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Resilience in the Global Supply Chain: Understanding 5 Key Ingredients

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Archives, Global Logistics, Global Trade Daily, International Trade

Resilience in the Global Supply Chain: Understanding 5 Key Ingredients

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Resilience is defined as follows:

re·sil·ience

/rəˈzilyəns/

noun

1. the capacity to recover quickly from difficulties; toughness. “the often remarkable resilience of so many British institutions”

2.  the ability of a substance or object to spring back into shape; elasticity. “nylon is excellent in wearability and resilience”

In terms of global supply chains, resilience is determined by an ability to adapt, survive and perform despite devastating and unplanned circumstances such as those we have been dealing with since the Covid-19 pandemic enveloped the world in February 2020.

The Covid-19 pandemic has been disruptive to every company, in every business vertical, in all countries, to all companies and for most people in the world.

The impacts of increased delays, cost escalations, unavailable space, reduced inventory balances, and lost sales continued to escalate through 2021, a year that we hoped would have positioned the pandemic in our rear-view mirrors.

By contrast, the economic impact, as well as the personal toll, have been devastating, and as we enter 2022 the residual concerns are lingering and in some business models are worsening.

Delays, cost escalations and uncertainty plague all global supply chains and have made for very difficult daily management and long-term planning.

All these issues are challenges that must be met by the supply chain executives who manage these responsibilities for the companies they operate in.

Having been through numerous disasters that have impacted supply chains, from hurricanes to tsunamis to winter storms … this pandemic has exposed corporations to new and extended vulnerabilities, never previously seen to this magnitude.

Over the last 35 years and especially in the last 20 months, I have witnessed and participated in various strategies, methodologies, and tactics to deal with these challenges.

An individual’s demonstration of “RESILIENCE” has been a key ingredient to surviving these challenges and keeping his or her organization on an even keel through these turbulent waters.

I believe there are 5 Key Ingredients to “Resiliency in Global Supply Chains”.

-Patience

-Pliability

-Information & Research Gain

-Creative Solutions

-Going Back to Basics

Patience

Those that are too quick to respond under the pressure of the issues and under senior management demands will likely make misjudgments that will make matters worse.

As an example: A logistics manager is losing patience with their service provider, who is having difficulty booking space. Instead of trying collaboratively to find a solution … moves the business to another freight forwarder … to only discover that the new forwarder’s senior management team is prioritizing space allocations to older clients and not new ones.

The logistics manager has now created a bigger hole to get out of.

Exercising patience, along with a collaborative approach, would more likely have brought a resolution that could now be in play. The impatience moved the potential resolution to the back of the line.

Patience comes with maturity, confidence, and experience. Junior-level supply chain personnel lacking tenure need to closely observe senior management – who are hopefully setting an example of a more balanced reaction and approach to disaster.

Reactions by instinct alone, hurried responses and not well-thought-out actions will typically lead to poor choices. Poor choices produce bad outcomes.

Through this pandemic, I have observed many company supply chain executives – both young and old – overreact and make some bad decisions, which placed their supply chain in further jeopardy.

“Patience is a Virtue” is part of an old adage that has never rung truer than in managing global supply chains in 2020, 2021 and into 2022.

Pliability

Pliability is the ability to bend, like a willow tree in the wind. It is all about flexibility, like a gymnast performing at this year’s Summer Olympics in Tokyo.

In Supply Chain, the meaning moves us in a direction where our strategies, tactics and decisions must become molded to the new circumstances we face where demand and capacity have been misaligned for over the past 20 months and likely to continue down that road well into 2022.

It means we must adapt to a completely new set of assessments, quantitative data input, expected outcomes, and circumstances mostly out of our control.

Specifically, in companies with a global footprint, this means underperforming suppliers, unreliable freight services, escalating costs and enormous frustrations in promises made by many and kept by few.

In addition to being patient, in this pandemic, the supply chain executive must take well-thought-out risks and approaches that can offer resolutions to all the obstacles and challenges.

And more importantly, it means that we must be pliable in our approach to attempt solutions not previously tried.

Information and Resource Gain

The Supply Chain Executives showing resilience will have to make better decisions. Better decisions will originate with quantitative data analysis, based on robust information flows.

As an example: A procurement manager for a perfume company that has a major supplier in Guangzhou, China, which accounts for 80% of a particular product line.

The Chinese supplier is having trouble meeting demand. The intuitive procurement manager dives deep with the supplier to find out who supplies them with the raw materials that they seem to be having trouble obtaining in the necessary quantities needed to fill their PO’s.

The procurement manager reached into their sourcing staff to see if they can find some alternative suppliers, which they were successful doing.

This new raw material supplier to their supplier made a big difference in having them mitigate the problems of meeting all the PO requirements.

Information, along with collaboration, resolved the problem.

In today’s world, information can make the difference between success and failure, profit or loss. Supply Chain Managers need to spend considerable time in developing resources to gain information.

Some of these resources could be:

-Friendly competitors

-Supply Chain Organizations: CSCMP, ISM, NIWT, etc.

-Consultants specializing in Global Supply Chain: Blue Tiger International & others

-Internet (search, networking)

-Media: Journal of Commerce, American Shipper & SupplyChainBrain

-Industry Trade Shows

-Advanced Colleges & Universities with Supply Chain Modules

Information that provides useful data comes from reliable sources, comprehensive structure, timely subject matter and from qualified expertise.

The “Gain of Information” is invaluable in making informed and well-thought-out decisions.  Resourcefulness is making clever use of the information gained.

Creative Solutions

This is a time one needs to raise the bar of performance in meeting the Covid-19 Pandemic challenges.

Solutions of the past may not have contemporary applications. Current practices may make the problems even worse.

One needs to “put on the thinking cap” and bring new and creative ideas to the table.

This is directly tied into being patient, pliable, and developing information sources and resources, previously discussed.

An example: A NY-based chemical company operating successfully for 40+ years is having difficulty moving cargo timely and cost-effectively from various Asian suppliers.

Their typical move is product in 25 and 50 Kilo bags and boxes, stowed in 20- and 40-Foot Containers.

They are feeling the pain of 90-120 delays in ocean freight and cost escalations from $2700/per 40’ to $22,500/per 40’ from March of 2020 till now in December 2021.

The delay and cost escalation are devastating the cost-effectiveness in an established supply chain that has worked well for more than 40 years.

The potential of customer loss is great along with margin depletion.

They collaborated with a supply chain consultant who suggested they load the product in 500 kilo super sacks at their supplier facilities and “charter” a Breakbulk vessel to move 20’ container volumes of freight.

This was very much out of their wheelhouse, but they diligently, along with their consultant reviewed the risks, quantified, assessed carefully and took steps to mitigate all the challenges that came to light.

Now, 8 months later, they have had 3 successful charters and have actually reduced landed costs by 10-12%. Their margins are in-line, the customers are happy.  The new and creative approach, with well-thought-out risk management steps, came to a favorable conclusion.

In another example: A Houston-based consumer electronics company purchasing finished products from all over the world, specifically from suppliers in Europe, Asia and the Middle East.

In their standard (pre-pandemic) process, they would bring the goods into their 750,000 sq.ft. distribution facility just outside Houston for quality control work before shipping product to customers in all 50 states, Mexico and Canada. Most customers were big-box retailers.

In this case, their supply chain consultant gave them two suggestions which they studied, assessed, and modified to fit their supply chain; both of which ultimately created favorable outcomes.

For the first option, they approached their larger retailers who were building their own consolidations in the countries they were sourcing from.

They offered the retailers pricing discounts to move the sales from CIF INCO Term to FCA Overseas Consolidation Point. Meaning they would deliver the goods to the warehouse/carrier at the outbound gateway of the country of origin. The retailer would take possession of the goods at their consolidation facility and combine it with other orders and ship as a “consolidated shipment”. The benefits could be freight cost savings and affording the control of the cargo directly to the consignee.

The second suggestion was to make the distribution facility in Houston into a Foreign Trade Zone (FTZ), where duties on sales to US entities were deferred until point of sale.  For goods exported to Canada and Mexico, no duties were paid, as the goods passed through the FTZ and never entered the U.S. economy.

This option took approximately 3 months to assess and implement, and an upgrade in their supply chain technologies became a favored solution.

Other creative solutions are as follows:

All these options present potential solutions to the global supply chain management teams to consider in mitigating the impact of disruptions and to lower landed costs.

Going Back to Basics

I was an athlete throughout my high school and college years, rising to “All American” status. I observed many times when athletic prowess waivered, winning subsided, and performance shattered how the coaches brought us back from the “dark side”.

Experience demonstrates that difficult times are likely to occur. Success is not a straight and smooth line. It is curved, bumpy and has roadblocks.

I observed over the years that quality coaches had the ability to turn circumstances around and bring guidance, solutions and resolve to the challenges we faced.

Their number one solution was to bring the team and the athlete back to basics. In soccer, it was dribbling, passing and running. In wrestling it was take-downs, grinding and stamina build-up, in lacrosse, it was throwing, cradling and scooping.

Practice those basic skill sets and once achieved again, move forward onto more robust capabilities and strategies.

It was a formula that worked over and over again. In my adult life, I utilize the same strategy in golf. When my game goes south I go back to basics: slow the swing, keep the head down and work on the short game.

The basics in global supply chain are:

Summary

We believe … like tragic forest fires that ultimately benefit the woodlands as old timber is destroyed allowing new and stronger growth to eventually flourish … that weak supply chains will potentially be lost and stronger supply chains will survive and prosper.

So it will be for global supply chains.  This latest unprecedented disruption will make supply chains ultimately operate with:

-Greater Efficiencies

-More cost-effective strategies

-Enhanced processes, protocols and SOP’s for future disruptions and affording proactive mitigation strategies

All leading to a mindset of “resiliency” … a great management quality allowing not only survival but growth and prosperity … in the most difficult of times.

 ______________________________________________________________________

Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reached at tomcook@bluetigerintl.com or 516-359-6232

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Archives, Global Logistics, Global Trade Daily, International Trade

Spotlight on Supply Chain Management: Raising the Profile & Importance of the Supply Chain Manager

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Supply chain management has become a much more important business function in all companies since the pandemic began in February 2020. Let’s frame the issues which have made this executive and management change occur.

The Covid-19 pandemic has been devastating to the performance of both domestic and global supply chains. The disruption, uncertainty, cost escalations, and delays which began in March 2020, continue into the fall of 2021.

The crisis caused by a disturbing and unanticipated imbalance between demand and supply in all world markets has resulted in unprecedented challenges facing all managers and operations personnel engaged in the supply chain, procurement, manufacturing, warehousing, logistics, transportation, customer service, import/export, and sales.

The challenges and their impact extend to all the support functions to supply chains: service providers, freight forwarders, carriers, 3PL’s, technology providers, consolidators, and distributors.

While the supply chain has generally had a “subordinated” posture in most companies, the Pandemic has now elevated this area of responsibility because the consequences of poor performance and failure are so impactful in the success of a business’s margin, profit, growth, and sustainability.

The importance of this area runs equally now to the importance of the supply chain manager, who may be known under the various “Titles” in the organization. Supply Chain, Procurement, Logistics, Warehousing & Distribution, Manufacturing, Materials Management, Demand Planning, etc.

With this “increase in importance”:

The disruption has impacted every company, executive, and business vertical. And we must also acknowledge the consequences to people and their families.

The impact to supply chains has moved up the ladder in every company all the way to the CEO, The Board, and the Shareholders.

In our consulting practice, where 90% of the time we deal with mid-level managers, in the last 20 months, my team and I have met with more CEOs than we have in the last ten years.

Supply Chain Managers and their colleagues have been forced due to the disorder in their business models, to work harder, work smarter and ultimately bring resources, experiences, and capabilities to the benefit of the disruptive impacts of the Pandemic.

Supply Chain Managers have been now tested in areas as never seen previously. Most companies, over time, have seen physical, weather-related geopolitical events impact their supply chains. Negative events happen all the time. While we have had some more notable micro-events in the supply chain in the last 10-15 years:

-The Recession of 2008/9

-Hurricane Sandy in 2012

-The 2011 Tsunami in Japan

-Hurricane Katrina in New Orleans in 2005

-Global Wildfires 2019

-Sichuan Earthquake in China in 2008

-South and Mid-West USA Tornados in 2013

-Mississippi River Flooding 2011

-Northeast Winter Storm in 2018

-The current Covid-19 Pandemic 2020-?

The impact on people, business, and the costs in billions and trillions from all these events is unthinkable. And the challenges that faced businesses and supply chain managers were dramatic.

However, this Pandemic has presented a unique set of circumstances:

-Every country and every person and business are impacted

-Personnel working from home has changed communications, team efforts, camaraderie and in some cases increased effectiveness and performance

-The tenure, now passing 20 months

-The uncertainty of planning out supply chain functions

-Demand Planning is almost impossible

-Lean Manufacturing and “Just in Time” Inventory Management Systems, have been retired

-All business models are being strained resulting in alternative and modified structures

-Managers and staff are working longer hours, becoming “burnt out” is a serious reality

-Hiring has been impaired

-Margins, profits, growth, and sustainability are all being challenged

With all these concerns having been identified as the “new reality” the good news is that many organizations’ talents, particularly in supply chain functions are finding ways to meet these challenges and maintaining their company’s business models to a necessary extent of successful operations.

Supply Chain Managers have become creative in their approach and along with companies like ours, Blue Tiger International, have found solutions to mitigate the impact of the Pandemic.

We have developed 14 Solutions, collaboratively with our supply chain managers. Some of these are:

The new roles and responsibilities of The Pandemic Supply Chain Manager require them to “think-out-of-the-box” and create approaches that were never thought of or utilized previously.

At Blue Tiger International, we become an extension of the supply chain manager’s resources and provide a business model to evaluate these options and apply them to the uniqueness of their business models and supply chains.

The four steps profiled above start with an overall assessment of the domestic and global supply chain. That review provides some solutions which must be tied into a financial evaluation that defines ROI.

This is followed by an operational review which determines what changes in the companies supply chain and business model require modification to meet the solution requirements. As an example, if it was assessed and evidenced ROI, the company choosing a Foreign Trade Zone as an option, it is likely changes would be made to the functions of compliance, security, product accountability, technology, and business process.

The last step is implementation, working collaboratively to make the solution work to the benefit of the business model.

This is all unfertile ground to the Supply Chain Executive. What we have observed is a significant “rise to the occasion” of many supply chain personnel, managers and executives to meet and successfully manage these required changes.

They are not necessarily eliminating the issues, but they are providing mitigating strategies all in the name of protecting market share, margins and sustainability.

Supply Chain Managers have become “Frontline Heroes” in the face of this Pandemic and deserve much credit and recognition for keeping supply chains functioning in the face of all these challenges.

This has and will continue to “raise the profile & importance” of Supply Chain Management in all companies’ business models. Additionally, senior management is recognizing their value to the organization, which has been a long-time coming.

________________________________________________________________

Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reach at tomcook@bluetigerintl.com or 516-359-6232

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Archives, Global Logistics, Global Trade Daily, International Trade

Navigating the 12 Pitfalls of the Global Supply Chain

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With over 30+ years of international trade experience, I have witnessed numerous and repeated errors made by Sales, Purchasing, Logistics Managers, Supply Chain, and International Business Executives.

There are tremendous opportunities and benefits to be derived through global sourcing and foreign business development. Along with these opportunities are considerable challenges, obstacles, and pitfalls. In order to succeed in international business, management must mitigate these concerns through gaining knowledge and implementing processes and controls over import and export operations, including the development of robust training for all personnel.

The following section contains twelve steps companies can take to manage the solutions that will allow the navigation through these challenges and delivering success to the international operation.

These twelve steps create a pathway forward in a concise, straightforward methodology and time-tested process to ensure management accomplishes their desired corporate goals of profits, growth, and sustainability.

Avoid the following:

Step 1: “We have no personal liability”.

There is significant personal liability for individuals who operate in global supply chains.

U.S. Government enforcement agencies, such as but not limited to:

– Department of Justice

– Customs and Border Protection

– Departments of State, Commerce and Treasury

– Bureau of Alcohol, Tobacco and Firearms

– United States Department of Agriculture and the Food and Drug Administration

All above are a few of the agencies that will prosecute both organizations and individuals who are seriously out of trade compliance with their import and export regulatory responsibilities.

While criminal prosecution is a rare occurrence … it does happen every day in the supply chain, somewhere in the world of international trade.

Trade Compliance Management in companies with an international footprint is a necessary evil that needs to be managed and integrated into the fabric of the organization’s culture and business model.

Step 2: “The FOB Term is Always a Safe Incoterm to Utilize”.

The FOB Incoterm has three deadly areas of concern:

-It is used in domestic trade

-It is a gray area in the loading process

-There can be ambiguity when the point in time responsibility and liability shift from the seller to the buyer (exporter to importer).

It is used in domestic trade

For domestic trade in the United States, the UCCP (Uniform Commercial Code of Practice) currently (though in contention) utilizes the FOB term as a “term of sale or purchase”, where there are two primary options FOB Origin and FOB Destination.

Within the UCCP, FOB is defined as:

Uniform Commercial Code › U.C.C. – ARTICLE 2 – SALES (2002) › PART 3. GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT

2-319. F.O.B. and F.A.S. Terms.

Unless otherwise agreed the term F.O.B. (which means “free on board”) at a named place, even though used only in connection with the stated price, is a delivery term under which:

(a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier; or

(b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and their tender delivery of them in the manner provided in this Article (Section 2-503);

(c) when under either (a) or (b) the term is also F.O.B. vessel, car, or another vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case, the seller must comply with the provisions of this Article on the form of a bill of lading (Section 2-323).

The UCCP Term allows any mode of transit or conveyance.

Some sources claim that FOB stands for “Freight on Board”. This is not the case. “Freight On Board” is not mentioned in any version of Incoterms, and is not defined by the Uniform Commercial Code in the USA.[10] Further to that, it has been found in court that “Freight On Board” is not a recognized industry term.[11] The use of “Freight on Board” in contracts is therefore very likely to cause confusion. The correct term is “free onboard”.

Keep in mind that a huge amount, if not a clear majority of domestic commercial transactions, are sold or purchased on a FOB basis and moved by truck, rail, or air. This would be ok if the FOB Term was the UCCP intent and not intended utilization under Incoterms 2020.

There is a very clear line of confusion between the domestic and international “FOB” terms in selling and purchasing. It is only when it causes a problem when it is seen as an issue.

Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated with same. At the point, the goods are safely onboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.

FOB is the most common agreement between an international buyer and seller when shipping cargo via sea. This Incoterm only applies to sea and inland waterway shipments.

The 2020 edition of Incoterms opened the door for domestic utilization of the FOB term. The FOB UCCP term varies greatly from the FOB Incoterm.

Under Incoterms 2020, the preferred term for domestic utilization, since that door was opened, is FCA (Free Carrier At).

It is a gray area in the loading process

Under Incoterms 2000 and prior, the FOB term transferred risk and cost from the seller to the buyer once the goods passed the ship’s rail.

This factor was changed in the 2010 edition of Incoterms and continues in the 2020 edition. The term now read “…passes when the goods are on board the vessel”.

However, “on board” is not clearly defined. Is that when the goods are placed on the deck, in the hold, not yet secured, secured, etc.?

We had a case in our office, where a U.S. exporter, sold a huge piece of equipment, (25 Tons, $11m in value) to a customer in Europe. It was going to be shipped via ocean, secured in a cargo hold under deck.

During the loading process, the goods were being lifted onto the vessel by a crane and longshoreman crew. In the handling, the equipment was laid down on the deck of the hold several times, while the longshoreman positioned the cargo.

In that repositioning process, the freight was damaged. The issue now became who is responsible, based upon the Incoterm of FOB Port Elizabeth – the seller or the buyer?

Were the goods actually “on board” when they were damaged? The maritime judicial system will eventually resolve that issue and court precedence will be established.

But today there is an ambiguity in defining “on board” in the FOB Incoterm. There are references to being “secured in place”, but it appears ambiguous.

Sellers and buyers need to address these specific concerns in the contract of sale and attempt to minimize the gray areas of liability, that may present themselves when using the FOB term.

There can be ambiguity when the point in time responsibility and liability shift from the seller to the buyer (exporter to importer).

This is the explanation of the FOB term from the Incoterms 2020 edition.

A2 (Delivery)

The seller delivers by placing the goods on board the vessel nominated or provided by the buyer on the agreed date, or within the agreed period as notified by the buyer, or if there is no such time notified then at the end of that period.

There is still a belief that the ship’s rail is the defining point, i.e.: before the notional vertical line above the rail is the seller’s cost and risk, and after is the buyer’s cost and risk. A court ruled that the delivery point was when the goods were on the deck but that then caused the question was the notional vertical line replaced with a notional horizontal one in line with the deck itself and what if the goods were being placed below deck? This ship’s rail concept was removed in the Incoterms® 2010 version. Typically, then, “on board” is taken to mean when the goods are safely on the deck or in the hold. If the cargo needs to be then further secured for transportation such as being lashed or separated with some material or spread evenly throughout the hold for bulk goods like grain the seller and buyer should agree in their contract what is needed and at whose cost and risk this is done.

B2 (Delivery)

The buyer’s obligation is to take delivery when the goods have been delivered as described in A2.

FOB A3 / B3: Transfer of Risk

A3 (Transfer of risk)

In all the rules the seller bears all risks of loss or damage to the goods until they have been delivered in accordance with A2 described above. The exception is loss or damage in circumstances described in B3 below, which varies depending on the buyer’s role in B2

B3 (Transfer of risk)

The buyer bears all risks of loss or damage to the goods once the seller has delivered them as described in A2.

If the buyer fails to inform the seller of where and when the vessel will be presented or if the vessel fails to arrive on time, or it fails to take the goods so that the seller cannot deliver, then the buyer bears the risk of loss or damage to the goods from the agreed date or at the end of the agreed period.

On an operational level, the seller delivered the goods to the terminal, carrier, or other agreed named place, and the goods were not loaded on board as anticipated for an array of reasons, such as but not limited to the carriers having vessel timing or loading issues and the seller appropriately notified the buyer than delivery has been made and risk of loss and damage has passed from the seller to the buyer.

The important aspect to note here is that the buyer expected to take delivery “on board” and now that did not occur as the buyer will take delivery and assume all risks at a point short of “on board”.

In general, Incoterms need to be understood in their entirety including the consequences associated with using the incorrect Incoterm or not understanding the specific responsibilities as the buyer or seller. Incoterms training is a must for all personnel engaged in global trade and more particularly those operating in Procurement, Sales, Operations, Finance, and Customer Service.

Companies involved in international trade using best practices will switch Incoterms 2020 rules in quotations, purchase orders, contracts, commercial invoices, and other commercial documentation when determining the level of responsibilities and costs they want to take on; dividing the responsibilities for risk transfer, costs, and responsibility for carrier selection between the buyer and the seller.

Step 3: Contracts Override Relationships

In international trade, relationships trump contracts. Relationships will drive a successful deal and a long tenure. I have always extolled “you can contract out risk”, but you can seriously minimize and mitigate risk by establishing favored relationships that allow the best opportunity for problem resolution and working out issues that will likely occur over time and trade.

Contracts are important to make the deal have legal standing, but it is foolish to believe that the contract eliminates any risk in the transaction. In fact, sometimes contracts can cause risk when a false sense of security is at hand.

Obtaining legal support is prudent but spending money and time at building relationships with suppliers, vendors, agents, and customers will go a long way in mitigating many of the risks in global trade.

Step 4: Service Providers are Experts in all Aspects of the Global Supply Chain

Just not so! While a small percentage of service providers are clearly experts, professionals, and aligned with teams of knowledgeable staff the majority have serious limitations.

While many have the expertise to arrange affreightment, pick up and delivery many lacks:

-the necessary local connections in all foreign markets

-trade compliance knowledge

-an understanding of how best to eliminate risk and cost from the supply chain

A high degree of scrutiny, vetting, and discerning should take place when choosing service providers, 3PL’s, freight forwarders, and customhouse brokers.

Areas of evaluation:

Service providers can be very valued partners in your global supply chain. Just because they hang out a shingle does not mean they can provide real benefit. Scrutinize robustly and vet diligently. It will pay off in the long run. Having a quality partner will make your job easier and with a greater ability to meet all the challenges successfully.

Step 5: Manage the Supply Chain with Robust Technology

Supply chains that have expansive technology in every aspect of the operation will gain great leverage in performance metrics.

Areas of technology in the supply chain are:

Technology creates efficiency, ease of operations, robust information flow, security, and other benefits. It allows for the highest levels of performance in any organization, but more particularly in the global supply chain. Technology advances forward and expands every day. Keeping contemporary is a challenge that all supply chain executives face.

Cyber Security has grown to be a significant threat. It must be contemplated and managed in every moment and keystroke of the day. There are cybersecurity solutions that must be integrated into all aspects of operation, where there is a technology interface.

Step 6: We have been doing it this way … for over 5 years with no problems.

We hear this often and clearly because a company has not encountered a specific problem, does not necessarily mean things are being done correctly.

A volcano is not a problem until it erupts. The underlying problem is waiting for emergence. Dealing with potential issues proactively and anticipating “what ifs” are a much better option.

Potential problems along with potential betterments must be proactively pursued to assure you do not have serious issues and are doing all possible to reduce risk and cost and/or business process improvements.

Continually updating a logistic SWOT Analysis, risk management assessments and process evaluations are all necessary steps in mitigating any unanticipated problems in the future.

Because no one is complaining does not mean everything is ok. You must be proactive in making sure everything is ok, without assumptions. Err to the side of conservativism as it will prevent future headaches.

The pandemic was a complete disaster and disruption to all global supply chains. Having said that, some good came out of it as companies had time for internal introspection at risk and threats leading to proactive steps in mitigation.

Step 7: We Handed it to the Carrier, so it must be “on board”

Tracking and tracing need to be accomplished at a very detailed and exhaustive level.

Just because you have confirmation that a carrier has received freight, does not assure it made it on board the vessel, aircraft, railcar or truck.

You need affirmation that in fact the goods have actually made it on board the conveyance with an updated ETA, followed up with daily frequency, in case of any unanticipated delays, which occur all the time.

Step 8: We Always Check the Denied Parties List

Many international executives believe their companies are consistently checking and reviewed the various lists making up the “Denied Party Screening” regulations for importers and exporters.

In many years of auditing companies engaged in global trade, only a small percentage is fully compliant with the review, checking and compliance responsibilities associated with Denied Party Screening.

There are available direct connections into the government agencies and numerous third-party technology companies with DPL Screening Capabilities.

Step 9: I am the Ultimate Consignee on these Goods, but not the Importer of Record.

Many companies who are the recipients of imported merchandise who are not participative in the import process believe they have no import responsibilities.

That is potentially and totally incorrect! Customs (CBP) has the right to evaluate any import situation and determine that the ultimate consignee could be considered the “importer of record” and therefore has all the responsibilities as the “importer of record”. This would then require adherence to all import regulations HTSUS, valuation, recordkeeping, etc.

Step 10: Domestic Packing will work for my International Shipments

Claims for loss and damage on international shipments occur every day and a major cause is inadequate packing, marking and labeling.

Just check with any marine insurance companies they will advise of the frequency and the severity of claims occurring on import and export shipments directly attributed to inadequate packing marking and labeling which could jeopardize marine cargo insurance coverage as an implicit or explicit warranty.

Step 11: Do we really need to ensure the shipment?

Loss and damage to international freight is a daily occurrence worldwide. In the overall cost of the global supply chain, marine insurance is an inexpensive purchase offering a high value of the return.

Just looked at what happened this year in the Suez Canal, with the grounding of the Ever Given (Evergreen Lines) which potentially caused losses in excess of $ 1billion.

Direct claims in delays and damage and indirectly caused by a General Average Claim. The fines, penalties, delays and lost cargo is still mounting, as only in early July, has the vessel finally exited the Suez Canal.

Marine cargo insurance is a solid, responsible, value-driven, and best practice purchase for any company shipping goods internationally.

“All Risk”, “Warehouse to Warehouse” with contemporary customized underwriting terms under standard policies are available.

Step 12: Do I need to train my global supply chain team?

The challenges of the global supply chain are numerous and daunting. These challenges can only be met by experienced well-trained managers and staff. The training needs to be consistent, contemporary and robust. Key areas to include are:

-Compliance

-Documentation

-Negotiating Freight

-Sourcing Management

-Logistics Management

-Technology Management

-Warehousing & Distribution

-International Contracts

-Risk and Spend Directives

-Foreign Trade Zones

These outlined above show a handful of the necessary skill sets required for import and export personnel to master. And “training” is the pathway to successful global supply chain management.

Summary:

The twelve examples outlined above provide a synopsis and evidence that mistakes based upon a lack of knowledge and skillsets can cause great disruption in import and export activity in the global supply chain.

Developing resources, providing training, and implementing procedures will assist in mitigating the problems and challenges identified in the above article.

Resources in international business and supply chain management will provide informed intelligence that will allow for making better decisions.

Training and skill set development will better prepare supply chain, import & export executives, managers, and staff to better deal successfully with all the challenges of global trade.

Procedures, protocols, and disciplines in management are always critical to a company’s success in business. In the global supply chain, SOPs are an integral component of freight, logistics, trade compliance, foreign sales, and overseas procurement that assure a company’s success in its international footprint.

The author can be reached at: tomcook@bluetigerintl.com for questions and comments.

global supply
3pls, Archives, Global Logistics, Global Trade Daily

Global Supply Chain Management: Developing Successful Relationships in Freight and Logistics

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The Covid-19 Pandemic has increased in global supply chains:

-Uncertainty

-Increased Costs

-Delays

-Reduced Capacity

-Limited Negotiation Leverage for Shippers

When freight is managed as a “commodity” there is little opportunity for long-term, more successful and profitable relationships in the purchasing of global transportation services between shippers of cargo, service providers and carriers.

Most shippers with international footprints work directly with carrier options, NVOCC’s, 3PL’s or forwarders/brokers. These relationships, as we enter the second year of the Covid-19 Pandemic are increasingly critical aspects of freight, logistics and overall supply chain management success.

Uncertainty in the freight markets has created a disruption, confusion, and disharmony in the trade lanes of the world, in particular, to and from the USA/China. Air and Ocean Freight Pricing is up in multiples of 3-8x average pricing over the 2017-2019 periods.

There are also delays and a significant lack of carrier capacity, chassis and trucking capabilities. This has impacted both imports and exports as well as certain domestic movements.

While the biggest impact is on international trade lanes, domestic freight is up and has caused capacity and pricing increase, as well.

The most impactful frustration is with inbound air and ocean freight from China to North America. The concerns start with the “demand planning” and the need to substantially increase lead times, say normally at 8-12 weeks to 20-30 weeks out.

Importers need to be prepared for delays in moving the freight as much as 30-60 days. Carriers have now come up with “Premium Pricing” best described as “If you want your freight to move … this is the price you will have to pay”. This is causing ocean freight pricing to rise into the $8-15,000 level per 40’ Container from China to the West Coast USA.

Ocean Freight which has been typically guided by “annual contracts” is now mainly controlled by “spot market pricing”. Another leading indicator of a very tight market condition.

Airfreight pricing could as high as $10.00 per kilo., where normally $2.50 per kilo would be the market rates.

The market volatility is likely to extend into 2022 so we caution all supply chain managers to properly prepare for more difficult times and seek numerous options.

With all the doom and gloom, there are a number of measures we can take to mitigate the impact and

When we have “sustainable relationships” we capitalize on the following:

Better working relationships between shippers, service providers, and carriers

We all want to work in an atmosphere in global trade where we would describe our relationships in the global supply chain as excellent. This allows for less stress and overall better results.

Quality relationships create the ability for better planning and management by more informed and better-anticipated expectations.

Ability to work through Pandemic Disruption.

Carriers and Service Providers are more likely to accommodate existing clients where a favorable working relationship is present. Since there is limited capacity, the industry prioritizes clients over prospects.

Longer tenured relationships

Changing service providers and carriers frequently is disruptive and costly and never a preferred option. Everyone engaged in the supply chain does better in long-term relationships.

Reduction of risk and spend in the global supply chain

When the relationships work well we always see a direct relationship to the reduction of costs and risks as goods move through the supply chain cycle both domestically and internationally

Keep in mind that there are a number of options from freight consolidation, drawbacks, FTZ’s … that these relationships can bring to value in global supply chains.

Consistency in pricing and service agreements

If we always have “spikes” and “steep” changes in our business models, no one will be happy in your company and the difficulty to manage operational issues will be very difficult all the time.

The preference always is to have a smooth gliding more rhythmic path in the business model to follow so changes are not large or small but even out on a more consistent basis.

Less “angst” in “day to day” business dealings

The uncertainty is global shipping has caused much frustration, which has led to high degrees of angst.

Angst causes stress. Stress causes anger. Anger causes bad decisions. Bad decisions usually produce bad results. Eliminate angst and have more success.

Ability to work through problems and bringing quicker resolve to issues at hand

Global supply chain managers face challenges every day. Even in the best-managed supply chains, problems will occur daily. They need to be resolved quickly. Good working relationships “open the door” to quick, swift and comprehensive resolution.

Access to better security and trade compliance initiatives

Every international supply chain requires due diligence, reasonable care and supervision and control to meet various government security and trade compliance regulatory requirements.  Better working relationships foster a more secure and compliant environment to ship freight in.

Better access to and utilization of technology resources

Technology will always enhance business relationships with all the benefits of expediency, efficiency, exactness and information flow.

Technology is becoming one of the most important value-adds in business relationships in the global supply chain:

-Enhance efficiency in information flow

-Enhance correctness in information

-Allows information flow to be the conduit for more informed decision-making

-Creates KPI’s (key performance indicators) that manage accountability between the multiple parties in international transactions

-Becomes a management tool to increase overall performance, lower costs and reduce risk.

Creating a “partnership” approach

We cannot emphasize enough the importance of establishing a “mindset” between all the parties to approach matters on a “partnership” basis.  This is the best course of action that achieves “trust and confidence” between shippers, service providers, and carriers.

Trust and confidence become “hallmarks” and allows all parties to both compromise and benefit from all the actions that impact one another in the day-to-day movement of freight throughout the world.

The following key factors create a path to better relationships and sustainability.

Transparency

Share all the information necessary to get the job done right. Eliminate a “mindset” of clandestine behavior, working through “secret passageways or working in the shadows” mentality.

Put up all the data. Shippers outline clear expectations. Service providers and carriers outline clear capabilities.

A no non-sense, direct, no BS approach works best.

Valuing Favored Incumbents

Always be loyal to companies that have serviced you well. Loyalty is what you expect from your customers, so give it to your vendors and suppliers, when well deserved.

If you need to conduct an RFP (Request for Proposal) and bring in competition always give some advantage to a favored incumbent.

Be Open and Honest, Consistently

The value of being open falls in line with being transparent, but also adds on an element of “frankness, truthfulness and honesty”.  People trust those who are honest period.

When you are more honest, you can get more done as people better respect you and are more open to participate and go the extra yard to get better results.

Be Creative

The challenges of global trade can be daunting. Every approach will require a potentially different and maybe even a new revolutionary approach.

Creativity is a necessary element of being able to compete successfully, as creativity opens the door for problem resolution, progressive options, aggressive tactics and at times advanced/rebellious/extreme/mutinous behaviors.

Risk Management in assuring “Insurance” is Addressed

Claims are inevitable if you ship goods internationally. If you want to see a “relationship, go south quickly” have an unresolved claim.  Liability for loss and damage in global trade is an area of major concern.

All parties in the supply chain shipper, service provider and carrier need to know where their risk begins and ends and if there is a claim, where indemnification will originate.

When this is left unclear, it creates frustration between the parties and eventually a loss of confidence, which leads to a breakdown in any opportunity for sustainability between the parties.

Address insurance concerns proactively, comprehensively and with transparency and you will mitigate future relationship issues.

Summary

Quality relationships drive sustainability, which is always a preferred option in global trade.

The big concern is the impact all of this will have on both industrial and consumer pricing, which has and is likely to increase pricing even more than it has already with inflation raising its ugly head.

Comprehensive planning, making better more informed decisions and developing quality options and relationships create a blueprint for mitigating these supply chain challenges now and down the road.

____________________________________________________________

Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reached at tomcook@bluetigerintl.com or 516-359-6232.

supply chain
Archives, Global Logistics, Global Trade Daily, Warehousing

Exclusive White Paper: Managing Inbound Supply Chains – Cost, Capacity & Delay Are The Supply Chain Manager’s “Nightmare”

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The Covid-19 Pandemic which impacted global supply chains hard in February of 2020, has grown as on “steroids” as we approach the 2nd Quarter of 2021.

There is no professional logistics service provider, freight forwarder, NVOCC, Carriers, 3PL, customhouse broker, consultant, or any expert in the industry who would have anticipated what has happened in the past 12 months and likely to have a legacy well into the balance of this year.

Demand had impacted capacity and capacity has impacted cost. Ocean freight rates have doubled and in some trade lanes have tripled and air freight pricing has multiples of 4-8 times more than we witnessed towards the end of 2019.

Making this all worse is how long this crisis has developed with no specific end in sight.

Tied into capacity and cost are the logistics delays, doubling and tripling expected ETA’s.

This past year has been a “nightmare” for all supply chain managers who are looking for relief … when very little is in-sight.

The biggest influence can be observed on the Asian to North American market where the impact has been most disruptive.

In our Supply Chain Management Consulting Practice, we have been approached by hundreds of companies desperately seeking assistance in finding options and providing some relief. We will share some of our recommendations at the end of this article.

Over the 40+ years of our practice in the global supply chain, we have witnessed other times where craziness and disruptive behavior impacting freight markets. There have been at least 6 times from 1981 to 2020 where the supply chain has been disrupted in a major way.

Most professionals point to the poor management of the carriers, who have difficulty managing capacity, assets, and client’s supply chain needs when disruption is looming. While that is true to some level, there are numerous other influential areas that add to the crisis. The impact of Covid-19, greater global demand for PPE, expeditious replenishment of global inventory levels, and uncertainty in consumer and commercial spending, are but a few of the other contributing factors.

Also keep in mind, that in North America the entire domestic transportation market is also experiencing increased costs, capacity issues, and delays in providing timely, comprehensive, and cost-effective transportation services.

While we have all this “gloom and doom” in front of us, there is some light at the end of the tunnel. Here are some recommendations that we offer:

1. Recognize that in all the other times (of which we estimate that there were 6 events) of disruption in the global supply chain … in time … balance and normality eventually prevailed.

The issue in this Covid-19 Freight Dilemma … is when will we see normality? Many experts advise by April and May 2021.

Our best estimate is that while we may see some sunlight by May, supply chain executives should plan that the disruption will last till September.

Demand planning, freight purchasing, and contract negotiations would best be accomplished by anticipating freight and supply chain issues not being seriously resolved till the Fall of 2021.

2. As a supply chain executive, create a greater reach into alternative options for the acquisition of logistics services. Come out of your comfort zones, your traditional “go-to” providers, and open the doors to a larger web of players in the freight market.

3. Alternative options should include:

-Direct to Carriers

-Integrated Carriers

-3PL’s

-Freight Brokers

-Logistics Consulting Companies

-Customhouse Brokers

-NVOCC’s

-Freight Forwarders

-Freight Purchasing Groups and Associations

-Consolidators

4. Friendly competitors also can present an option where you can combine your purchasing power and leverage your freight spend.

5. Evaluating your freight spend. Consider consolidating your freight with one company by putting “all your eggs in one basket” where you may achieve getting the best value for your dollar. However, when placing all your eggs in one basket, recognize the risk associated with that option and manage that basket diligently.

6. Hire very capable staff that can bring resources, contacts, and industry relationships that might prove beneficial.

7. Work with your suppliers who also may be able to provide lower-cost or more expedient freight solutions. It is their interest as well to make sure their customers are well-served and happy.

8. Work tightly with your demand planning teams to provide timely and comprehensive information flows, so they can better plan when placing manufacturing orders. Lead times may need to be doubled and tripled. This also means working more closely and proactively with your suppliers and vendors to enhance their performance in increasing capacity and on-time capability.

9. Consider where you distribute from. Consider the demographics of where your customers are. This may conclude you adding on or expanding the warehousing locations so you can meet clients’ needs less costly and timelier. The example is if your customer base is throughout the USA and you singularly distribute from one warehouse in Baltimore Maryland, what is the cost and time element to service a customer in Chicago and one in Los Angeles?

Additionally, if the freight is sourced from China, compare the time and cost to ship from Shenzhen to Baltimore to Shenzhen to Long Beach. The warehousing and distribution costs become part of your overall competitiveness. Any steps that can be taken to help offset and mitigate the impact of higher inbound freight costs can provide various levels of some relief.

10. Be open, honest, and transparent with all the partners in the supply chain, including your customers. Extoll these virtues and they will come back to you in spades.

Working with more integrity creates camaraderie, team efforts, affords a better understanding of common concerns, and allows better partnerships to form, which ultimately produces better outcomes for all parties to an international business trade or transaction.

The Covid-19 Pandemic has turned the world of international freight upside down. It has caused a lot of frustration, headaches, loss of markets and clients, and multiple areas of serious concern for everyone involved in managing all aspects of global supply chains.

There is no question that the challenges of 2020 and the legacy now in 2021 have become ground zero for supply chain managers, but there is light at the end of the tunnel. The above outlined ten recommendations have been time-tested, battle-worn, and seasoned successful concepts in managing the risks, lowering the costs, and allowing for better-managed logistics in global supply chains.

__________________________________________________________________

Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida. The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management. Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions. Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management. He can be reach at tomcook@bluetigerintl.com or 516-359-6232.

sourcing
Archives, Global Trade Daily, International Trade

Exclusive White Paper: Sourcing Globally – Senior Managements Guide to “Thirteen Key Practices”

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Sourcing globally will continue to grow and expand into new markets as we enter the third decade of the new millennium.

Multinational companies down to smaller family-owned organizations are learning the critical importance of developing multiple and varied sources of raw materials, components, and finished products.

Traditional foreign sourcing options, such as China are being challenged aggressively for the first time in its 40-year tenure as the fastest and expansively growing foreign source of manufactured goods.

Tied into this are the 301 Tariffs under the Trump Administration, that our newly elected President Biden is likely to continue on with for at least the balance of 2021. Which have increased “landed costs” by as much as 25%.

Senior management is best guided by setting up policies, protocols, and SOP’s in how their management teams and staff operate in their global sourcing opportunities and initiatives.

The goal should always be to reduce the risk and cost of goods sourced globally.

In public companies, these guidelines would help meet Sarbanes- Oxley regulations and in private companies … “Best Practices”. The SOP’s create a standard with the following benefits:

-Documented and written commitment to follow government regulations

-Consistent approach to regulatory adherence

-Foundation and resource for all global supply chain personnel to follow

-Creates training module to make sure everyone knows how to operate in their companies following all necessary regulations.

Having said all of that …. The following Best Practices outlined in Thirteen Steps offer the international executive a blueprint for either new or matured global sourcing initiatives:

1. Learn how to navigate the opportunities offered through the numerous Free Trade Agreements that can be leveraged for economic advantage in the global sourcing arena

Utilizing FTA’s lower lands costs by reducing or eliminating duties and taxes.

2. Diversify sourcing into multiple countries so dependence on single sourcing is not relevant

This becomes a risk management concept in spreading the sourcing exposure over Variable options.

3. Learn the culture of the countries you source from. This will maximize your opportunity to negotiate better deals and build stronger relationships.

Keep in mind in overseas markets … “relationship” drives the success of the business deal and the long-term partnership with the vendor/supplier.

4. Utilize specialized professional attorneys who can guide you through the maze of foreign regulations, laws and policies that will influence sourcing options, agreements and contracts.

Legal expertise can be expensive, but it is a necessary expenditure that can help avoid pitfalls, mistakes, and serious financial consequences.

Laws vary greatly in foreign countries and companies that learn how to proactively avoid litigation and other legal issues will always minimize risk and maximize opportunity.

Purchase Orders (PO’s) also have different legal consequences in various countries, that need to be reconfigured to work better.

5. Develop sourcing reach into Mexico where maquiladora programs and near sourcing initiatives can prove to be a valuable option as a sourcing alternative.

Near sourcing can prove to significantly lower landed costs, reduce risk and enhance demand planning sand lead time reductions.

6. Utilize the service of specialized freight forwarders who can provide local support in the sourcing countries in arranging local freight needs, outbound logistics requirements, handle export specifics and the inbound process into the United States.

The freight forwarder or Customhouse broker can be a valuable partner in impacting risk and cost along with huge benefits in managing inbound supply chain needs.

7. Tread cautiously through all Intellectual Property Exposures (IPR) that can happen once you start to trade in foreign markets, share business models. Trade secrets and confidential manufacturing data.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

Managing IPR issues needs to always be addressed proactively when forming relationships in global sourcing models. The headaches and costs in chasing and dealing with IPR breaches can be costly, aggravating and a waste of time and effort. And litigation in markets such as China typically create less them robust results … leaving both parties dissatisfied and filled with angst.

8. Pay close attention to the choice of INCO Term (International Commercial Term of Purchase or Sale). The choice impacts risk and cost between the supplier and the buyer.

There are 11 INCO term options in the revised 2020 Edition: Ex Works, FAS, FCA. FOB, CIF, CIP, CPT, CFR, DAP, DPU and DDP.

Importers need to choose a term where they typically control the international freight inbound, the customers clearance process and delivery to the ultimate consigned.

This helps reduce both cost and risk and typically will offer better options and performance on the inbound logistics.

9. Make sure you:

-Understand all the regulatory issues with Customs and other regulatory agencies.

-Make sure you have a “point person” who takes ownership of regulatory concerns … typically referred to as the “trade compliance manager”.

-Develop SOP’s to integrate into the sourcing business model.

-Train all stakeholders in the global supply chain on all the aspects of regulatory controls and just how it is related to their specific responsibilities.

10. Always make sure you have supported your sourcing decision by working up “landed cost modeling” to affirm the purchasing decision utilizing specific metrics.

Landed cost modeling creates a metric to do comparison shopping and to evaluate options or choices by adding up all the direct, indirect and ancillary costs added to the origin purchase or acquisition cost.

Landed cost modeling creates a comprehensive formula to measure the method and process in making a sourcing decision on foreign shores.

11. Document these protocols in written SOP’s to evidence adherence to government regulations and best practices. This provides clear and concise senior management influence on managing with good intent, behavior, due diligence and reasonable care.

12. Create internal training programs for your management teams and your operating staff in all these guidelines and best practices. Solid training initiatives are an excellent and proven method to make sure everyone has comprehensive information flow, know what is expected and how best to execute.

13. Combine the utilization of Bonded Warehouses and Foreign Trade Zones, with various sourcing options, that can leverage risk and spend to your favor. This would include inventory, distribution, manufacturing and assembly operations in a secure FTZ, that could significantly lower landed costs to the USA based importer.

The role of Senior Management is to lead. Following these thoughts and turning them into effective actions within your business models is the best way to assure the opportunities to minimize risks and maximize profits within your global sourcing business models.

Senior management is best off by leading their teams into best practices and always exercising due diligence in their business behavior patterns. Any short-term costs and inconvenience will be outweighed by long-term benefits to any organization.

Benefits will include: reduction in risk and cost, business process improvement, more efficient operations, sustainability and significant growth potentials.

_______________________________________________________________

Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reach at tomcook@bluetigerintl.com or 516-359-6232

freight
Archives, Global Logistics, Global Trade Daily, International Trade

EXCLUSIVE WHITE PAPER: International Freight and Trade Compliance Key Management Considerations for 2021

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Overview:

Manufacturers, Dealers and Distributors that are engaged in global trade… Importing, Exporting, Buying, Selling and distributing various products worldwide.

The ability to move goods in the international arena will make or break sales or even maintain a client relationship.

The ability to deliver products on a timely and loss-free basis is a critical component to the companies operating with a global footprint.

This “white paper” created for the readers of Global Trade Magazine addresses “Six Steps” to follow to help reduce risk and cost in the area of international shipping, freight and logistics.

Supply Chain Spend in 2021

We should all keep in mind that the Covid-19 Pandemic of 2020, brought significant increases in logistics costs and supply chain spend, along with limitations on service both domestically and internationally.

This is likely to continue heavily into the 2Q, second quarter of 2021 with a residual impact lasting till December 2021.

Those engaged in budgeting supply chain costs should plan for increases in excess of 25%, as much as 50% and continued delays to midyear 2021.

Demand, capacity, pandemic disruptions fears along with greed will continue to be driving factors.

Warehousing, distribution and all related costs have and will continue to escalate, with limitations on space and capacity.

The Six Steps

The following six steps originate from the authors 35 – year experience in moving freight all around the world and in assisting corporations with global logistics that are cost-effective and reduce risk to themselves and their clients’.

1. Chose the Best INCO Term

2. Insure the Shipment

3. Chose the Right Freight Forwarder and Carrier

4. Track all Shipments Proactively

5. Understand the Total “Landed Costs”

6. Be Trade Compliant!

Choose the Best INCO Term

The INCO Term, established by the International Commerce Commission is followed by all countries belonging to the United Nations for goods that pass through international borders.

INCO Terms typically get updated every ten years as was demonstrated this January 2020.

There are 11 Options in the 2020 Edition.

The seven Incoterms® 2020 rules for any mode(s) of transport are: 

EXW – Ex Works (insert place of delivery)

FCA  – Free Carrier (Insert named place of delivery)

CPT  – Carriage Paid to (insert place of destination)

CIP –  Carriage and Insurance Paid To (insert place of destination)

DAP – Delivered at Place (insert named place of destination)

DPU – Delivered at Place Unloaded (insert of place of destination)

DDP – Delivered Duty Paid (Insert place of destination).

Note: the DPU Incoterms replaces the old DAT, with additional requirement for the seller to unload the goods from the arriving means of transport.

The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are: 

FAS – Free Alongside Ship (insert name of port of loading)

FOB – Free on Board (insert named port of loading)

CFR – Cost and Freight (insert named port of destination)

CIF –  Cost Insurance and Freight (insert named port of destination)

The INCO Term is a term of sale between a seller and a buyer that picks a point in time in the transaction where risk and cost is transferred from one party to the other.

It does not address other contractual concerns, such as payment method, title and details of marine insurance.

What it really does is advise an exporter till what time and place in a transaction is it responsible for cost and risk to …. And conversely where the importer picks up on.

Depending upon the INCO Term utilized … the risks and costs could be dramatically impactful for either the seller or the buyer.

We recommend that all operations, purchasing and sales personnel for the readers of Global Trade Magazie learn at a very detailed level all they can about INCO Terms and more specifically how to best leverage the term to reduce risk and cost in their transaction.

The author is available to the readers of Global Trade Magazine with any questions. (tomcook@bluetigerintl.com)

Insure the Shipment

The typical importer and exporter never worry about loss or damage until it occurs.

And at that point, everyone from the forwarder to the carrier is blamed for the occurrence.

Freight will always get lost or damaged at some point in time, when you ship frequently and all over the world.

It is very important to make sure that you first identify through the purchase or sales contract who has risk of loss or damage. What INCO Term is being utilized? How payment is being made?

Once the risk is understood … then marine cargo insurance should be acquired … on an “All Risk”, Warehouse to Warehouse” basis with a reputable international cargo insurance underwriting company.

Additionally, some loss control elements need to be considered to mirror the insurance policy that considers:

-That the freight is packed, marked and labeled well

-A responsible forwarder and carrier is utilized

-Freight needs to pass through the system quickly … delays at border pints open the door for loss and damage

-Freight needs to clear customs … thoroughly, legally, following all import regulations and timely … all that will mitigate the potential for loss and damage

Chose the Right Freight Forwarder and Carrier

As an extension of your shipping personnel the Forwarder and Carrier take responsibility to move your freight through the global system.

They need to do this:

-Timely

-Safely

-Cost-Effectively

Choosing the right company who is qualified, experts in pet products distribution becomes some very important criteria to make sure the shipment, the freight and the logistics moves your package to your customer’s satisfaction.

Blue Tiger International with over 35 years’ experience has developed some very key relationships with an array of freight forwarders and carriers and can assist you in making sure you have all the necessary information to make the best choices.

Other organizations like the NCBFAA, AFA and TIA … all freight trade associations can produce members who specialize in the Global Trade Magazine Industry Vertical.

Track all Shipments Proactively

Making sure the shipments arrive on time and in workable condition is the guarantee of customer satisfaction, long term relationships, less headaches and greater margins.

This can be a service your freight forwarder or carrier provides, but it needs to be clearly identified in that vein and it must be done proactively … through every step of an international shipment.

Depending upon distances involved, countries of export and import, choices of mode and carrier … some freight can travel 12,000 miles, through 4-5 carrier handoffs, via several customs authorities and in several modes of transit.

All these convolutions can create exposure to loss, damage or delay. All three concerns we want to avoid. They lead to loss of revenue, customer dissatisfaction and lots of stress within your organization.

To mitigate this concern you need to structure a proactive system to “track and trace” all your international shipments through all the convolutions, hand-offs and modes of transit.

Many “track and trace” systems can be electronic and advise you through web portals, emails and other electronic means on all your shipping activity.

The benefits of proactively in lieu of a “reactionary” mindset will pay off in spades over the course of time and client relationships.

Understand the Total “Landed Costs”

Landed Costs are the total of all the accumulated expenses attached to a shipment moving internationally.

Many of these costs are outlined as follows:

-International Freight

-Duties, Taxes and Fees

-License Charges

-Handling Charges

-Domestic Freight

-Clearance and Handling Charges

-ISF Fees

-Carrier Surcharges

-Demurrage

-Storage and Warehousing

Sometimes the landed costs can exceed the value of the actual shipment.

In order to protect margins and profits … it is critical to make sure “transactional” that you completely understand what the “landed costs” are for your shipment … then you can make sure these costs are covered in the eventual client invoicing that will follow.

Remember no one likes surprises … particularly those that have an additional price tag attached to them.

Be Trade Compliant!

It is imperative that both pet product importers and exporters operate their global supply chains trade compliantly.

This is following procedures and operational practice that accomplishes:

-Due diligence

-Reasonable Care

-Supervision and Control

-Engagement

This includes …

-Understanding the regulations

-Building internal SOP’s to comply with the regulations

-Train personnel on how to interpret and practice the SOP’s and in a regulatory manner

-Engaged in government programs that provide evidence of managing secure and compliant global supply chains, such as C-TPAT, Customs-Trade Partnership Against Terrorism

C-TPAT is a voluntary program of security created for importers into the United States managed by CBP, Customs Border and Protection … now open to include exporters from the USA.

Areas also included in trade compliance have to do with … documentation, classification (HTSUS/Schedule B Number(s), Valuation, Record Keeping, Export License Requirements, Denied Party Listing … to name a few of the operational concerns.

The penalties for non-compliance are fines, penalties and potential loss of import or export privileges. More serious areas can include criminal prosecutions.

Summary

Importing and exporting products successfully, means paying attention to detail. These six areas outlined above are a good foundation for creating a detailed and comprehensive approach to managing global supply chain responsibilities.

Our 35 years plus of global supply chain experience has demonstrated that those companies that are diligent about how they manage the freight, logistics and distribution of pet products will create the best opportunity to:

-Protect margins and grow profits

-Increase customer satisfaction

-Decrease stress and problem areas in global markets

-Better the reputation, which converts to client retention and expansion

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Thomas A. Cook is a 30 year seasoned veteran of global trade and Managing Director of Blue Tiger International, based in New York, LA and West Palm Beach, Florida.

The author of 19 books on international business, two best business sellers. Graduate of NYS Maritime Academy with an undergraduate and graduate degree in marine transportation and business management.

Tom has a worldwide presence through over 300 agents in every major city along with an array of transportation providers and solutions.

Tom works with a number of Associations providing “value add” to their membership services and enhancing their overall reach into global sourcing and in export sales management.

He can be reach at tomcook@bluetigerintl.com or 516-359-6232

sourcing
Archives, Foreign Trade Zones, Global Logistics, Global Trade Daily

Global Sourcing Opportunities: Reduce Your Risks.

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The American business sector is growing and expanding foreign sourcing at unprecedented rates. This growth is due to a number of factors. One contributing impact is the need to source competitively priced raw materials, components, and finished products from foreign markets.

While there is always a value in “Buying American” the reality is that we participate in a global economy and buying and selling in a multitude of markets offers all companies value in growth, profits and sustainability.

This holds true for all business verticals in a robust fashion. More and more USA based retailers, manufacturers, and distributors are finding alternative sourcing opportunities in other countries.

Consumer products, chemicals, electronics (both components and finished products), industrial goods are examples where we witness increased foreign sourcing.

China leads the world as a source for most manufactured products. . “Hats-off” to them for creating a huge capacity, with a robust bandwidth to be both comprehensive and competitively priced, making all other markets subordinate in comparison.

The United States has lost a lot of ground to foreign competition but has still maintained a strong manufacturing profile in numerous verticals. And in recent years has begun to grow again.

Most management personnel in expanding companies … are pressured into short term profitability goals, source internationally, which can lower production and purchasing costs, so margins can be maximized.

These strategies create a dependence on foreign sourcing and a continued need to develop numerous options in purchasing both materials and finished products from low-cost countries.

Cost reduction is the main reason for foreign sourcing that comes with certain risks and challenges, that we need to navigate successfully.

Some of the examples of the challenges and risks in global sourcing:

-Making sure “landed costs” are figured into the cost of goods purchased

-Handling the complications of shipping internationally

-Dealing with U.S. Customs (CBP)

-Managing Trade Compliance

-Packing, marking, and labeling concerns

-Other government agencies, such as but not limited to: USDA, FDA, ATF, DOE, etc.

The critical step is to evaluate and understand your risks and manage solutions to mitigate the challenges of global sourcing and the import process.

In that regard we have eight recommendations:

1. Proceed with new suppliers cautiously.

Do not rush into sourcing relationships. Initially obtain a flow of samples. Check, recheck and check again. Initially buy limited quantities till you have had a number of successful import transactions.

2. Raise the Bar of Quality Control (QC)

Many Industrial Companies we have interfaced with over the last 20 years have had QC issues with foreign suppliers. We strongly suggest you acting diligently and with high reasonable care in assuring that all quality standards are being met.

3. Control the Term of Purchase

INCO Terms control international sales and purchasing. Chose terms that leverage your purchase, such as Ex Works, FOB, FCA and stay away from the DDP Term.

4. Align with Qualified Service Providers

Freight Forwarders and Customhouse Brokers become a reliable partner in your import supply chain. We maintain strong relationships with several service providers that understand the Pet Products Vertical and can refer you to several options.

5. Create Robust “Landed Cost Models”

Landed Cost Models outline all the costs in an import transaction that impact the overall expense in choosing a specific foreign supplier. Freight, duties, taxes, clearance charges, consolidation, etc are just a few of the many expenses associated with imports.

It is critical to make sure you are identifying and covering all of your expenses in the import transaction.

6. Continually do comparison purchasing and diversify your sourcing options

Foreign sourcing is a “work-in-process”. It is a best practice to always seek options, explore alternative suppliers in various countries to make sure you are truly obtaining the most competitive price and highest level of QC and product performance.

7. Utilize and leverage your Logistics Options

Bonded warehousing, foreign trade zones, tariff engineering are practices available to help lower landed costs of goods purchased and are legitimate options to reduce inbound logistics costs.

8. Pay attention to detail

Issues such as Harmonized Tariff Codes, Valuation, Transfer pricing, and Record-Keeping are all issues you have to manage successfully to keep your inbound supply chain running and managing successfully.

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Thomas Cook is a recognized leader in global supply chain and author of 20 books on global trade and business management. He can be reached at tomcook@bluetigerintl.com or 516-359-6232.