Category Archives: Global Trade

Was it Nearshoring? Or Bullwhip Effect?

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

China’s exports in February were up 45% from last February. (LA Times)

My opinion: the rapid decline and unsustainable increase in Chinese exports were from the bullwhip effect of a long supply chain. A small change in final demand can cause huge swings in upstream supply.

This mainly applies to those using ships to transport from China. If you can use air, China isn’t much further (in hours) than Mexico.

Dick Locke, Global Procurement Group and Global Supply Training.

Think Halifax Can’t Handle Your Ocean Freight? Think Again!

As per this recent news release from Materials Management & Distribution, Halifax has broken ground on its $35 million berth project that will see the port’s berth become the deepest on the eastern seaboard of North America. Once complete, the South End Container Terminal will be able to simultaneously service two full-sized post-Panamax vessels (and Panamax II type vessels can carry up to 12,000 TEUs). 24,000 Twenty-foot Equivalent Units is an awful lot of freight.  (It should be enough to make Halifax a top 10 North American port at the very least!)

And this is just the beginning. Over the next five years, the Halifax Port Authority — which has invested more than 100 Million in cargo-related infrastructure improvements in the past five years (in addition to 250 Million in investments from the private sector), will invest more than 225 Million dollars in port and infrastructure improvements.

If you’re wondering how you can take advantage of these improvements and leapfrog your competition (as Halifax is the closest port to many overseas locations in Southeast Asia), you could always contact the World Trade Center Atlantic Canada or Nova Scotia Business Inc. They’d be happy to help. And as I pointed out, Halifax is The Best Place to Do International Business in Canada.

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Does your Global Trade Management Platform Have Content and Connectivity?

A recent article in Industry Week on “The Role of Content & Creativity in Global Trade Management” by Adrian Gonzalez of ARC Advisory Group noted that compliance is only one component of a best-in-class global trade management solution: content and connectivity are also critical. According to Adrian, companies must have accurate and complete trade content for every country they operate in and trade with in order to successfully comply with trade regulations and prevent customs clearance delays because a GTM solution without a comprehensive and continuously updated trade content database is only marginally useful.

According to Adrian, trade content should include:

  • denied parties
  • embargoed countries
  • harmonized system chapters and descriptions
  • license codes, descriptions, & requirements
  • document templates
  • duty, value added tax, excise taxes, and seasonal taxes

When you think about it, Adrian is right. Without proper tax rates, you could pay the wrong duties and get hit with fines and penalties. Without harmonized tax system data and license codes, you could mis-categorize your shipments and have them seized. And, without denied party or embargoed country lists, you could risk criminal charges. You need content. And if your platform provider can’t provide it to you, you need to get it from third parties, just like you’re probably doing with your supplier data.

Plus, sourcing in a trade data silo can have serious and costly consequences. Purchasing managers must take into account duties and taxes in total landed cost calculations, as well as countries of origin. Are there currency exchange risks that need to be estimated? Additional transportation costs? Preferential trade agreements, or a lack thereof?

Sourcing professionals will not be able to get this data without connectivity, which is also of critical importance because a cross-border shipment typically involves the exchange of information with about 25 external parties, including custom agencies, freight forwarders, brokers, banks, regulatory agencies, transportation providers, and suppliers. Thus, it’s important to make sure that the solution you select integrates with key external systems and supports open standards for information exchange.

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Buying Across Borders … How Hard Could It Be?

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Professors Hausman and Lee of Stanford University have written a paper titled “How Enterprises and Trading Partners Gain from Global Trade Management: A New Process Model for the US-to-China Trade Lane”. (Free registration required.) It’s been getting a lot of attention on the supply management blogs.

In the paper, they present a flow chart of 106 process steps needed to identify a potential supplier and to place, receive and pay for a cross-border order. One hundred and six! Wow! How can a two-day purchasing training program cover that? Well, I dug into their flowchart and here’s what I found:

  • Six steps are ‘optional’ and are mainly error checking and correction
  • Thirty-one are necessary for domestic transactions as well as international transactions. They cover issues such as issuing a PO, counting the goods and putting the goods into stock.
  • Seventeen are only necessary if the buyer is using letters of credit. (Shame on those buyers.)
  • Seven are only necessary if there is special “trade financing” arranged through a bank or other lender.
  • Fourteen are very specific to China. The supplier executes all of those steps.
  • One only applies to quota goods
  • One only applies to specific consumer products

That leaves 29 steps that apply to all global transactions and wouldn’t be needed for a domestic transaction. The supplier executes seven of them, and the buyer or the buyer’s agent executes 22. The training aspects seem much more manageable than the 106 step statement implies. Actually, most of those process steps are executed by a freight forwarder and a customs broker. Training for buyers mainly consists of explaining what those companies do and what an appropriate standard of service is.

I also noticed that the chart completely neglects one very important issue: Exchange rate risk protection. That will require close coordination inside the buyer’s company. They probably left it out because the yuan is pegged to the US dollar. Overall, I wasn’t very impressed with the chart. The overall paper extolled the virtues of a Global Trade Management system. That’s a good idea for any company with significant international purchasing.

Dick Locke, Global Procurement Group and Global Supply Training.

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With Global Trade, Training is Only the First Step

A recent article over on Supply Chain Brain by Wayne Slossberg of QuestaWeb on what can global trade management technology do for importers and exporters made a great point when it noted that with regard to the complexity of global trade, training is only the first step.

Keeping up on the latest requirements and regulatory changes looming on the horizon is one thing, but you have to do something about it. After all, there are now 106 discrete steps to global trade in the average transaction, and things are probably only going to get worse before they get better. And with the 10+2 Importer Security Filing now a requirement, and massive fines looming for those who do not comply, a single mis-step can be financially devastating.

You need tools to manage global trade, and spreadsheets (which are costing you billions) are not the answer. They never were, and never will be. You need a platform. Moreover, the savings will pay for itself. I could understand not wanting to be an early adopter, but this is a relatively mature technology now and there are a number of Global Trade Companies with products that can help you. There’s no excuse to wait any longer.

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