Global Supply Chain

Stanford University professors Warren Hausman and Hau Lee and TradeBeam associates Graham Napier and Alex Thompson released, in October 2009, a detailed study on Global Trade Management (GTM) focusing on the complexity of the global trade environment.  In the report they detail  the >100 processes related to a global transaction and the value proposition for managing the processes efficiently and effectively.  The report,  “How Enterprises and Trading Partners Gain from Global Trade Management” is chock full or process flows, charts and formula that provide extensive insight into what is actually required to affect a global trade transaction.  For any practitioner or student aspiring to excellence in the area of  GTM, this document is a must read .

Their conclusions as to the benefits – translated into % savings in annual costs and % increases in annual profits for both importers and exporters – should be enough to make any senior executive involved in Global Trade Management take note, if not immediate action.

• Dollar savings amounting to 1.7% in Annual Sales for Exporters
• Dollar savings amounting to 0.6% in Annual Sales for Importers
• Benefits amounting to 28% increase in Annual Profit for Exporters (assuming profit = 6% of sales)
• Benefits amounting to 10% increase in Annual Profit for Importers (assuming profit = 6% of sales)

The downside of mismanaged global trade management exposes a company to direct costs (such as fines for non-compliance), and hidden costs (such as greater inventory safety stock, increased product obsolescence, lower productivity, higher customs fees, lost opportunity for duty-drawbacks and supplier/logistics claims.

To achieve the annual savings and benefits, requires IT-enabled solutions that streamline the processes required to execute complex, simultaneous global trade transaction.  To streamline the import and export processes requires two (2) vital capabilities:

1. The ability to seamlessly integrate processes across the internal organization and external partners, and
2. The ability to seamlessly synchronize information between the required actors so that they can efficiently execute their work and insure that shipments move effectively through the multiple processes.

The challenge in optimizing the global trade management environment is primarily that of streamlining complex processes.  With the myriad of cross-functional and cross-company interactions necessary to execute GTM streamling processes is virtually impossible without enterprise IT-eneabled GTM support.   IT-enabled GTM support will enhance organizational effectiveness and efficiency by enabling:

• operators to execute their work efficiently with minimal reliance on outside resources for their supporting information (streamline process)
• partners to share critical information collaboratively in (near) real time – suppliers, customers, 3rd party logistics providers, warehouses, customs, and financial institutions
• seamless information sharing across internal silos,
• total visibility of product and financial transactions across the entire global supply chain,
• full total cost control,
• comprehensive compliance management – regulatory and business,
• user centric analytics and reports, and
• real-time collaborative capabilities.

Global Trade Management is a relatively new discipline.  Over the passed several years several “GTM” solutions have matured and are deployed as a Software as a Service (SaaS) offering.  However, these GTM solutions while supporting some GTM functionality, and in some instances extended GTM functionality, all are still somewhat specialized in their offerings and are dependent on larger ERP systems for the core business processes.  In order to achieve GTM excellence requires an enterprise-wide approach.   However, even with the interfacing of the current SaaS GTM offerings most of the ERP solutions do not have the robust functionality required to provide a comprehensive solution.   The journey is most often difficult and costly and the results deliver less than promised or expected.

Because of the unique orientation of enterprise Global Trade Management, there are still very few IT-enabled solutions that provide ture  enterprise capability.  The enterprise level GTM solutions are provided mostly by small and mid-size solutions providers and not the large GTM “best of breed” or enterprise solutions.  This simple reality presents the most fundamental challenge to a company achieving  GTM excellence – dealing with a small or mid-size enterprise-capable GTM  solution provider.

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).