Managing Logistics and Trade Compliance in the Global Supply Chain

Sept. 17, 2008
Five strategies to help manufacturers optimize global logistics and trade management, while reducing risk and enhancing visibility.

Sourcing or manufacturing offshore has become a reality for many companies today. To remain competitive, they are seeking to grow -- expanding global markets and increasing revenues, while reducing costs by outsourcing materials and parts procurement, and even manufacturing, to overseas countries with lower-cost infrastructures.

This reality comes hand in hand with new complexities -- some anticipated and others unforeseen. Unlike managing a domestic supply network, operating an extended global supply chain carries higher risk and may also present challenges and incur costs not calculated in advance.

Global Supply Chain Challenges

Offshoring business challenges range from variable lead times and the difficulty of collaborating with remote business partners and suppliers, to more complex logistics processes and the need to comply with diverse multi-national trade regulations and agencies. Delays can also result from events caused by economic and political volatility or natural disasters. Too often, ad hoc attempts to cope with these complexities and increased transit times lead to uncoordinated and often unwise decisions, operational inefficiencies, higher logistics costs, and eroding sales, profit margins and customer service.

Global supply chains are inherently fragile -- any disruption will result in increased cost, risk and complexity. Companies seeking to improve global supply chain visibility and agility need to take a synchronized, cross-functional and strategic approach. The following exemplify best practices established by industry leaders in implementing efficient and smoothly functioning global logistics and trade management networks.

  1. Build a Comprehensive, Integrated Global Supply Network. Best-in-class manufacturers have shown the value of establishing an effective and smoothly functioning global supply platform in which all participants share one view of demand with the goal of improving business performance and customer service. Achieving this level of optimization across the entire supply network requires linking cross-functional operations such as sourcing, purchasing, logistics, distribution, sales, customer service and finance to enable timely information flow and collaboration. Although it sounds daunting, the fact is that building scalable enterprise architectures can be done incrementally over time as business needs dictate and resources allow. However, the end result is interoperability with other IT assets, lower total cost of ownership and -- perhaps most important -- an agile, resilient and responsive supply chain that is fully optimized to meet corporate goals.
  2. Leverage Information Technology for Improved Visibility. The days of running a business on manual processes, silos of information and paper-based spreadsheets held within discrete functional departments are long gone. In global manufacturing operations, the process automation, enterprise-wide integration, and real-time information flow provided by today's advanced technology software applications are absolutely essential to achieving supply chain visibility from end to end. While many manufacturers have deployed business systems such as Enterprise Resource Planning (ERP) or Manufacturing Execution Systems (MES), a majority have yet to implement solutions designed to optimize supply chain planning, collaboration or business performance management. Best-in-class companies have found that leveraging these kinds of integrated technology solutions can be a powerful engine to drive end-to-end visibility and agility.
  3. Improve Logistics for Real-Time Agility. The rapid rise in fuel costs over all transportation modes -- air, ocean, rail and truck -- has many companies rethinking their transportation and logistics policies and practices. However, fuel costs are not the only factor to consider when aiming to achieve optimized logistics. Fragmented visibility and uncertain delivery times due to missed sailing dates, expediting issues, regional labor strikes and other bottlenecks can also play a role in driving up costs and disappointing customers. In managing a global supply chain, the key is having end-to-end visibility and a smart contingency plan, both of which require close communication and collaboration with factories, forwarders, logistics providers, brokers and other partners across multiple geographies and process touch points. With global visibility, transportation and logistics managers can monitor shipments and respond with greater speed and agility to make more informed decisions, resolve issues in-transit, and potentially identify opportunities for modal shifts, inventory diversion, direct drop shipping and other cost-saving tactics.
  4. Assure Global Trade Compliance. International trade compliance typically falls into three areas: export compliance, import compliance and trade agreements. As one can imagine, when it comes to making sound and cost-effective decisions related to importing, exporting and trade agreements, it would be virtually impossible for a manufacturer to independently master all of the intricacies involved. Fortunately, there are technology solutions and solutions providers whose core business is providing expertise in complying with customs, security and trade regulations, policies and procedures worldwide. In fact, many leading supply chain software providers have formed strategic alliances with leading global trade management solutions providers to integrate and automate import, export and trade agreement activities. For example, JDA Software partners with Management Dynamics, Inc. to provide clients with an integrated framework for international logistics and trade, with applications designed to optimize and track shipments, provide accurate landed cost assessment, ensure accurate data management and record keeping, avoid fines and leverage trade agreements favorably. By leveraging joint solutions, companies can gain greater visibility and control over their shipments from the point of origin to the point of delivery.
  5. Ensure Operational Readiness and Optimal Performance. As we have seen, the massive market shifts created by globalization have many organizations facing a disconnect between their need to expand globally and their operational readiness to actually do it. According to one industry analyst, two out of three companies still manage their global logistics and trade with manual processes, and a majority of companies have inadequate staffing levels to handle global operations. As a result, the global supply chain is currently only 50% as automated as the domestic supply chain. New investments will be required to address these inefficiencies, ensure operational readiness and enterprise-wide performance monitoring. The key to a successful global logistics and trade management strategy resides in a combination of people, processes and technology deployed in such a way as to achieve a highly strategic and optimized global supply network.

Best-in-class companies have shown that a well-executed, fully integrated transportation, logistics and trade management plan using the right solutions and implementation partners can produce impressive results. This includes increased visibility and agility, reduced logistics costs, lower financial risk, shorter lead times and optimized synchronization and significantly improved profit margins and customer service. Ultimately these results will add incalculable business value and competitive advantage -- proving that perhaps the best practice of all in running a profitable manufacturing business is to "Follow the Leaders."

David Johnson is Senior Vice President, Manufacturing and Wholesale Distribution for JDA Software Group. JDA Software Group, Inc. delivers integrated merchandising as well as supply chain and revenue management planning, execution, and optimization solutions for the consumer-driven supply chain and services industries.

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