Monthly Archives: October 2011

Trade Partnership Programs: Are You Ready for Global Compliance?

Chances are that, if you are a US based organization, you are up to date on you C-TPAT (Customs-Trade Partnership Against Terrorism) and if you are a multi-national, your AEO (Authorised Economic Operators) initiatives to achieve a safer supply chain while streamlining trade through self-compliance security initatives (designed to withstand comprehensive audits). And while this may have been enough in the beginning, today the C-TPAT and AEO are just two of many global trade partnership initiatives that you should be aware of. If your organization is to be a major player in the global marketplace, you should be aware of at least the following seven initiatives:

  • AEO (EU)
    Authorized Economic Operator: AEO status is granted to reliable operators that are compliant with respect to security and safety standards and who can therefore be considered “secure” traders. Benefts include fast-tracked consignment, streamlined declarations, and mutual recognition with countries with a similar program.
  • C-TPAT (US)
    Customs Trade Partnership Against Terrorism: A voluntary supply chain security program focussed on securing supply chains against terrorism. Benefits include reduced customs inspection, reduced border delays, and eligibility for account-based operations.
  • Customs Co-operation and Mutual Administrative Assistance in Customs Matters
    An European Union program that provides the necessary tools for customs cooperation between EU member countries and other importers and exporters, including Korea, Canada, Hong Kong, the US, India, China and Japan.
  • FAST
    Free and Secure Trade: A voluntary joint initiative between the Canada Border Services Agency (CBSA) and U.S. Customs and Border Protection that enhances border and trade chain security while making cross-border commercial shipments simpler and subject to fewer delays.
  • ISA
    Importers Self Assessment Program: a voluntary approach to trade compliance that provides the opportunity for importers who have made a commitment of resources to assume responsibility for monitoring their own compliance in exchange for benefits.
  • SAFE Framework
    SAFE Framework of Standards to Secure and Facilitate Global Trade: a WCO Framework that includes requirements for Customs and Authorized Economic Operators that is designed to facilitate the implementation of secure trade programs in member nations
  • SEP
    Secure Export Partnership: A US-New Zealand Customs security arrangement (which is representative of emerging US security arrangements with other countries).

The Growing Importance of Water Conservation

Chances are, somewhere along the line, your supply chain requires freshwater — and lots of it. If it’s not already costing your organization a lot of money, it will soon. Why? Consider these facts, as collected in “Greenhouse Gas and Energy Co-Benefits of Water Conservation” by Carol Maas and Water for Energy by the World Energy Council.

  • 70% of the planet may be covered in water, but only 3.0% of that is freshwater, and five sixths of that is frozen in glaciers
  • 60% of freshwater is found in nine countries: Brazil, Russia, China, Canada, Indonesia, United States, India, Columbia, and the Democratic Republic of Congo
  • one third of the Earth’s population does not have the necessary quantity of 100 to 200 litres/day of water available to them
  • the US estimates that by 2050, half of the world’s population will live in nations short of water
  • over the last 70 years, water withdrawals have increased at more than twice the rate of population expansion
  • on average, 70% of available freshwater is used for agriculture and 22% is used by industry
  • water is required to produce energy
  • municipalities in Ontario consume more electricity than any industrial sector outside Pulp and Paper
  • water and wastewater services in Ontario municipalities represent a third to a half of electricity consumption – double that of street lighting
  • global water requirements for energy production are expected to increase from approximately 1.8 Billion cubic meters in 2005 to almost 2 Billion cubic meters in 2020 to about 2.1 Billion cubic meters in 2035
  • the increased need for energy production combined with increased agricultural needs and industrial process needs (to produce goods for an increasing population) is going to add considerable strain to an already strained water supply

The cost of water is going to increase as freshwater becomes more scarce, just as the cost of energy has increased with the cost of oil, which is still a primary fuel for electricity generation. As a result, water conservation is quickly becoming just as important to your supply chain as energy conservation, and any measures taken today will pay off in spades tomorrow.

A.T. Kearney’s Four Dimensions of Strategic Value

In a recent article over in IndustryWeek on why it is “time to tell your CPO to collaborate with suppliers”, A.T. Kearney outlined their four dimensions of strategic value that they claim will allow an organization to unlock the next level of value. The four dimensions of value they outlined are:

  • growth
    through improving the value proposition for existing customers or generating sales to new customers
  • risk management
    to deal with a world of increasingly unpredictable and devastating risks
  • value-chain optimization
    by tweaking the value chain to benefit all players by allowing them to focus on their strengths
  • structural capabilities
    that improve agility, responsiveness, scalability and even corporate social responsibility

And, according to the article, they depend on collaborative relationships with the supply base. However, in order to succeed in these relationships, the parties must reach mutual value. So how do the parties reach win-win situations? They start by using a value-screening process that takes the following steps:

  1. Develop a Relationship Baseline
    does the existing relationship provide a competitive position, strategic direction, and/or joint commercial flow in an aligned culture?
  2. Identify Initial Value Hypotheses
    is there a potential opportunities that brings a level of value to both parties?
  3. Align with Internal Partners
    which opportunities bring the most value to the organizations?

Then, according to A.T. Kearney, the next step is to turn supplier collaboration into a core competency. This is not an easy process, but it is a manageable one. It revolves around:

  • the formation of value creation teams,
  • the establishment of foundational processes, and
  • management of the transformation.

These core actions become part of a two-to-three year transformational roadmap which, when completed, will address all key suppliers and, hopefully, provide value well above and beyond typical cost reduction strategies. And if they are done right, they should enable the four dimensions of value outlined above.

Are they worth it? Any organization that grows, controls risk, and improve its structural capabilities and value chain should be able to create and sustain value even in weak economic environments, so they are worth it. Are they enough to get you to the next level? On their own, probably not as they don’t require innovation (as renovation is often enough for companies who are not leaders), but they are good value dimensions.

Can Electronic Postage Really Demystify International Shipping?

A recent white paper by DYMO Endica claims that “Electronic Postage Technology Demystifies International Shipping”. Needless to say this got my attention because, being aware of the dozens and dozens of issues that can arise in international shipping, postage usually doesn’t make the list.

The paper starts off with some facts that every supply manager needs to know, which include:

  • 96% of the world’s consumers live outside the US and collectively hold two thirds of the world’s purchasing power
  • currently, US-based online retailers that ship abroad acquire 5% of their revenue from foreign orders and this number is rising
  • 14.5% of retailers that ship abroad see more than 25% of total sales from foreign orders
  • rate classes that change annually, tariffs and taxes in multiple currencies, the disparate shipping rules of numerous countries, plus the rigours of complying with customs documentation and reporting are just a few of the challenges of international shipping

And then defines electronic postage systems as:

software platforms that enable the online purchase and printing of U.S. Postal Service postage, from the computer, to be used for domestic and international mailing and shipping

which is the proper definition of a country-based electronic postage solution. But how does that address the issues of tariffs, the disparate shipping rules of multiple countries, and the rigours of complying with customs documentation? All a typical electronic postage system does is insure that you apply the proper amount of postage (assuming you enter the proper dimensions of the packaged item and the proper weight and choose the proper shipping method, as the system looks up the rate from published rate tables). Now, some solutions from private industry will also produce the necessary documentation, given the necessary information, but then you are venturing into the territory of customs and trade documentation solutions. By definition, an electronic postage system does not produce customs documents. And you need to know how to answer the questions correctly (in what is typically a wizard-like interface) to get the right documentation.

In other words, if you integrate an electronic postage system with a trade and customs documentation system, you will simplify the trade process, as you will know how much you have to pay and what documents you need to include, but you will not demystify it. Many of these regulations are complex, with even more complex classifications for goods (for example, referencing HTS codes, a printer shipped with an installed cartridge is not the same as a printer shipped with an uninstalled cartridge). If you don’t understand the rules and regulations of where you are shipping, and the terminology used by the application, you will still be lost. There’s no magic demystification that occurs simply with the acquisition of such a solution.

However, if you understand the basics of international shipping, and the mandatory rules and regulations of the country you are shipping to, I do believe their claim that average shipping time can be reduced from 20 minutes to 2 if the software is in the hands of a professional in international shipping and logistics.

If you’re a small to mid-size business getting into the international direct-to-consumer shipping game, the white paper is definitely worth a read, but don’t get taken for a ride on the magic carpet. Simplification is not demystification, and you’ll have to learn a little to get a lot from this type of solution.

The Next Practices Xchange Is Only Two Weeks Away!

The Mpower Group‘s next Next Practices Xchange (NPX) is two weeks from tomorrow, Friday, November 4, which means that if you are a Supply Management VP or CPO that wants to discuss pressing issues relating to next practice identification and adoption, you should be on a plane in fourteen days time.

And yes, the doctor will be there. As most of my regular readers know, I’m not that big on conferences. Most of the regular conferences in this space have become, or have always been, fairly mediocre from a Supply Management improvement perspective as they are focussed on appealing to the lowest common denominator to maximize their potential audience, attendance, and $$$’s in their pockets. Just like the now-defunct Purchasing, the content has been watered down like a soda at the KWIK-E-MART to the point where you really don’t want to drink it if your goal is to be a leader in that top 20%, 10%, or 8% (however you want to define it). Given that SI’s goal is education and innovation, they just don’t fit.

However, there are still a few shining lights in the darkness, and the NPX has repeatedly proven itself to be one of those shining lights. In the same league of leading Supply Management consulting firms like Greybeard Advisors (led by Bob Rudzki who recently published Next Level Supply Management Excellence) and Archstone (who were recently acquired by The Hackett Group), The Mpower Group has been trying to take Supply Management into the teens in a big way by defining what the Next Level is and what Supply Management organizations need to do to get there. And while it is a work in progress, a number of the issues they have hit upon in the last couple of years are dead on.

For example, the second last NPX focussed on Training and Transition and the last one focussed on Value. In between, The MPower group has been defining a new methodology for improving performance based on AEIOU: Adoption, Execution, Implementation, Optimization, and Utilization — noting that many of the benefits of new processes and technologies go unrealized because of lack of adoption or proper execution.

For full details, check out the NPX website or contact Theodore Brown at 1-888-5-Mpower or theodoreb <at> thempowergroup <dot> com.

See you there.