Category Archives: Global Trade

Seeking Spherical Supply Solutions? Succeed in the EU! Part II

Alliteration aside, the reality is that if you are looking for a modern sourcing or procurement solution, not only should you not exclude the EU, if you truly want to go global, and install global, you should probably focus in on the EU solution providers before making any decision. In today’s post we continue an explanation of why.

They understand that customer priorities differ by locality.

While this could have been included in the last point, it merits its own point because priorities do differ substantially between NA and the EU. While many North American companies will often trade functionality for usability — which is why there are so many flashy solutions out there across the spectrum of business solutions that are almost void of advanced functionality where optimization and analytics are concerned, the same is not true of the EU solution providers that, after the doctor‘s heart, favour functionality over form. That’s why many of the EU (import) solutions have deeper, and broader functionality but UIs that look like they were designed five to ten years ago. (Fortunately, with customer help, this is an easy fix. It’s easy to put a new paint job on a faded corvette. It’s much harder to turn an oldsmobile into a corvette.)

One way or the other, you have to be in Asia.

If you’re a global multi-national, you’re either buying from, or selling, to Asia — if not both! Most of the EU Supply Management companies have a larger footprint in Asia than most of their counterparts in the US. The EU, close to Asia, has not only been doing business with Asia for just as long as North America, but due to their ability to support multiple languages, and locales, from day one, had an easier job moving into Asia.

It reduces the chance that you will need two solutions.

While you want Best of Breed, the last thing you want is multiple best of breed solution providers if you can get away with one. Adding the EU providers to the list increases your chances that you can find a solution provider that will meet all of your needs.

In other words, you have at least five very important reasons to be seriously considering EU solution providers. Tune in tomorrow when we’ll summarize the situation.

Seeking Spherical Supply Solutions? Succeed in the EU! Part I

Alliteration aside, the reality is that if you are looking for a modern sourcing or procurement solution, not only should you not exclude the EU, if you truly want to go global, and install global, you should probably focus in on the EU solution providers before making any decision. Here’s why.

They’re already multi-lingual!

There are twenty-seven (27) member states in the EU, speaking close to two dozen languages. To do business across the EU, you need to support close to a dozen languages, and most European sourcing and procurement providers do, and have supported multiple languages since their first release. In contrast, most North American providers built up their suite supporting only one language, English, and added other languages as an after-thought. This means that only the bigger names can support multiple languages, and your selection of global providers in the US is limited.

Plus, multi-lingual is more than just translating the UI. It’s having people who speak the language – natively – to support the product and local references in the appropriate countries. If you ask ten random EU providers for a reference in Poland or Malaysia, nine will probably be able to name three off of the top of their head. In contrast, ask ten random NA providers for a reference in Poland or Malaysia, and you are likely to get a blank stare from nine of them.

They understand the importance of locality.

And the bigger providers are global. The first thing they tend to do when they want to enter a new market is open a local office. In contrast, an average North American firm will try to serve the new locale from an existing office first, and a US one if possible, with only the help of one or two local employees to assist them.

Secondly, they understand that since most transactions involve money and legal contracts, that it’s very important to localize not only the language, but the terminology in order to come off as being a professional solution put forward by a professional company. For example, in Europe it’s “article” instead of part and “position” instead of bid.

Thirdly, localization of the supplier enablement process is very important as it is often a critical factor to supplier adoption. Each locale has it’s own business and technical challenges. For example, in addition to language and terminology on the business front, an understanding of local culture is often critical to convince an uncertain or wary supplier to get onboard. An organization that is already established in the region typically has a much better understanding of culture than one that is not. Secondly, even though there are often multiple connectivity options at an organization’s disposal, some options are not applicable to some regions. Example: punch-outs in Asia.

These are just two of the reasons. Turn in tomorrow for Part II.

Free Market? What Free Market?

In the developed world, we supposedly have a free market, defined as a market structure in which the distribution and costs of goods and services, wage rates, interest rates — along with the structure and hierarchy between capital and consumer goods — are coordinated by supply and demand unhindered by external regulation or control by government or monopolies. (Dictionary.com) However, every time you turn around these days, governments are imposing new policies to restrict free trade (which allows for a free market on a global scale) or failing to abolish old policies that allow monopolies to persist in this day and age.

For instance, after taking steps to bust up the telco monopolies, the U.S. has now made it illegal to unlock your cellphone. (Read the full decision if you like.) In other words, instead of being forced to use one monopoly, you now get to choose between six mini-monopolies. (Now, it’s true that the FCC will investigate the U.S. mobile phone unlocking ban, but it’s no guarantee they will reverse the decision.) The absurdity of this cannot be put into words. (Imagine if you had to buy your TV through the cable company and you couldn’t use the TV again if you switched cable providers. Does this make sense? Basically, the law is saying a telco carrier gets to choose how you use YOUR phone.)

But this isn’t what I’m ranting about today, as this is a Supply Management blog after all. My rant today is about the fact that it’s 2013 and we are still subject to captive shipping in the railroad and inland barge industries because there is no mandated reciprocal switching (in the United States). So, not only are you forced to use the carrier that owns the line your port/warehouse/etc. is located on, but you cannot ship to a destination if that carrier does not service it. Not only does this increase shipping rates by an average of 20% by some accounts, but it forces many shippers to use long-haul trucking way more than they would otherwise need to.

The fact that captive shipping has not been eliminated is costing the U.S. economy billions of dollars each year. As per a recent report issued by the National Industrial Transportation League (NITL), and summarized in DC Velocity, the introduction of new switching rules that would allow for limited reciprocal switching between the nation’s four major railroads could save rail customers up to 1.2 Billion a year. Simply allowing a (truly) captive shipper or receiver to gain access to a second rail carrier if the customer’s facility is located within a 30-mile radius of an interchange where regular switching occurs would shave up to 1.2 Billion off of shipping costs according to the accepted Revenue Shortfall Allocation Method (RSAM) formula. (So imagine how much could be saved if reciprocal shipping was mandated across the board or more freight shipped rail instead of truck!)

The Surface Transportation Board (STB) could use the powers granted to it under the Staggers Rail Act of 1980 and order the railroads to create reciprocal switching agreements between each other to eliminate captive shippers, but since they’ve had thirty three years to do this, and have made zero progress, it’s not likely to happen. So we’re going to have a monopoly until, as the DC Velocity article notes, angry shippers descend on Capitol Hill and demand that Congress update the Staggers Rail Act to include mandatory reciprocal switching. Maybe then we’ll finally have a free market on the rails two-hundred and fifty years after the first railroad* (Montresor’s Tramway) was built in the US.

* Note that the first railway in North America, drawn by horses, was not built in New York, but in Nova Scotia forty-four years earlier to support the construction fo the Fortress of Louisbourg in Cape Breton! (Source: Nova Scotia Railways)

You Need to Get a Handle on Your Global Trade Risks – FAST!

Because, if you don’t, in three months, one in every five shipments you make is going to result in a large fine! By the end of May, the United States Customs and Border Protection (CBP) is expected to issue a proposed rule that would make various changes to increase the accuracy and reliability of the advance information submitted under the Importer Security Filing (ISF or 10+2). No big deal, right? Wrong! It is further expected that the final ISF rule will follow later this year and that the CBP will, upon release of the new rule, begin to enforce (the full extent of) the penalties associated with the ISF.

This is a major risk for most organizations as the most recent statistic that is publicly available where 10+2 compliance is concerned is a compliance rate of 80%. In other words, 20% of shipments are not compliant! It’s hard to say why. It could be because, up until now, the CBP has not issued much (if anything) in the way of penalties for violations and failures, and many importers, (customers) brokers, and forwarders are taking advantage of the situation and not doing anything to improve their processes and procedures when they (regularly) make late and inaccurate filings. And if this is the case, this is a dangerous game — for you!

We have to remember that the CBP has the right to enforce a minimum fine of $5,000 for EACH 10+2 violation. If you do a lot of importing, this will add up fast if you are in violation with every fifth shipment. Even if you only did 10 inbound shipments a month, you could expect to lose at least 120K a year to fines! And that’s (significantly) more* than what an average mid-size organization can expect to pay for an annual license to a basic SaaS e-Trade Document management system these days. So they should get one, and begin to get a grip on their global trade risks, fast, before they burn money needlessly.

* A good (end-to-end) global trade management system will still run you six figures, but it goes way beyond e-Document management and provides multiple ROI in terms of process improvement, tactical man-hour reduction, global supply chain visibility, compliance monitoring, etc. (But if you’re small, or just getting started, you can start with just the e-Document management and ease your way into a bigger system.)

Headline From the Land of D’oh: Notorious Somali pirate quits: Now is shipping safe?

A recent CNN article which noted that the retirement of the pirate leader Mohamed Abdi Hassan, also known as “Afweyne,” has generated much media coverage, but the real significance of his announcement is the indication it gives of how Somalia’s pirates currently view their business model and that it appears that hijacking vessels in the Indian Ocean and the Gulf of Aden is no longer seen as a relatively risk-free affair concluded that while piracy off the country’s coast will not be ended conclusively … it might be contained to a manageable level.

Depending on what you conclude a manageable level to be, that might happen, but shipping is NOT safe. If a pirate can make 10 times the average annual salary in one hijacking, and one hijacking can command a 5M ransom, even with the introduction of international naval ports, armed guards aboard vessels, and best practices, piracy is not going to stop. First of all, it’s still way too lucrative when the right ship is passing through. While it is true that an average shipment of consumer goods is many times safer, the risk for high-value petroleum, weapons, pharmaceutical, and hi-tech shipments is still there. If there’s a 100M worth of easily-moved cargo on the ship, and pirates know about it, the risk is there — especially with more organized crime getting involved in supply chain thievery. Secondly, when a void is created — there’s always a rush to fill it. Recent warfare against gangs across North and South America has shown us that if multiple gangs are vying for a territory, and the biggest one is wiped out, violence escalates as the smaller gangs jockey for position.

The reality is that, for some of you, shipping is now more dangerous than ever. And any article that tries to insist otherwise is giving you a false sense of security that is even more dangerous. Especially when your cargo is more valuable than drugs and guns.