A substantial opportunity lies in the ability to make GSP claims.  There are however, minimum requirements that the importer must meet in order to take advantage of the lower opportunities that this special customs program provides.  The first is understanding that minimally 35% of the products’ input ingredients must originate in the beneficiary country.  Secondly, it is important to be able to validate all aspects of the entry during an audit.

These requirements lead to fundamental questions about the GSP filing process.

1. Who has the knowledge about whether a product qualifies for the GSP?  Answer: the supplier.
2. Who will verify the supplier statement?  Answer:  The Importer
3. How will your customs broker know whether the product should be claimed under a GSP entry?  Answer:  ???

Because, being able to take advantage of special custom’s programs is so opportunistic there are strong reasons that the importer should take a hands on interest into the customs filing process.  Nobody knows the product better than the importer.  With responsibility for product duty classification residing with the importer and the new technologies supporting automated customs record management, the importer has incredible opportunity to take advantage and significantly increase compliance while reducing cost at no greater effort.

The Association of Food Importer has published an insightful article on GSP Compliance – Getting it right

Best practice in Import Compliance is a topic that is well discussed.  The issue of Customs Management is another issue.

There are several major best in class global players in the area of Trade Compliance – MIC, Amber Road, Integration Point, Tradebeam – along with the ERP modules of SAP, Oracle and Microsoft.  There are others players that deal with import and/or export compliance specific to their local geographies.  However there are very few trade compliance solutions that are able to fully manage and automate the last mile of trade compliance – which is the Customs entry process.

The area of Customs Management is not often written about in the popular supply chain journals.   However, the ability to integrate and automate Import Compliance with Custom Management is now possible with the result that importers are able to achieve dramatic hard-dollar results along with the more typical soft benefits.

This blog is the first of a 4 part series that addresses how you can develop a Best Practices automated Import Compliance and Customs Management program.  The series outlines how importers (of virtually any size) can take advantage of the new technologies to achieve best-in-class trade compliance and automated customs management and as a result dis-intermediate the costs that are associated with providing a best-in-class trade compliance and customs management environment.

• Part 1 – Introduction
• Part 2 – The state of Customs Management with Traditional Customs Brokers
• Part 3 – Best Practices in Import Compliance and Customs Management – redefined
• Part 4 – Conclusions

Part 1 – Introduction

Traditionally, the import process has been managed by freight forwarders and customs brokers.  This relationship, between the importer, freight forwarder, customs broker and customs has been in place since the inception of the country.  The need for the relationship grew out of the complex logistics requirements and documentation management and the relative specialization that is required to deal with international suppliers, carriers and customs.   The Customs Broker has traditionally filled a critical function as an intermediary between the importer and customs.  The Customs Broker provides services to facilitate the filing and remittance process and support a level of objectivity that may help insulate the importer from penalties or prosecution.  However, the Customs Broker does not relieves them of the ultimate responsibility for the custom’s entry filing.

Aligning Control with Responsibility

Today, importers have the opportunity to take charge of the import process and align authority with responsibility.  The reality is that the importer is responsible for insuring they are compliant with customs and other government agencies involved with the regulatory control of foreign produced products into the United States.  The importer, not the customs broker is liable for the regulatory entries supporting imports.  What the Customs Broker provides is expertise and an arms-length authority so that if there is an infraction with a filing, there is the appearance that “reasonable care” has been exercised and the resulting penalty will be minimized.

Import compliance and the customs filing process has historically been managed by full line Customs Brokerage firms.  Where large companies manage the processes internally they are usually staffed by licensed customs brokers and lawyers who oversee and manage their compliance programs and filing process.  However, even in these instances, most companies still use the external services that a full time Customs Broker offers.  This is what has constituted “best practices” when it comes to import compliance and customs management.

Until recently the process of managing an import compliance program with a level of comfort was beyond the reach of most import organizations for several reasons.

The Mystique of Customs

Firstly, there is a mystique around the actual process of the customs relationship and the complexity of the filing process.  This leads to the belief that the Customs Broker is necessary to navigate the relationship with Customs.

Secondly, importers mostly feel they don’t have the expertise to manage the classification, compliance and custom filing processes.   The belief that classifying product is difficult to manage and maintain is one of the greatest concerns of the importer.  The inability to easily maintain product tariff classification within a relational data structure means that the information is not readily available to the importer to support the customs compliance requirements from both an operational and filing support level.  Because of the inability to easily manage the regulatory and tariff information, managing compliance processes is virtually impossible for the importer without the services of a full line customs broker.

Thirdly, the increase in regulatory requirements, from national security and product safety, adds complexity to the import process and makes managing the process appear significantly onerous.

Fourthly, there has been a lack of tools and systems to support the interfacing with customs.  Without information systems to capture, maintain, and access regulatory information, across multiple regulatory agencies, related to a product, supplier or country, simply and within the context of operations, the management of information required to execute a customs import filing is daunting.

The result is that the importer relies on the traditional full-line customs broker to manage the relationship with customs including classifying products, filing entries, etc.  The customs broker extends their services to support the importer in interfacing with the government and helping insure that they are operating in a way that will be deemed to be “reasonably careful” in the import processes and provide the importer with “cover” from penalties or legal proceedings.

It is in this light that traditional best practices for Import Compliance and Customs Management is framed.

The McKinsey study talked about the need for having a global supply chain strategy that was agile and able to flex to the rapidly shifting global environment.  The Bloomberg report highlights a significant concern that China will face exceptional dislocations in their banking system that will reverberate around the world.  If this happens, and clearly the vast majority of the respondents to the study poll believe it will happen within 5-7 years, it begs the question, what will be the impact on supply and supply chains around the world?  At this time the question is moot.  However, if it happens, the impact on supply and supply chains will  likely be impactful and possibly devastating to some companies. The way organizations respond will greatly impact their success.  The way organizations respond will depend on the strategies they have formulated and are able to implement.

Another column appeared in Supply Chain Digest today titled “Time for More Dynamic Supply Chains” http://www.scdigest.com/assets/news/11-01-27.htm#FT.  In the article, Dan Gilmore, the publisher and a very insightful guy asks the question: “ What is of more importance for supply chain success (and agility): the trucks and the software, or the people who design and run them?”

What links all three of these articles is their focus on the need for organizations to have agile supply chains to address the unknowns that the future holds for their supply chains.

I think that the questions posed by Dan is worthy of thought and a response.  The response to this question is that they are all important, but not all equally important.

I believe that people are the foundation of any organization, and therefore the most critical component for creating and maintaining an agile supply chain.  An agile supply chain is ultimately about being able to respond to changing supply conditions quickly, with the least amount of disruption, and at the lowest possible cost.  People interpret information that the software (systems) provides and make the decisions that organize the trucks (physical supply chain components) to deliver the materials.  Therefore people who run the supply chain are the most important.

I would then argue that the software is next in importance for creating and executing supply chain agility.  As supply chains become more complex, the amount of information related to the planning, procuring, moving, making and distributing products to the final customer is growing geometrically, if not exponentially.  Having systems and software solutions that capture the raw information and contextualize it is a major keystone component of any successful supply chain infrastructure.  Access to the underlying supply chain information is vital to the people who are responsible for making the decisions about the design, deployment, and execution of the supply chain.   Software solutions that contextualize the information and present it in a way that is meaningful for the user is critical to supporting the decision making process that people must do on a minute-by-minute basis.

The final component addressed by Dan’s question, the trucks, are important but are the outcome of the former.  When people have meaningful information that they can then apply to their experiences they can make better decisions as relates to the physical (trucks) supply chain.  When major supply disruptions arise in the physical supply chain having visibility to the problem is critically important.  The visibility is provided by information.  It is this information, most often supported by appropriate software solutions that enable the people to make the best decisions about how to deploy the resources across the supply chain.

These opening 2 paragraphs from a McKinsey Quarterly report (https://www.mckinseyquarterly.com/Operations/Supply_Chain_Logistics/Building_the_supply_chain_of_the_future_2729) clearly enumerate the challenges that companies face in managing their global supply chain.  How they deal with these challenges will determine their success in the future.  The BRIC countries (Brazil, Russia, India and China) are radically changing the playing field and affect everything in the supply chain from raw material availability to logistics capacity to currency exchange.   How successfully organizations deal with the rapidly changing global environment will depend on creating and implementing agile global supply chain strategies and executing the mechanics of those strategies.

The integration of strategy with mechanics is so inextricably linked that it can be easily argued that one without the other will ultimately lead to limited success of the former.  Which come first – the global supply chain strategy or the supporting mechanics that provide the infrastructure?   While having a global supply chain strategy provides companies with powerful differentiating plans of action, lacking comprehensive supply chain execution mechanics leaves the organizations highly vulnerable to failure in carrying out the strategy.

Executing agile global supply chain strategies is dependent on information that provides transparency into all aspects of the global supply chain.  As a company moves further away from its basic manufacturing paradigm – both physically and geographically – it depends more and more on information to provide insights into events and their outcomes.  This requires a comprehensive set of tools designed to support the gathering, synthesizing, contextualizing and reporting of the information into meaningful and easy to access analysis and reports.  However, without the ability to execute the tactical activities in support of the overarching strategy limited success is the most likely outcome.  It is being able to rapid execute change across their global supply networks that ultimately delivers the success of the strategy.

In our white paper, Lean, Agile and Adaptive Global Organizations,
http://blinco.com/casestudies/whitepapers/leanagile02206.pdf we present a comprehensive roadmap on how it is possible to build a lean, agile organization that will be able to support whatever agile global supply chain strategy the organization implements.

The paper points out that “[c]onsulting and  business applications that both identify and address these problems have been developed over the last few decades primarily for large multinational companies. However, without the budgets or internal expertise to realize such projects, small and medium sized discrete manufacturers struggle to find affordable business services and IT applications to address their sector specific needs and budgetary constraints. There are still limited software applications to support the small and mid-sized manufacturers.”

There is much literature now being published on SaaS and LCO and one can easily draw the conclusion that a SaaS solution, if it can work for you, will bring you a lower cost solution than a traditional licensed model would.  My view is a firm – Yes and No.

There are strongly stated underlying assumptions in favor of the SaaS solution as the LCO option.  The first assumption is that the SaaS solution fits the business requirements of the client organization.  The second assumption is that the SaaS solution can be easily configured to support the business processes of the client organization.  The third assumption is that once implemented, the SaaS solution will continue to accommodate changes in the client.  The fourth assumption is that the sum of the costs (subscription, implementation and data conversion costs) of the SaaS solution(s) implemented at the client will be less than the cost of a more traditional solution (whether licensed or subscription – plus maintenance costs) that is supported with client-centric modification and/or customization.

For many small and mid-size businesses whose business model doesn’t change over time and who can adjust their processes to the software solution, the SaaS delivery mechanism can fit very well.  However, for companies that are in environments that experience change, whether internal or external, the SaaS model needs to be seriously questioned.  Change manifests itself in business requirements imposed or necessary business processes change.  If an organization want its software applications to change to support the new process requirements, then the SaaS solution may prove inadequate and limiting.

With respect to LCO, the numbers have to be examined very carefully.  Questions about the net present value of the software over a 3-5 year period should be questioned.  It might be that the traditional license model with upfront license fees and annual service and maintenance may actually be less expensive over a 3 year period than a SaaS subscription and significantly less expensive over a greater period of time.

If a company changes or requires additional software to support changed business processes or requirements, questions around the additional costs of other SaaS solutions should be considered and compared to the cost of modifications to a licensed application.

There are many costs to consider when moving forward with a solution – whether SaaS or traditional license.  Like any major investment, consideration of both the obvious and hidden costs is imperative.  Care should be taken when evaluating the SaaS model as to whether the savings are as real as the current press reports or more of an illusion.

Some questions to consider when deciding on whether a SaaS solution is right for you:

1. Does my business neatly fit into the SaaS solution offering – today and in the future?
2. Will my business be required to change to meet the requirements of external forces – i.e. customers, suppliers, government regulations in the foreseeable future?
3. Will my business processes be required to change over the next 2-5 years due to growth opportunities?
4. Does the SaaS solution address my business requirements or will I have to look at additional solutions to round out my IT environment?
5. If I need additional software how will it be integrated into my SaaS solutions?  What will be the cost of integration?
6. What is the break even point between SaaS and a more traditional License model?
7. If I need the software to “flex” to my business processes will the SaaS provider be able to support me?
8. What is the Total Cost of Ownership of a multi-SaaS environment when compared to a software solution that can be modified to meet on-going business needs?

If the low level conflict between North and South Korea escalates, supplies and markets in South Korea will most likely be affected. The degree of disruption, if it occurs, will depend on the spill over into Japanese, Taiwanese, Philippine and Chinese trade. While the situation in another hot-spot, the South Asian region, is still “relatively” stable, it can be tipped into crisis mode by any number of flash-points erupting into conflict. Iran, Afghanistan and Pakistan are but a few of the areas where political instability can turn into critical supply issues.

Most companies address (to a greater or lesser degree) these and other disruption issues as a matter of basic supply chain strategy.   However, the ability to react if, and when, the disruption occurs is critical to lessening the impact on the business while being able to take advantage of the competitive opportunity presenting itself. Being able to fulfill obligations to customers and suppliers depends on one’s ability properly see, develop and execute an action plan that limits the effects of the disruption and ensures that supply can be maintained.

Visibility and Agility – The Key to Adapting to Traumatic Supply Disruption

When traumatic supply disruption occurs, the more quickly a company can respond, the more likely it is for the negative consequences to be mitigated.  There are two fundamental components to minimizing supply chain disruption effects.  The first is a continuity plan, while the second is a business disruption insurance program.

To address business continuity when traumatic supply chain disruption occurs, companies need visibility into virtually every aspect of their supply chain at the product level. They need to be able to analyze:

• what supplies are at risk
• what quantities are at risk
• what alternative supply sources exist for the products at risk
• what logistics capabilities exist to insure supply continuity
• what are the best total landed cost alternatives for the products to be supplied
• what are the compliance issues related to supply fulfillment
• what are the time constraints in restructuring the supply availability

Once analysis is complete, the organization needs to swiftly execute a comprehensive procure-to-deliver capability to reduce the costs associated with the implementation of the alternative sourcing.  The level of agility in execution is directly linked to the access of information, the speed of analysis, the response time for decision-making, and the ability to put the decision plans into action.

Effectively responding to supply disruption requires systems that present information comprehensively from source availability and inbound logistics options to the manufacturing or distribution network.  Visibility into product, supplier and service provider compliance is integral to the supply acquisition decision.  Finally, integrated total landed cost management is an important supporting function for insuring optimal supply purchasing decisions.

By definition, traumatic supply disruption can be anticipated and even planned for.  However, until the disruption takes place, there is little that will be done in the way of supply disruption mitigation.  When it happens, a company’s success (whether real or relative) will depend on the speed by which it reacts and its agility in putting plan to action.  Those companies with highly tuned global supply chain systems will be the winner both in normal times, and specifically when supply disruption occurs.

With this continuing seismic transformation to a global economy, the complexity of a company’s supply chains increases geometrically if not exponentially. The ability to manage inventory, costs, and compliance effectively and efficiently across a network of global supply chains is being severely compromised when using traditional processes and technologies. Rising levels of inventory, misunderstood total cost of product ownership, increased regulatory business compliance and the risks associated with international business have brought an unprecedented level of awareness to the C-level executives.

With this growing percentage of global activity in a company’s product mix, the way a company constructs and manages its global supply chain has a significant and growing impact on its financial results and strategic competitiveness. The inability to effectively manage these complex supply chain networks, places organizations at significant risk. Whereas the ability to command, streamline and control the global supply chain environment brings with it incredible opportunity and strategic advantage.

Synchronizing Your Supply Chains

The key challenge to developing a comprehensive 21st century global commerce management capability (the management and synchronization of international physical, financial and information supply chains) is rooted in the basic architecture of information systems that are poorly integrated across functional business silos and units. Lack of synchronization limits the ability to predict and respond to events across the supply chain, resulting in sub-optimal results. With many activities across the global supply chain being outsourced to contract suppliers and service providers, the level of direct control over results is limited. To achieve and assure high levels of performance in this less controlled environment, companies must have the appropriate tools in place to influence partners and service providers to deliver the highest levels of compliance to contracts and commitments. To achieve a best-in-class global supply chain capability requires integrated solutions that synchronize activities and information across multiple participants in the supply chain.

The synchronization of global supply chains is comprised of four elements, each of which is critical to effectively managing your global supply chains. This synchronization is imperative if superior supply chain and organizational performance is to be achieved:
1. Developing a global network of suppliers and service providers
2. Retaining people with the right level of expertise to manage the global environment
3. Creating the right processes
4. Providing the information infrastructure that enables controlled global supply chain execution and management

Integrating the Physical and Financial Supply Chains

Within an organization, operations handles the physical supply chain while finance manages the financial supply chain. Whereas management’s focus is on setting strategic goals and overseeing the activities to ensure these goals are met or even exceeded. Virtually all see their world through the presentation of tangible assets in digital format. In a perfect world, information represents the physical and fiscal worlds as they are, in as close to real-time as possible. Accurate and real-time information that is available for collaboration across an organization’s supply network (internal or external) and that supports timely execution of tasks and responsibilities, tactical problem solving, and strategic decision-making, is the fundamental underpinning of optimal global commerce management.

Information and visibility, while important in and of themselves, are limited in their potential unless put into meaningful context. Contextualized information allows users to understand the implications of an action within the supply chain and its effect on a specific activity. It empowers users to make optimal decisions.

Contextualized supply chain information enables users to see where an item is in its supply chain life-cycle and understand its effect on distribution or manufacturing. Contextualized financial information allows users to see the impact a physical event has on the cash and asset position of the company, and to optimize financial asset allocation and execution. With intelligent contextualized supply chain information, management has 100% visibility into where any department, business unit or organization is at any point in time.

To be truly effective in support of global commerce management excellence, organizations require systems that bridge the gap between procurement, warehousing and fulfillment.  The TMS system must be oriented to both international and domestic transportation with the objective of streamlining the entire supply chain and insuring that inventory is balanced as optimally as feasible.

Blinco Systems Inc. has increased its 3rdwave GCM TMS capability by extending its already comprehensive global TMS with powerful domestic functionality.

From a global perspective, 3rdwave GCM provides clients with an integrated solution supporting shipment planning, load building, carrier bidding, booking, contract and freight management, track and trace, documentation control, automated customs management (for both import and export), freight auditing and payment authorization, and detailed logistics analytics.

Domestically, 3rdwave GCM delivers to clients the same level of command and control over a 3rd party transportation network as it has been providing for global TMS.  3rdwave GCM’s domestic TMS delivers the following capabilities and benefits:

a)   allows for selection of orders across many different dimensions, making the order allocation to trucks, LTL or intermodal shipments very quick and easy
b)   allows for the  dynamic reallocation of orders from one truck to another, right up to the time of shipment from the warehouse
c)    allows for orders to be amended and these amendments to be reflected in the truck control programs so freight can be validated and reconfigured
d)   allows for the proper allocation of freight estimates to orders, improving accuracy and reporting of freight costs
e)  supports the interaction of receiver fulfillment rules and TMS planning and execution
f)   manages freight by lanes and regions to support optimal carrier selections and freight cost reductions
g)   tightly integrates to WMS systems allowing for last minute adds and reconfigurations to occur (allowing for much improved customer service and cost control)
h)   provides visibility into shipment status ensuring that late shipments are avoided and that fulfillment rises
i)    provides logistics analysis and reporting framework to allow for better analysis of freight spend and carrier performance
j)    systematizes the interactions with carriers benefiting each party with better data exchanges and information.

With the launch of the domestic TMS component, 3rdwave GCM provides a completely integrated global capability to managing transportation for both domestic and international shipments.
TMS – A Critical Component for Global Commerce Management