Category Archives: Global Trade

Integration Point: A Global Content Provider

When we last covered Integration Point (in 2008 and 2010), we discussed their solutions for customs, security, and product classification; for free / secure trade zones and for regulatory compliance.

We talked about how their SaaS solutions helped companies with product classification under HS codes, advance notification (as required by 10+2), denied party screening (through integration with the US denied party lists), free trade / special economic zones (and identification of associated agreements), and the creation of necessary documents as well as the creation of surveys to determine if the supply base was compliant.

It was a good all-around solution, but it wasn’t a one-stop shop. While the import and export management solutions were extensive, the supply chain compliance solutions were limited; free trade was primarily ECCN, entry visibility, and country of origin; there was no automatic HS or country of origin classification; and content was primarily limited to HS/HTS codes, common import documentation, custom compliance documentation, and FTA summaries.

However, recognizing that their entire solution was dependent on good content, Integration Point, which now has twenty (20) offices across six (6) continents (and which promises an Antartica office as soon as the penguins start trading), started working on a Content Repository ten years ago and over the last decade has grown that content repository into a Global Content Repository with relevant trade data for over 185 countries. This include HS Codes, Tariff Schedules, Import/Export documentation requirements, rulings, free trade agreements, free trade and special economic zones, customs compliance programs, denied parties, sanctions and embargoes, and relevant trade acts, such as Lacey. The repository, which is maintained by a team of over 200 people globally, contains millions of base documents and millions of codings and mappings and is updated daily.

Daily updates is a critical part of a trade content repository. While some countries only update their tariff schedules a few times a year, others update their schedules monthly, and some update their schedules weekly (or more as Brazil once updated its schedules 80 times in one year). In addition, as trade relations improve or break down between countries, new trade restrictions / sanctions / embargoes are created almost overnight, denied parties get added to the list daily, and new regulations and rulings also come out on a daily basis. Correct classification, coding, and documentation is the difference between trouble-free trade and having your shipment held up for days, weeks, or months. And not shipping a restricted product to a denied party is the difference between smooth sailing and being federally investigated and fined millions of dollars. In both cases, your logistics and trade managers can only insure properly documented, legal, trade if they are on the ball with up-to-date data.

Since Integration Point has a global team, Integration Point, which sells access to its content repository as well as its trade management solutions on a subscription basis, is able to keep its repository current, which is no mean feat considering there have been over 2M updates to HS classifications alone on a global basis so far this year and over 1M updates to the import / export document database were required to capture regulation updates, trade agreement updates, form updates, and new rulings.

Integration Point now has one of the best and most complete Global Content Solutions out there and should be included in your list of content solution providers as you endeavour to get your compliance under control because Content is a Cornerstone of Compliance.

Plus, based on this content, Integration Point is now able to offer innovative solutions around country of origin determination, product classification, tariff analysis, and supply chain costing. We will cover these in future posts in early 2015.

Content is a Cornerstone of Compliance

In Friday’s post, we asked if you could solve the compliance challenge before it cost you tens or hundreds of millions of dollars. We noted that the biggest reasons for lack of compliance are lack of knowledge, policy, visibility, analysis, and procurement technology and the fixes are knowledge, policy, and appropriate technology.

One of those technologies is a Procurement Marketplace that can steer (or force) buyers to buy the right products from the right (and approved) suppliers. Another is supply chain visibility technology that lets a company monitor what is going on in the supply chain and evaluate a potential supply base before making a decision. A third is import/export/trade management software that helps the organization identify the regulations it must comply with, collect the necessary information, produce the required documents, make sure the documents get to the proper authorities complete and on-time, and track all of the associated certifications and insurance certificates that go with the products and the supply base.

A good trade solution will address, at a minimum, import/export requirements, ECCN (Export Control Classification Number), custom security programs, FTA/FTZ/SEZ (Free Trade Agreements/Free Trade Zones/Special Economic Zones), country of origin, HS (Harmonized System) codes / HTS (Harmonized Tariff Schedule) codes, DPS (denied party screening), and entry visibility. Essentially it will help a company determine all of the export requirements, all of the import requirements, produce the necessary documentation, and track its product from country of origin to the destination country.

In order for this solution to work, it needs a lot of content. Namely:

  • import/export regulations for all of the countries being sourced from, sourced through, and shipped to
  • US ECCN database
  • requirements for programs such as C-TPAT, PIP, and AEO
  • Free Trade Agreements between all of the relevant countries
  • database of all FTZs / SEZs in the relevant countries
  • HS schedules for all of the relevant countries and mappings
    and/or mappings to from country specific schedules
  • Denied parties lists for the relevant countries

That’s a tall order. But no longer an impossible one. Stay Tuned.

Procurement Trend #28: Supply Chain Risk

Twenty-five trends are left
Together they are quite heft
Depriving us of deft
So let’s make another cleft
… and shred them one-by-one!

We won’t give up. We won’t surrender. We will plow through to the end. We shall expose the half-truths and the lies. We shall tackle the issue head-on and with growing confidence and clarity, we shall spread the truth, whatever the toll may be.

The goal is that, at the end of this thirty part series, you will not only understand why so many historians are still talking about the false trends we debunked in our Future of Procurement series, what you need to do to prevent staying in the past with your organizational “peers”, but what you need to do to not only stay in the present but start marching towards the future, which is coming faster than you think.

So why do so many historians keep pegging this as a future trend? There are a number of reasons, but among the top three today are:

  • Natural & man-made disasters are on the rise and will increase five-fold in next 50 years
    In Combating Supply Chain Disruptions: Lessons Learned from Japan by The Logistics Institute (Asia Pacific) published in THINK Executive, Nov 2011, the authors state that is predicted that both natural and man-made disasters will increase five times in the next 50 years! (page 18)
  • Specialization means lengthening supply chains
    as more and more companies focus on components or pieces of a solution and not the whole product or solution
  • Trade and security agreements mean more trade and economic risk
    as these agreements multiply faster than Fibonacci’s rabbits around the world

So what does this mean?

Natural Disasters are on the rise

Even more supply chain interruptions are on their way, and if your organization designed its supply chain around the ring of fire*, expect to get burned! Many organizations have not yet realized that they need to move manufacturing and storage away from the hot zones to the greatest extent possible, that they need to make sure that their facilities have multiple access routes (as one road is easily blocked by a huge sinkhole, earthquake, landslide, etc.), and that they need to have backup facilities in other locations and plans to quickly bring those backup locations online in an emergency. If the organization designed its supply chain around JIT (Just In Time), it needs to make sure that it has enough buffer stock of critical inventory to account for the expected time delay between production and shipment from a primary location and production and shipment from a secondary backup location if the switch needs to be made.

Specialization

The longer the supply chain, the longer it takes for material and product to flow though the chain to the end consumer. The organization needs to focus on collaboration and technology to make sure the chain flows smoothly. (The longer the chain, the greater the chance the order will NOT be perfect.) All parties will need to work together closely and disclose issues as they arrive so all parties can provide options for resolution. Data will have to flow quickly as well, and hence the need for new technology platforms and networks.

Trade and Security Agreements

Your organization needs to keep a watchful eye on trade agreements being negotiated and on the lobby groups pushing for those agreements, since many negotiations are now, despite being led by free countries, going on behind closed doors. If something is going to drastically change the terms of trade, your organization needs to know what the potential impacts will be and have a plan in place to deal with them. If your organization doesn’t, chances are it will miss opportunities to increase market share in the best case and be locked out of the market entirely in the worst. Sad, but true.

* Not Johnny Cash’s Ring of Fire, which burned brightest with Dilana.

Procurement Trend #31: Increased Competition

Today we continue our coverage of each and every “future” trend that we debunked in our Future of Procurement series that falls under old-blues and ongoing news. Before all is said and done, we’re not only going to make sure that you not only understand why the historians are still talking about these ancient trends, but why they are still relevant to many Procurement organizations stuck in the past with the historians as well as what your organization needs to do to prevent getting sucked into the historical time vortex as well. So on to trend number thirty one!

As per our original series, while an idiot, and maybe even an imbecile might not be aware that Globalization is, obviously, going to lead to increased competition (and that as the pace of Globalization increases, so does the pace of increased competition), but even your everyday dull-witted dimwit is going to realize this, as is everyone of average intelligence (and it’s pretty unlikely that you’re going to find anyone of lower IQ in a senior management or Procurement position [with the possible exceptions of Texas and Florida]). As a result, not only is this trend as old as globalization, but it has been obvious for almost as long.

So why are the historians still pegging it? What are some of the primary reasons?

  • Emerging markets are new Emergent Marketsand even emergent markets are outsourcing

    China is no longer emerging, it is now the world’s second biggest economy, regardless of whether you take the UN, IMF, or World Bank GDP calculations as gospel, Brazil is the seventh, Russia is the eighth, and India is the tenth. In other words, the BRIC are all top 10 economies. If that’s not an emerged market, I don’t know what is (especially since Canada and Mexico, the latter of which used to be buoyed by American near-sourcing, have been knocked down the list. Canada is not even top 10 anymore! [the doctor blames Harper.])

  • A New Set of Emerging Markets are Risingand even Africa is seeing investment

    A few years ago, people were talking about BRICS. Most because they saw the beginnings of the rise of South Africa, which matched the beginnings of the rise of the BRIC a decade or so ago, and a few because they were forward looking. But now that the BRIC has emerged, focus is shifting to the MIKTS (Mexico, Indonesia, South Korea, Turkey, and South Africa). As a result of the continual rise in transportation costs, labour costs in China, and automation, progressive American multi-nationals are realizing that near-sourcing to Mexico is not only the low-cost opportunity, but increases JIT capability in their supply chain. Indonesia is the new China and Vietnam for traditional manufacturing. South Korea, while very technologically advanced, is not as prominent as Japan or China as an outsourcing destination and, thus, provides additional opportunities for forward-looking multi-nationals for high-tech outsourcing. And Turkey, like Poland, has considerably lower labour costs than Western Europe but still has top-notch manufacturing standards and capabilities that not only meet Western European standards and capabilities, but in some industries, such as steel, exceed those capabilities. (For example, 1 US Dollar is approximately 2.3 Turkish Lira, and minimum wage in Turkey equates to about 4.3 Lira per hour [turkeys-minimum-wage-earners-slaves-to-poverty (todayszaman.com)], while the minimum wage in their neighbour Greece is about 2.5 times that, and the average Turk makes about 2,000 Lira or $800 US a month).

  • Developed Markets are becoming hyper-competitiveand sometimes the only option is global expansion

    Despite the irrational beliefe by some US leaders that markets can grow forever (because, theoretically, population can grow forever), from a global perspective, relatively speaking, market share at any given time is a zero-sum game. Your economy grows at the expense of another economy. At any given time, the are a fixed number of people on earth with a fixed number of hours to contribute to create a fixed amount of product — which means at any given point in time, there is a fixed global gross domestic product. So if your economy is getting more for that product than another economy is getting for an equivalent product, then your market share is growing at the expense of that market.

    So it should come as no surprise that now that reality has sunk back in and companies realize that market growth is limited to population growth, markets are becoming hyper-competitive as each company wants a bigger share of the fixed pie.

So what does this mean for you?

  • Emerging markets are now Emergent MarketsDon’t look for outsourcing cost savings from these markets, look at new customer opportunities and opportunities for nearby, or even local, production to keep global transportation costs and transportation delays down.
  • Third World Markets are Now Developing MarketsIf you must outsource, you need to look to the MIKTS, not the BRIC. If you still believe there is labour arbitrage, cost savings, etc. by outsourcing, then you have to look at Mexico, Indonesia, Turkey, or South Africa or get ahead of the curve and figure out what markets will be developing markets in 10 years.
  • Developed Markets are Becoming Hyper-CompetitiveSavings is not the answer — someone bigger can use leverage to save more. Value is the answer — value to the consumer, value to the company, and value to the supplier. So look for value generation in everything your organization does.

Procurement Trend #32: Globalization

As per yesterday’s post, we need to discuss in detail each and every “future” trend that we debunked in our Future of Procurement series on old-blues and ongoing news. Until you not only understand why the historians are still talking about these trends, but why they are still relevant to many Procurement organizations that are stuck in the past with the historians, as well as what you need to do to prevent staying in the past with your organizational “peers”, we can’t risk ignoring them simply because we’re fed up of them. We have to make sure that each and every organization that wants to claw its way out of the past and into the present has the knowledge it needs to do so. So without further ado, we move on to trend number thirty-two.

As per our original series, globalization began soon after trade between nations. As far back as 3,000 BC Egypt was trading with Mesopotamia, which was near the end of the known civilized world for most Egyptians at that time, for pottery, lazuli, and obsidian. Then, about 3,000 years later, the Silk Road connected China to India, Africa, the Middle East, and Europe — and that was the known world at that time. Globalization has been with us for thousands of years and isn’t going away either.

So why do so many historians keep pegging it as a future trend? There are a number of reason, but among the top three today are:

  • Post-Panamax Ships and the Panama Canal Widening
  • 767s
  • The New Silk Road

So what does this mean for your organization? How do you blast out of the past and into the present in preparation for planning for the future?

Post-Panamax Ships and the Panama Canal Widening

Current Panamax Ships can accomodate 5,000 TEU (twenty-foot equivalent units), and can hold the equivalent of three-plus football fields, but with the widening of the Panama Canal, expected to be completed next year, the canal will be able to handle post-Panamax ships with a cargo capacity of up to 13,000 TEUs. That’s a 260% increase which will bring the cargo capacity up to about eight football fields. That’s over 20 million pre-packaged ready to sell iPhones on a single ship. Assuming Foxconn can pump them out fast enough, one ship and all of North America’s iPhone needs are met for an entire quarter!

It means that even with increasing oil prices and transportation costs, it will still be cheaper to outsource production of certain goods because the cost per unit will be essentially zero in certain compact high-value goods categories.

787s

Can’t wait 33 days for ocean freight? You don’t have to! The new 787-10 Dreamliner has a 124.4 meters of cargo capacity, which is over 3 TEUs of cargo capacity that can be moved halfway around the world in less than a day! For compact, high-value goods, this also results in outsourcing continuing to be profitable and logical for certain categories despite rising oil costs and rising labour costs in Asia.

The New Slik Road

Despite the almost utter lack of coverage from western media, the new China, Russia, and Germany trade partnership is going to usher in a new era in Eurasian trade, strengthen both the European and Asian economies (and Russia, India, and China in particular – the “RIC” in “BRICS”), and offer a plethora of new opportunities for global expansion both in terms of sourcing and selling — and Procurement organizations need to lead the way. Russia, China, India, and the EU account for about 42% of global GDP, and even though it’s still too early to tell precisely what impacts the new trade agreements are going to have, there’s no way that they are not going to be uber-significant. Not only does it have the potential to biggest boon to supply chain finance this year, if not this decade, but it’s going to change the way you think about trade. In other words, you have to totally reevaluate your global sourcing and procurement strategies to make sure they still make sense in this new era of trade.

That’s two down and twenty-eight to go. It’s going to be a long trek, but we’ll do it!