Category Archives: Global Trade

What Elements Are Truly Necessary To Prevent Missing Links in Your Supply Chain?

A recent article in Canadian Transportation & Logistics that asked “where the missing links in your supply chain are” did a great job of of pointing out that when it comes to supply chains, what you see is what you get. And it often is the situation that the more you can see into the chain, the more benefits you can receive.

It also hit the nail on the head when it noted that the ability to view timely, accurate information from the beginning of the chain to the end is essential for:

  • reliable forecasting
  • accurate decision making
  • minimizing risks
  • optimizing inventory turnover
  • reducing days and costs in supply chain cycles
  • healthy cash flow and profits
  • customer satisfaction
  • competitive advantage

But when most companies rely on a patchwork of systems and software to address supplier management, purchase order processing, receipt of goods and inventory management, did it have the right checklist of critical system and software capabilities required to avoid the critical missing links that are currently present in most enterprises that are not Supply Management Leaders?

The article identified these necessary elements, which we’ll take one by one:

  • Real-time detailed visibility into every key juncture
    i.e. demand, procurement, production, transportation, and inventory and accounts payable (to make sure the invoices match the order), market data (to make sure quotes are reasonable), risk data (to detect potential volatility or issues as soon as the signals appear), and trade data (to inform you on issues of regulatory and customs compliance)
  • portals connecting the entire supply chain from order through deliver
    what year is this? 2002? there has to be e-integration all the way down through you supplier, and their suppliers, to raw material providers for key or scarce raw materials, but it doesn’t have to be a portal; heck, it could be as simple as the pull of a daily update EDI file from a secure FTP server or as complex as real-time asynchronous communication between multiple databases in a replication configuration
  • collaboration capabilities that allow stakeholders of the chain to readily share information on supply and delivery
    and communicate with each other, in real time, when they are both online
  • ability to integrate varying information formats from various supply chain partners
    which is a given and should be automatic; again, it’s 2012, not 2002
  • open-endedness with flexibility
    enabling easy modifications and integration with other systems and this is a definite must — avoid any system with proprietary integration methods
  • capability of generating alerts of events that require attention
    throughout the supply chain as most day-to-day management should be exception based, with the exceptions defined on your rules (and not the vendor’s)
  • ability to create “dashboards” that enable consolidate viewing of information from multiple sources
    in a manner that focuses on problem areas identified by missed metrics, bad data, missed data, or declining trends — generally speaking, you don’t care about the green, only the red

These were quite good, but it’s also very important not to overlook:

  • sourcing, procurement, logistics, and global trade solutions
    this could be one solution with dedicated sourcing, procurement, logistics, and global trade modules (or views) or multiple solutions that are interconnected — you need end-to-end sourcing to identify the right deal, procurement to secure it, logistics to get it delivered on target, and global trade to make sure there are no costly, disruptive snags
  • an analytic solution
    that lets you analyze trends and predict demand levels, market cost changes, and potential disruptions
  • out of the box ERP support
    because chances are that a number of supply chain partners are going to have one of the big ERP solutions and be relying on it at least partially
  • security
    as there will be a lot of sensitive data flowing back and forth — make sure it is encrpted and only accessible by authorized parties
  • adoption
    how many companies are currently using the solution, how big are they, how much third party support is there and what is the long term outlook for the solution

But if you can meet all of these requrements, and the collaboration flows, the the solution is probably going to prevent many of the critical missing links in many of today’s supply chains.

Doing Cross-Border Trade in Europe? Download this Free Handbook!

The Organization for Security and Co-operation in Europe (OSCE) recently released the “Handbook of Best Practices at Border Crossings — A Trade and Transport Facilitation Perspective” to assist the 56 OSCE participating States / UNECE member States in the development of more efficient border and customs policies through the promotion of existing best practices in the field. Clocking in at 268 pages and 5.7 MB, this e-book is filled with advice on the international legal framework; international co-operation; balancing security with trade and transport facilitation; policies for control, clearance, and transit of freight; risk management; border crossing point design; the use of information and communications technology for non-intrusive inspection; human resource management, and measuring performance. Given the wide array of legislation that an international organization can face, given that this e-book is totally free, the doctor thinks it’s a must have in your global trade e-Library.

As the handbook points out in chapter 3, there are five major categories of security threats that countries need to watch out for at their borders:

  • normal criminal acts
    such as car thefts on one side and chop shops on the other
  • technical violations
    such as lack of proper documentation
  • traditional organized crime
    that would include smuggling of weapons, people, and other contraband
  • terrorist threats
    that could result in attacks, destruction of property, and death
  • border management threats
    that would include corruption and abuse of power

These require a number of security procedures and controls to deal with. (The UK alone has 37 procedures, as outlined on page 57, that range from AEO [Authorised Economic Operators], CSI [Container Security Initiatives], and MATRA [Multi-Agency Threat and Risk Assessment] all the way to dangerous goods declarations, pre-ship notifications, and commercial insurance.) Some of these are compliant with the new WCO SAFE Framework, some are not. Either way you need to be aware of them, what impact they have, and how they can benefit you.

To really dive into the issues, and recommendations, download your FREE copy of the OSCE “Handbook of Best Practices at Border Crossings — A Trade and Transport Facilitation Perspective” today!

A Great Piece on the Real Drivers of Corruption in India over at K@W

Knowledge @ Wharton recently published a piece on the Real Drivers of Corruption in India and the Rest of the World that is a great read and great food for thought. Corruption is definitely one of the most important and topical issues in India today, and while we might like to think that the Zero Rupee Note would fix the problem, that’s just another one of Mario’s pipe dreams.

But the real insight into the article is that there is no innate difference, just differences of scale between business ethics in America and India. The differences that exist, which can be generally attributed to differences in the development, institutionalization, and capital generation stages of the two countries, are relatively minor and there are significant similarities between business in India today and business in America during the “robber barrons” age (from 1890 to 1934).

And while India has a common practice of using the politico-business nexus of “getting policies fixed, obtaining clearances, and resolving irregularities”, America lobbying, and, more recently, Super PACs (Political Action Committees), which often pour money into the pockets of potential senators and congresspeople than bribery in India ever could. After all, almost all major businesses understand the need to engage lobbyists. That is the price they pay for access to the U.S. Congress to fix policy, obtain legislative clearances, and influence political decision making. When you get right down to it, lobbying is just civilized, legalized, bribery.

However, since India doesn’t have a semi-structured “lobbying” process, the absence of institutional safeguards ensures that the process of influence peddling is a free-for-all. The authors argue that this is why the level of corruption in India is much larger than in America, but if you take a step back, there is nothing innately or structurally different between the American and Indian processes. In both countries, companies give money to people and groups they believe can help advance their cause.

However, the situation in India is now similar to the situation in America a century ago because of the recent waves of foreign capital flooding into India and the creation of a new class of billionaires — overnight — with the granting of spectrum licenses that allowed a select few to offer spectrum (mobile) based telecommunications services to a country with over a Billion people. As a result, the politicians, who made the awardees rich with the license grants, created a render unto Caesar what is Caesar’s type of demand, which was met because of the flood of money these Billionaires had at their disposal. But the truth is that, relatively speaking, the level of corruption in India is not much more than in America, the difference is that India is still in the “Wild West” phase of economic develop, and America has civilized the process of bribing through lobbyist intermediaries who, because they don’t make the Congressional vote, can’t guarantee results — but considering that the reality is that lobbyists who don’t get results don’t keep their jobs …

Best Practices of Trade Compliance

A recent article over on the ISM site entitled “A Steel Thread”, which discussed how import/export compliance management is part of the fabric of today’s global business world and how ignoring it could result in your shipment being flagged for intensive investigation, seized, or destroyed, did a good job of pointing out how federal trade compliance regulations have increased dramatically over the past several years. But this is not why SI liked it. It also did a good job of pointing out the roadblocks to compliance for an average Supply Management organization, starting from the fact that the sourcing and compliance teams often have different definitions of supply chain security. But this isn’t why SI liked it either. The reason SI likes it is because it summarizes six best practices of trade compliance that will significantly help an average Supply Management organization get its global trade processes and policies under control.

The six best practices it focusses on are:

  • Education and Training
    Let’s face it. The average supply management professional is probably not aware of the myriad of compliance and security legislations that an average category could be subject to when sourcing internationally. Training, which overviews the major legislations, the common sourced categories that might be covered under those legislations, and best practices to maximize the chances of compliance is a great place to start.
  • Senior Management Commitment
    We all know nothing takes root without senior management sponsorship, so making sure senior management understands the importance of a good trade compliance initiative and supports it is a great place to start. If you’re having trouble getting support, SI recommends that you start by pointing out the 88 Million Dollar Fine JP Morgan got for failing to comply with trade compliance legislation.
  • Written Policies and Procedures
    Once you’ve identified your best practice processes that minimize the chance of non-compliance, you need to write them down, create checklists, and make sure they are followed. The reality is that if you are found in non-compliance, you will be fined, even if it was 100% unintentional and you did everything you could to be in compliance, but if you can show you did your best, the severity of the fine and punishments levied will likely be minimal. The government agencies responsible for monitoring compliance aren’t out to shut businesses down or make trade unduly difficult, they are just trying to do their job and enforce the law. However, most of the acts only define maximum fines, not minimum ones, and it’s not common practice for them to severely punish good corporate citizens who have a process, follow the process, and do their best to ensure compliance for a small slip-up.
  • Connectivity with Business Units
    Not only is it impossible to do compliance in a vacuum, as the article points out, but it is the business units who often have the detailed data on products and services that you need to make proper compliance assessments. Working with them can eliminate issues before a shipment is even made.
  • Internal Assessment
    As the article points out, an internal self-assessment of compliance practices should be performed to gauge how well regulations are being met and how compliance is connecting with logistics, supply management, sales, shipping and receiving — and it should be done as soon as possible if you haven’t done one, and reviewed annually to see if all bases are still being covered. And it should be very well documented. This will help you if you are ever investigated for possibly running afoul of trade legislation.
  • Third Party Assessment
    In addition, as the article points out, once or twice a year, a “second set of eyes” should evaluate how trade compliance is being handled throughout the company to make sure you didn’t miss anything. This can turn the tide in your favour if non-compliance occurred someone along the supply chain as you not only did your best to make sure you were in compliance, but had a third party that has expertise in supply chain audits do their best to verify that you are in compliance as well.

About the only critical best practice that they missed is:

  • Implement a Trade Compliance Platform
    The reality is that you can’t do all of this manually, or even attempt to track all of the relevant data manually. You need a technology solution to help you — one that centralizes all of the data and makes it all available to all of the people in your organization that need it, as well as to trusted partners that need, and are authorized to use, it.

There are other best practices, but if you start with this list, you will get most of the way there in short order.