Global Supply Chain

The recent study  by American Shipper magazine and AAEI, “ISF Benchmark Study: Achieving Complaince – Against All Odds”, presents some revealing benchmarks when it comes to meeting ISF compliance requirements on January 26, 2010.

The benchmark study highlighted 5 key areas that separates winners from the general population of importers:

• Will be ISF compliant by the January 26, 2010 enforcement date.

• Have a high level of confidence that their ISF filings are timely, accurate and complete.

• Keep total cost of ISF compliance below $100K per year.

• Pay <$25 per filing.

• Make amendments to contracts and service agreements to incorporate ISF compliance.

The ability to meet CBP ISF compliance is predicated on several key elements:

1. Having a system in place that helps the importer assure the suppliers are providing the ISF information in a timely manner that does not delay shipment cycle time.  The survey highlighted that delay in shipment cycle time due to ISF information reporting was a major concern for importers with the implied additional cost associated with a delay.

2. Being able to capture ISF supplier information electronically or through an electronic facsimile.  The ability to easily validate information and where necessary request amendments or updated ISF information quickly.

3. Preparing the ISF filing without, or with minimal, manual intervention.

4. Submitting the filing electronically to Customs or a Customs Broker.

5. Monitoring ISF filings status to insure CBP compliance.

To be a winner requires the ability to manage the entire process efficiently and economically.  Winners have software  solutions that streamline process and integrate information flow to ensure   data flows from suppliers and is convertedto meaningful information without significant manual intervention.  The system is able to validate the information to insure that all required data elements are recieved.  The solutions provide alerts if there is incomplete information requiring attention.  Finally, the system should automate the conversion to the ISF details for electronic transmission to the defined filing system.

However, achieving winner status is not likely achievable without a supporting IT infrastructure that provides  supplier PO shipment planning and execution visibility and the ability to monitor ISF information submissions.

Blinco Systems has implemented 3 systems with clients that are considered large (and approaching mega) filers by CBP.  Each client had their ISF solution implemented within 60-90 days and have achieved >99% accuracy on their filings within the time constraints required to comply with CBP.  Furthermore, with full visibility into their suppliers’ shipment schedules and ISF filing performance, they have experienced virtually no degradation in shipment cycle time due to the information flow.  Finally, and most importantly our clients have been able to fully automate the ISF process and reduce costs dramatically (<$5.00 per entry).

A quick slice of news from Procurement Leaders in the article “Experts warn firms losing sight of operations due to supply chain outsourcing” highlights the “Rule of Unintended Consequences”.  In this case, the outsourcing of either or both manufacturing and supply chain activities to 3rd parties was intended to increase efficiency and reduce total cost across the supply chain while relieving the company of supposedly non-core competencies and streamline operations.  In theory this works well.  However, as many organizations are discovering, without adequate systems in place to provide the capability to command and control an outsourced environment, the unintended consequences often lead to a significant lack of responsiveness and a meaningful increase in inventory and cost across the supply chain.

Outsourcing supply chain activities does not mean outsourcing responsibility for supply chain performance.  The issue of visibility is an important (but not the only critical) element in gaining control over the supply chain.  However, visibility into outsourced operations is more difficult than it might first appear because of the number of participants that must be monitored and the shear breadth and differences of activities  that must be executed across the supply chain.

It is important to realize that in the context of supply chain management, visibility is an outcome of information.  Because of the complexity of all but the most simple supply chains, it is virtually impossible to maintain a manual system and achieve a reliable and  meaningful level of supply chain visibility. Therefore, it is imperative to have systems in place that can capture the information from all the required sources and put it into a context that is meaningful to the user.

While I fully agree with Andre Pino, Marketing Director of Acsis, that “… new automated data collection and collaboration technologies can provide visibility and restore the management control over their demand-supply networks and minimise disruptions and operational errors”, the effort to achieve world class capability is not simple.  To achieve the results that he alludes to implies the ability to:

• collect and validate the information from all participants across the supply chain,
• distribute it seamlessly and make it visibile to the individuals who are responsible for monitoring and managing the supply chain,
• enable real-time collaboration with all required parties (both internal and external) for information sharing and problem resolution,
• and support action as required

True operational visibility across an outsourced supply chain will only be achieved if the organization has systems in place that synchronize information from multiple sources.

A recent Aberdeen study reported that the greatest problem for executives in global supply chain management is still visibility. In the study 79% of the executives from large companies and 41% of executives from SME that responded ranked “Lack of critical supply chain visibility” as the overall most important issue. The second greatest problem was “Uncoordinated multi-tier supply chain processes” which garnered 56% and 37% respectively from the executives responding.

The results are rather telling given the emphasis and investment that has been made by organizations to insure that they have the critical visibility required to enable their global supply chains to operate efficiently.

Are the results really surprising? The answer is Yes and No.

Yes, because it is believed that if people have visibility into where an item is within the global supply chain they are able to make optimal supply and demand decisions based on the information.

No, because the visibility solutions provided are only stop-gap solutions that provide snapshots into where an item is in the supply chain, but provide no, or very limited, visibility into the financial and compliance implications surrounding the item. With no integrated visibility into the physical, financial and compliance status of the item it is virtually impossible to have the critical view of the supply chain necessary to significantly improve supply chain performance.

Without context it is virtually impossible for individuals responsible for managing products across complex global supply chains to make decisions that are optimal for the organization. To get context the organization requires cross-functional execution, information and financial visibility and implication analysis.

Operations areas include internal functional areas such as sourcing, purchasing, international logistics, customs, inventory management, accounting and finance. Each functional area is affected by the activity within the supply chain. However, in most instances both the operational unit and the systems supporting it are not integrated and the information is often not easily reported in a meaningful way. This lack of integration is even more evident with external partners. The result is the lack of critical supply chain visibility.

Critical supply chain visibility is not just about the location of an item in the supply chain but it includes the ability to see virtually all aspects that affect the item. Critical supply chain visibility includes views into where an item is anywhere in the cash-to-cash cycle and the views into all of financial and compliance issues that accompany the item.

It is undeniable that getting complete physical, financial and compliance visibility still does not exist in almost any organization, large or small. Which leads to the second finding of the study – uncoordinated multi-tier supply chain process. In order to deliver this level of capability and the benefits that come from it organizations must be able to capture the information at these levels, make it visible, and put that information into a comprehensive contextual picture. The two issues of visibility and coordinated processes across an organizations global supply chains are inextricably linked together. You cannot get multi-tier coordinated processes if operations is not linked to integrated and synchronized global supply chain information. This information must be visible at all levels of the supply chain and include the physical, financial, and compliance information.

Until that happens, the issue of global supply chain visibility and coordination of multi-tier issues will remain a very high ranking issue on executives minds because they will continue to lack the information required to support optimal demand and supply chain challenges.

What are your comments?