Category Archives: Global Trade

Does Your 3PL Have the CCSF Designation?

If you want quick transport by air, maybe it should.

As per this article on “tsa finalizes airfreight screening ruling” in Air Cargo World, the US Transportation Security Administration has executed its interim final rule (IFR) on airfreight security and enabled entities other than airlines to screen cargo transported on passenger planes.

Before the TSAs certified cargo screening program (CSSP) that was introduced in September 2009, only the TSA or airlines were authorized to screen belly-hold cargo. But now that the IFR has been implemented, airfreight entities can now apply to become certified cargo screening facilities, provided they adhere to a stringent chain-of-custody requirement and implement a multi-layered security program that includes appointing security coordinators, strict access controls and vetting of key personnel.

Given that the TSA is aiming to achieve 100-percent cargo screening on all U.S.-bound flights by the end of the year, there’s a good chance that any shipper relying on the TSA or the airline to screen their cargo could experience a backlog delay during the holiday rush season. However, those who use a 3PL with CCSF status will see their cargo clear immediately.

Is An African Country Your Next LCCS Destination?

Now that India and China are leaving the low cost country collective, moving up on the global economic stage, chances are that you’re going to have to identify a new low cost country to start investing in to keep manufacturing and call center costs low. And unless you’re in the US or the UK, where you only have to look in your own backyard, you may have to rule out home-country sourcing as your low cost country sourcing destination. So where should you go?

Egypt and the Middle East were rising, but with the recent political unrest, it’s probably going to be a while before that’s a good choice. Poland is solid, but at only 38 Million people, only so many countries will be able to set up shop. Argentina, Columbia, and Chile are going strong, but are being greatly overshadowed by Brazil. What’s left? Africa. Even though some countries are in turmoil, and there are piracy problems off the coast, there are 1 Million people in the 54 countries that comprise the continent who are ready and willing to join the global labour force. Plus, India and China are starting to invest there heavily. With the two economies projected to be the dominant economies by the latter half of the century already pouring money and effort into making Africa the next emerging marketplace, you know it’s just a matter of time. Plus, with big multinational companies like GE also investing in the region, it’s very likely that at least a few African companies will be part of the next BRIC.

Plus, as in India and China, urbanization is off to a rapid start and, as per this article on “the hottest emerging markets” in World Trade, it is expected that over half of the population will live in cities within 20 years and that the top 18 cities will have a combined spending power of 1.3 Trillion. That alone puts Africa’s projected GDP in the top 10 within 20 years.

As in India, infrastructure and energy production is a problem, but a number of countries have a plan to improve and are working on it. Plus, the fact that these countries are resource-rich in a time of rising commodity costs means that there is money to invest in improving infrastructure and energy investments. It might take a while, but Africa is going to get there. The question is, who’s going to win when they do?

Global Collaboration Tips

A recent post on how to “be a better global collaborator” over on the HBR Blogs had some really great tips for those Supply Management professionals working with their global counterparts. My favourite tips were:

  • Be Prepared to Be Uncomfortable
    At least one of your global counterparts will speak or act in a way that makes you uncomfortable on a regular basis, and won’t even notice it because it’s normal behaviour for him. For example, he might get way too close in a conversation or always try to dominate the conversation.
  • Be Aware of the effect of Your Actions
    Similarly, there will be at least one global counterpart who will be uncomfortable with the way you speak or act from day one, and you will need to observe which communications or actions make that person uncomfortable and try to deliver them in ways that are less imposing to that person to foster a working relationship.
  • Prototypes are Not Perfect
    Your training classes will train you on the attitudes and behaviour of the average person. There is no average person. Maybe you were told that your Chinese counterparts would be relatively “shy”. And while most Chinese counterparts who are in subordinate positions might act “shy”, there are Chinese people who are very outgoing and aggressive. Be prepared to adapt to the personality and not the person.
  • Be curious
    Show an interest in them and their culture. Just remember what topics are sensitive and stick to the safe topics at first.

I’d recommend checking out the post on “how to be a better collaborator”. I know it’s worth your time.

The Control Provided by e-Sourcing is Only an Illusion – YOU HAVE NO CONTROL!

A recent post on one of the lesser known sourcing blogs indicated that, due to the lack of economic upturn in most of the developed world, maybe now is the time to finally try reverse auctions. The rationale, quotes from a CEO and his team that watched their first reverse auction that indicated that it was simple, powerful, easy to follow, effective, and, most importantly, if you read between the lines, gave them an illusion of control over the process and the results.

This, and some of the messaging coming from a few of the smaller e-Sourcing providers, is scaring me. I fear that adopters may believe that adopting this technology may give them some control. Well, as this recent article over on Chief Executive on why you should embrace tomorrow’s strategies clearly points out, you have NO control! You can manage the process, but you have no control over the outcomes. Why? For starters

  • Cartels, cabals, speculators, organized crime, and entire countries are constantly manipulating commodity prices.
    Case in point: China possesses over 90% of many of the rare earth metals used in many technologies (smart phones, batteries, etc.) and when they recently reduced exports, a steep price increase resulted that triggered a costly disruption of delivery of the precious commodities to global business.
  • Disasters are on the rise.
    Industrial, agricultural, and political disasters are increasing in frequency and wiping out production in entire regions. For example, the nuclear meltdown in Japan affected most businesses that rely on a Japanese supplier.
  • Global currency fluctuations, unforeseen credit crises, and economic stagnation are increasingly severe and unpredictably enduring.
    The extreme fluidity in the valuation of imported and exported goods, services, and components is as equally difficult to predict and manage.

No e-RFX or Auction is going to help you regain control over these economic nightmares that you have to deal with on a daily basis. And any provider that’s trying to sell you 1999 e-Sourcing technology to deal with the current economic stagnation doesn’t have a clue. There’s only one way you can even hope to adapt to the constantly changing reality, and that is through the adoption of a supply management platform with advanced data analytics capability. You have to constantly monitor, react, adapt, predict, plan for what-if, monitor, react, and adapt again. This requires extensive data acquisition, mapping, transformation, and analysis that only a real analytics solution, with advanced (spend) analysis, optimization, simulation, and reporting is going to provide. Don’t get fooled. All auction platforms give you in this day in age is a false sense of security. Sometimes an auction is the right way to go, but, most of the time, an auction (on its own), is not the answer.

Should You Move Your Production Back to the US?

In the outsourcing craze, there was a mad rush to move manufacturing to China and services to India. In the latter case, with the rising costs in the big, mature, outsourcing centers, it’s now cheaper to open call centers and back-office shops on home soil in the US and UK than to move them to India, where they are so desperate for talent that they are now hiring Americans in America to fulfill American outsourcing agreements. In the former, the price of production, especially with logistics costs and a weakening American dollar, is rising monthly. For some industries, it may soon be cheaper to produce at home, if it isn’t already. Especially when the total lifetime cost of ownership is taken into account.

Consider this recent article in Fortune which notes how some American businesses, fed up with the poor quality of having their products made in China, are moving production back to the US. In “why we left our factories in China”, we find out that Sleek Audio, a small business that makes in-ear headphones for iPods and other audio devices, fed up with low quality, too much travel, communications problems, shipping delays, rising costs, and — worst of all — a ruined shipment of 10,000 sets of earphones that cost millions and nearly brought the company to its knees, decided to quit China and move manufacturing back to the US. Their up-front costs are about 15% to 20% higher on-shore, but since they are now able to produce a higher-end product (that can command a higher price), they can justify the cost.

Now it’s true that some companies get great prices and great quality from Chinese factories, but the reality is that these are usually the large multi-nationals that can afford to have someone on the ground full-time to oversee production. If you can afford to oversee production and insure your production runs get the appropriate timing, priority, and quality checks that you need, you can get good quality. But if you don’t have someone on the ground full time, then you may not even realize there is a problem until the next day as most small operations don’t have a phone manned at 2 AM. And since your production run is usually squeezed between bigger ones, there may not be much attention paid to quality or other issues important to you.

In other words, if you’re a Global 3000 multi-national, then it’s likely that production in China still makes sense for the organization for the time being, but if you’re a small or mid-sized manufacturer, it might be time to pull production back home — especially with the economic incentives being offered by many states to revitalize the economy.