Category Archives: Global Trade

Where To Next?

In addition to pointing out the recent corruption survey by Transparency.org, which pointed out that Brazil, China, and India fall about halfway down the corruption chart, the CPO Agenda recently pointed out a recent report by the Economist Intelligence Unit that revealed that, although countries such as India and China remain vital investment destinations, investments are being planned in other destinations as well. Specifically, approximately:

  • 17% of multinationals are planning investment in Mexico
  • 14% of multinationals are planning investment in Indonesia
  • 12% of multinationals are planning investment in Thailand
  • 11% of multinationals are planning investment in Poland
  • 11% of multinationals are planning investment in Romania
  • 10% of multinationals are planning investment in Ukraine

Given that the investment plans for the BRIC are only:

  • 20% for China
  • 17% for India
  • 12% for Brazil
  • 10% for Russia

It looks like not only is near-sourcing coming back, but secondary sourcing destinations are on the rise. So where are you going next? Giving the lack of coverage of some of these destinations, it’s hard to say, but it’s almost a sure thing that new “low cost” destinations will be making the headline soon. Any bets?

How Corrupt is Your Country?

Transparency.org recently released the results of its 2010 Corruptions Perception Index, that ranks countries according to perception of corruption in the public sector, on a scale from 10 (very clean) to 0 (highly corrupt). I’m pleased to say that Canada is 6th at an 8.9, outranked only by New Zealand and Singapore (tied for 1st at a 9.3) in the Commonwealth.

The ten most corrupt countries, in order, are:

  • Somalia
  • Myanmar
  • Afghanistan
  • Iraq
  • Uzbekistan
  • Turkmenistan
  • Sudan
  • Chad
  • Burundi
  • Equatorial Guinea

But more interesting is where the BRIC, and the US and UK, fall in the list. The UK and US are 20th (with a 7.6) and 22nd (with a 7.1) respectively. South Korea pegs in at 39 (with a 5.4) and Mexico at 98 (with a 3.1).

  • 069th: Brazil
  • 078th: China
  • 097th: India
  • 154th Russia

As Abdul Khadar commented on SI’s recent post on Buy India, Sell China, maybe you should also consider the level of corruption when making investment decisions. If things go bad, and you want local help, you may need a fair amount of bribe money set aside to get it.

Does Outsourcing Save Jobs?

A recent article over on Global Services on “Outsourcing often Mischaracterized as Evil and Insidious” states that outsourcing costs jobs is one of the myths that turn outsourcing into an epithet.

The article states that it is a jobs fallacy that when a job disappears in a western country and turns up in India it was exported by a nefarious businessmen. The article claims that the reality is that the job was exported because the job has been uneconomic to maintain in the West, whether or not India exists. The example given in the article is that when Carly Fiorina exported 35,000 jobs, it was the right decision, because if HP did not remain competitive in fiercely competitive markets, HP would have lost 100,000 jobs. In addition, if a certain job gets too expensive to do, such as calling a patient to remind her to take her medications, then it will disappear. But if it can be outsourced at an affordable cost, it will not.

I certainly buy the second argument. But I don’t know how far I buy the first. Costs have to be kept under control to support solvency and maintain jobs, but does this mean they always have to be outsourced? Sometimes it’s just a matter of increasing productivity. While that may be hard to do in online customer support, in certain areas of manufacturing, new technology and processes might be all that is needed if the plant is put in an area where costs are low or government incentives are high. In other words, outsourcing may not always be saving as many jobs as other methods could. It’s a balance.

Is Globalization Hurting You?

A recent article over on the McKinsey Quarterly on “Understanding your Globalization Penalty” is very thought provoking and a must read for any organization — or supply chain — looking to extend its global reach. Not only does globalization bring with it a risk for every opportunity — creeping complexity, culture clashes, and courageous counters from local competitors to name a few, but, high-performing global companies consistently score lower than more locally focused ones on several critical dimensions of organizational health — direction setting, coordination and control, innovation, and external orientation. This is backed up by data from McKinsey’s organizational-health index database which contains the results of surveys of more than 600,000 employees who assessed the health of nearly 500 different corporations.

This is scary. We’re in a knowledge economy driven by innovation, which requires direction, coordination, and external collaboration with suppliers and partners. Everything that globalization appears to be putting at risk!

Given that at least 50 percent of an organization’s long-term success is a function of its health, this is doubly troubling. Especially since McKinsey restricted the study to 20 “local champions”, which had outperformed their industries over the previous ten years, and 18 “global champions”, which had likewise outperformed their industries and met the composite criteria for full globalization — the cream-of-the-crop, if you will.

So what’s the problem? According to interviews McKinsey conducted with executives, it’s the familiar challenge of balancing local adaption against global scale, scope, and coordination, often hindered by existing internal networks and linkages [that] are ineffective for managing global-local trade-offs and instead just add costs and complexity. For example, many companies can’t identify transferable lessons about low-income consumers in one high-growth emerging market and apply them in another while others struggle when local entrants undermine traditional business models and disrupt previously successful strategies.

So what can you do? Get a health check and find out if it’s hurting you, where, and why. Then you can craft an appropriate action plan which may be to pull back and focus more on local sales. Sometimes your best market is down the street.

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.