Monthly Archives: August 2007

Catching up with Global Data Mining: Don’t Underestimate Trade Compliance

Last October, while discussing Global Trade Data Management, I introduced you to Global Data Mining (acquired by CUSTOMS Info which was acquired by Descartes), a company that specializes in helping high-volume, high-value global trade businesses build effective trade databases for extensive trade reporting and comprehensive auditing to significantly improve their processes, reduce their error rates, and save time and money in their global trade endeavors.

Even though one of my interests is understanding how you can improve your global strategic sourcing processes with better trade data, it’s clear that the most pressing issue today for most companies is just trade compliance. Today, Trade Compliance goes well beyond just assigning the proper Export Control Classification Number (ECCN) and the proper Harmonized Tariff Schedule (HTS), but also involves making sure you are paying the proper duties, qualifying for Value Added Tax rebates, and taking advantage of Foreign Trade Zones. It also means that, before you ship your goods to their destination, you make sure they are complaint with any local regulations such as the EU RoHS, WEE, or REACH directives, the HAZMAT requirements, or the EC ELV directive. (Don’t know what these are? Keep checking the e-Sourcing Wiki [WayBackMachine] – a wiki-paper defining the basics of Global Trade is forthcoming.)

It’s a lot more costly than most organizations think it is. According to their whitepapers, error rates in global trade processes approach 10% to 20% and effective control of global trade processes is often 100 to 200 times worse when compared to accounts payable processes within a company. And the savings opportunities often go well beyond the 2.5% to 10% that previous Aberdeen research studies have indicated it to be. In conjunction with the Aberdeen Group, in preparation for their upcoming benchmark study, GDM analyzed the actual trade data for five organizations with 66B in revenue and found direct-compliance related savings opportunities of $261.2M alone. It might not sound like much, but it’s likely just the tip of the iceberg as the savings came only from non-compliance, self-filing, and free trade zone savings that could be identified on data analysis alone. Imagine what better sourcing that considered trade compliance and import / export rates, free trade zones, and automatic e-filing opportunities from day one could accomplish!

With complex cross border transactions expected to account for more than 10T this year, according to the McKinsey quarterly, with many companies still struggling to adapt to the HTS reforms in January, with pre-arrival e-manifests almost the norm now for cross-border trucking into the USA, with the recent elimination of many VAT rebates in China, and with the rapid multiplication of foreign trade zones in dozens of countries around the world, each with their own laws and benefits, it’s a given that billions of dollars are being lost by businesses around the globe just on Trade Compliance alone. So take it seriously, and if you need help, seek it out.

I’d be comfortable starting with Global Data Mining or their partner, the International Trade Bureau. They’re open about their tools, capabilities, and results, and will happily work with other vendors if you need a solution they can’t supply on their own. As to whom else plays in the trade management space, there’s Bearing Point Consulting, Core Solutions, Management Dynamics, Integration Point (acquired by Thomson Reuters), QuestaWeb (acquired by Descartes), and Tradebeam (acquired by CDC Software). As with PLM, I’m not an expert in the Global Trade Management space when it comes to all the players and their capabilities, but I do think a few of capabilities of Global Data Mining, along with a few of the reports, are unique and certainly worth investigating if you do a significant volume of global trade and have never analyzed your compliance or cost efficiency. Having them audit your data and prepare a summary will not cost you much, but could identify millions in savings. In one $3B apparel company alone they found $161.5M in potential duty and free trade savings – 5% of revenue – not cost, revenue! It’s something to think about.

The Green Purchasing Summit

Green Purchasing or Environmentally Preferable Purchasing (EPP) refers to the procurement of products and services that have a lesser or reduced effect on human health and the environment when compared with competing products or services that serve the same purpose.

Global warming is an (essentially) indisputable fact*. Although one can dispute how bad it really is, how fast it really is occurring, and how much of it is our fault (since science has demonstrated that carbon content in the atmosphere has risen and fallen over the earth’s history and that solar cycles do contribute to the earth’s temperature), it cannot be disputed that we pump carbon into the atmosphere (which serves to raise the global temperature) and, especially in countries where strict pollution control is not (yet) the norm, we still pump other dangerous compounds into the atmosphere that lead to (further) ozone depletion and acid rain. Furthermore, with the recent Live Earth campaign, it, along with corporate social responsibility, is on the tongue of just about every consumer these days. Thus, it’s important to consider the impact of your purchases on the environment when sourcing, or it might come back to haunt you when you become the subject of the next media circus, which could quickly be followed by the next boycott of your goods and / or services.

So how do you learn more about Green Purchasing? The way I see it, you have two options. Hire an expensive consultant or go to a conference since there are not a lot of options from an educational perspective (yet). Although you probably should pursue the first option and bring in an expert in your sourcing project the first time you tackle a green initiative, you probably don’t want to pay one to educate you on the basics since this will put your consulting budget through the roof. To this end, I recommend going to conferences and learning the basics from your peers. Then you will be able to identify what projects can benefit the most from green purchasing initiatives.

Unfortunately, these conferences are still few and far between. Over the next six months, I’m only aware of two “green” conferences targeted at Procurement EyeForTransport’s “Supply Chain Directions: Green Transportation & Logistics Summit” in San Francisco (California) on the 25th and 26th of September and EyeForProcurement’s “Green Purchasing Summit” in Miami (Florida) on the 29th and 30th of November.

Even though it’s the first time EyeForProcurement is putting the event on, I believe the “Green Purchasing Summit” should be one event that you should consider. Since EyeForProcurement’s events focus on industry speakers, you’ll have the chance to learn from your peers. Furthermore, the round-tables represent a great chance to talk with your peers on issues relevant to you. So what will you learn?

According to the site, they are focussed on bringing in speakers with the knowledge and experience to help you:

  • find out what benefits Green Purchasing has to offer
  • learn how to apply environmentally preferable criteria early in your procurement process
  • identify which ‘green’ products work well, or better, than traditional products

Unfortunately the agenda has not been finalized yet, but considering how overwhelming the conference season can get these days, I thought it was important to point out this event before it gets lost in the shuffle.

For those of you thinking of attending the EyeForProcurement Green Purchasing Summit in November in Miami, Florida, please note that EyeForProcurement is offering a 20% discount for all delegates who register and quote “Sourcing Innovation“.

 

* There are those that will dispute it, and those that will aggressively point out the flaws in those arguments, and those that will aggressively point out the flaws in the counter arguments, and so on, but since this is a blog about Sourcing Innovation and not about Global Warming, I have disabled comments for this post since I do not want a global warming debate. If you disagree with me, that’s fine. Everyone is entitled to their opinions. If you do disagree, I hope you can at least respect the fact that I pointed out there are two sides to the argument, and that if you delve into the scientific facts, because of the complex interrelationships between all of the factors that influence climate, it is hard to precisely quantify.

Archstone Actualizes

Continuing in my effort to overview the smaller specialty service firms in the sourcing and procurement space in addition to the product companies with some of the more innovative offerings, even though I wasn’t able to connect with Archstone in their San Francisco office last month, I made a point to track Bob Derocher, partner and head of their operations and procurement practice, at my earliest opportunity.

Archstone Consulting (acquired by The Hackett Group) was founded in June 2003 by senior, experienced, consultants from the likes of A.T. Kearney, BearingPoint, Booz Allen, Cap Gemini, Deloitte and PWC who wanted to form a different kind of consulting company that focussed on high value independent advisory services from a technology-agnostic and partner-agnostic viewpoint. In less than four years, they’ve grown to 235 consultants, 7 global offices, and have served over 25 of the Fortune 100 and 65 of the Fortune 500.

Like Denali, whom I overviewed a couple of weeks ago, they primarily hire experienced sourcing professionals with deep expertise in the service areas they practice in, and deep process and category expertise in strategic procurement practices. This is to ensure that they can maintain a flat organizational structure where all of their professionals, including their most experienced principals and partners, are able to work with clients on a day-to-day basis and consistently deliver value.

What I like about Archstone is that they take a client-centric viewpoint on each project and understand that good category sourcing is a combination of strategic sourcing, cost management and control, and supplier relationship management. They don’t have a set solution for their service, like a good consulting firm they work with the client to figure out what the client really needs, and they know that one approach doesn’t fit all when it comes to getting the maximum value on a category. They’re also comfortable on a wide range of projects, anything from helping you with your one-off category project to helping you build a global strategic sourcing function from scratch. I also like the fact that, like many of the good specialty firms popping up these days, they focus on making their clients self-sufficient and continually work on knowledge transfer and change management so that when the sourcing project ends, the client will continue to succeed. And they are comfortable on small to mid-size projects that only require 3-5 consultants and 3-5 months.

For those of you looking for a specialist consultancy in sourcing and procurement, the industry segments in which they have expertise are the automotive, industrial, and high-tech manufacturing sectors; the apparel, CPG, and food and beverage industries; life sciences, pharmaceuticals, and biotech; and financial, consumer and entertainment services. They also have deep category expertise in dozens of categories, which include IT Hardware, Software, and Services, Marketing and Advertising, Overhead and Support, Retail Specific Items, Capital Expenditures, Facilities, Outside Services, and Direct Materials, and on hundreds of commodities within those categories. Furthermore, they’ve sourced over $15B to date with an average savings of 13% ( as they’ve saved over 2B ).