessary documentation, and track its product from country of origin to the destination country.

In order for this solution to work, it needs a lot of content. Namely:

  • import/export regulations for all of the countries being sourced from, sourced through, and shipped to
  • US ECCN database
  • requirements for programs such as C-TPAT, PIP, and AEO
  • Free Trade Agreements between all of the relevant countries
  • database of all FTZs / SEZs in the relevant countries
  • HS schedules for all of the relevant countries and mappings
    and/or mappings to from country specific schedules
  • Denied parties lists for the relevant countries
  • Direct feeds to updated denied product lists for real-time updates
  • Direct feeds to updated tariffs for real-time updates
  • Early warning of products under consideration for bans/tariffs and real time flagging

Don’t overlook these last three. They are new and many of the traditional solutions on the market won’t have the capability. When a single ban or tariff spike can lay ruin to your best laid plans, be prepared.

There is No Bright Side to a US-China Trade War

I’ve read a few pieces over the last couple of weeks that some Asian nations expect that a drawn out reciprocal trade war between the U.S. and China could have a bright side for them as they expect that they can lure more manufacturing or agricultural exports their way.

Sounds good in theory, but here are the problems with that theory.

1. A lot of outsourced production over the last two decades has become highly specialized to the point where very few nations have factories with production lines that can produce the goods.

2. The modern electronics industry relies on rare earth metals, and China is the majority producer for many of these — in fact, only a few nations on the planet produce some of these rare earth metals.

3. The only nation that can rival China in agricultural production in Asia is India.

4. A number of companies that need supply assurance have locked in contracts with Chinese (multi-)nationals that can’t be easily broken without penalties.

5. International trade requires logistics infrastructure — good roads, reliable trucking, modern ports, large cargo carriers, etc. Something that not many countries in Asia outside China and India (and to some extent Japan and South Korea) have a lot of.

In other words, there’s not a lot of outsourced production that can be easily switched to other Asian countries, and, most importantly, if China becomes unattractive to the U.S., which we must remember controls about one quarter of global GDP, then

6. Central and South American sources can be just as attractive, and can be easier to source logistically.

Trade wars are never good, and there is no bright side, especially in this trade war.

Twenty Years Ago Today

Exxon and Mobil sign a $73.7 B USD agreement to merge and become the world’s largest company at the time, now surpassed only by Walmart, the staple of the US retail economy.

As the world’s largest oil company, it produces almost 4 Million BOE a day, is the largest refiner in the world, and despite the rise of tech, is still one of the most profitable companies in the world.

And with the continued reliance on petroleum based fuels in ocean and air shipping, most of the world’s supply chain indirectly rely on its products.

We may claim it’s the information age, but the products we use and consume still rely on the holdovers from the industrial age to get us through.

Category Management: Getting it Right is Key to Surviving the Trade Wars Part III

The Trade Wars are here! Tariffs! Counter-Tariffs! Counter-Counter-Tariffs! Counter-Counter-Counter-Tariffs! Even online traders can’t trade that fast. It’s dizzying.

And if you’re planning didn’t start weeks ago, you have a lot of catching up to do. Because if you don’t, your business may not survive. Literally.

So far, we told you it was critical to:

    1. 1. Understanding your Current Costs in Detail
    1. 2. Understand your Tier 2 Supply Chain in Detail
    1. 3. Start By Identifying Alternative Supply Choices
    1. 4. Then Build Alternative Cost Models Around those Alternative Supply Choices

5. Re-Evaluate on Every Tariff Change

But this is not always enough. What if the majority of the rare earth metal comes from China and the cost is insurmountable for your business? You also need to:


6. Start looking at alternative designs that eliminate dependence on a single country.

You can’t be dependent on China, the EU, or any other locale that Trump is targeting. Costs could go through the roof.

Also, you can’t be dependent on certain transportation methods. If diesel costs go through the roof, long haul shipping is going to get considerably more expensive. It may actually be cheaper to do short-haul trucking from Mexico or Brazil if you’re selling in the US because you know that the US may subsidize your industry in other ways (with lower taxes or rebates for buying / shipping at home). Thus, you also need to


7. Start looking aggressively at near-shoring.

SI has been telling you for years that sometimes the best cost county sourcing is home country sourcing, and when that’s not viable, near-shore sourcing is becoming a better option again. Find alternative suppliers closer to home, just in case!

And, you better make sure their supply chains are secure.


8. Weed out near-shore suppliers that are actually getting most of their materials or doing most of their production remotely.

Remember, the entire point of trying to bring production closer to home to ensure affordable supply is to actually bring production back, not just source from a supplier that is just an intermediary that outsources on your behalf. That actually adds more time, risk, and cost to the supply chain.

Is this everything you can do? No, but it’s progress.

Category Management: Getting it Right is Key to Surviving the Trade Wars

The Trade Wars are coming. The Trump Tariffs are coming fast and furious, and the rest of the world is retaliating. So if you aren’t prepared, just about every category under your purview is about to get a LOT more expensive. A LOT more.

And while you’re not likely to thrive, because no one wins a ware, and no one comes out unscathed, you can survive — with care and planning. So what do you need to do?

1) Understand your Current Costs in Detail

Build detailed total cost of ownership cost models for all of your significant (cost/volume) or strategic purchases as if they direct purchases. The costs should be broken down into the components and raw materials that constitute at least 80% of the material cost, and, if possible, energy and labour costs should be broken out of the overheads. Done right, when you add in the “fair” margin, you have the expected unit cost.

On top of this, you add in the transportation costs, surcharges, non-recoverable taxes, import & export charges from source to sink countries, and defect/waste costs.

And this is why we noted you needed talent that could do modelling and use platforms that could handle it is important. But this is just the start. Sometimes the tariffs will be imposed on the product level, but sometimes on the material level. So, that’s why you have to …

2) Understand your Tier 2 Supply Chain in Detail

It’s not just what you’re buying and where you are buying it from, it’s what your suppliers are buying and where they are buying it from. If you’re buying your assemblies from Germany, and 15% tariffs get smacked on assembly imports, that’s a 15% increase. But that’s not the only increase you could be subject too. Maybe Germany is buying the bulk of the raw materials from China. What if Germany decides to smack 15% to 20% tariffs on almost all of the raw materials being sourced from China? Which constitute 60% of your supplier’s costs? Then their costs will go up 9% or more, and guess what’s going to happen to your costs? They’re going to go up another 9%. And you won’t know it until you get the bill!

But if you understand your Tier 2 supply chain you can know when your suppliers are going to get hit with new tariffs, and when they are going to pass on those tariffs to you. You can proactively question them if they are going to switch suppliers, and work with them to find alternative sources of supply without tariffs, or which have a lower overall total cost of acquisition than the sources of supply they are using now.

And this is why we noted you needed talent that had commodity market expertise and negotiation capability as well as a platform that could integrate real-time market data (including tariff changes) and supplier performance management.

But this is just the beginning!

Stay tuned!