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A Tipping Point in the Trade War? 4 Tips to Consider Now.

trade

A Tipping Point in the Trade War? 4 Tips to Consider Now.

While reassured by a recommitment to the U.S.-China trade agreement, companies still need to be vigilant in protecting their supply chains from pandemic aftershocks – and election-year unpredictability

Think back – way back – to January 2020. The U.S. and China signed the Phase 1 trade accord, agreeing to roll back tariffs, expand trade purchases and renew pledges on intellectual property.

Many global shippers felt encouraged by the prospect of improved trading days ahead. And various American businesses welcomed the chance to equalize their trade footing and to counteract China’s intellectual property practices.

While many companies continue to manage through the hefty impact of the various trade remedy measures of Sections 201, 232, and 301 of the Trade Act, there was hope that Phase 2 of the trade deal between the U.S. and China would signal even better prospects.

But then the coronavirus claimed center stage. Its supply-chain side effects dominated the global marketplace, turning it into a de facto PPE-and-sanitizer delivery system – presenting shippers and manufacturers with an entirely different set of obstacles.

Many global manufacturers and suppliers pivoted to face mask production. French winemakers turned fine wine into the finest hand sanitizer. And American companies in search of these supplies turned to new sources globally, navigating the choppy waters of U.S. Food and Drug Administration (FDA) importing requirements and those of other government agencies in the process.

The administration’s 90-day deferral of import tax payments offered temporary relief to some companies. But for nearly eight months, manufacturers and shippers remained in a state of suspended apprehension when it came to the future of trans-Pacific trading.

Finally, on August 24, U.S. and China trade representatives officially recommitted to carrying out Phase 1 of the trade accord.

The chessboard today
Now, as the U.S. presidential election comes into view, the spotlight is once again on the global chessboard of tit-for-tat tariff moves, amplified by the Trump administration’s desire to counter the practices of U.S. trade partners and address the U.S. trade deficit.

As part of a longstanding dispute over aircraft subsidies, the Office of the U.S. Trade Representative (USTR) initially imposed 10% tariffs on Airbus aircraft – but increased that to 15% in March. Also announced this August, the USTR decided to maintain 15% tariffs on Airbus aircraft and threatened 25% tariffs on other European goods, such as food, wine, and spirits, including a tariff on imported French makeup and handbags, in retaliation against France’s Digital Service Tax (DST). However, no tariffs have been imposed yet as France has not implemented DST.

Trade winds have been equally tempestuous on both sides of the U.S. border. After the U.S. imposed tariffs on aluminum from Canada, Canada retaliated with its own trade penalties.

And the new U.S.-Mexico-Canada Agreement, which took effect this past July, was reassuring for many companies that even dubbed it the new NAFTA. While some North America cross-border shippers are still grappling with compliance and weighing potential trade gains, its changes to cross-border trade overall have been well received by many businesses.

Now, businesses are speculating on the potential supply chain effects in the months to come. Will U.S. tariffs on a long list of Chinese goods be rolled back during the next round of negotiations? That has become the $350 billion question.

Many answers, and potential changes, hinge on the upcoming presidential election.

Be ready for new rollouts
You may recall that the USTR announced – and imposed – some section 301 tariffs quickly after their announcement. While tariffs were suspended on $160 billion in Chinese goods (List 4B) – pending the success of Phase 1 of the agreement – it’s not known if they are suspended indefinitely or if these tariffs could again come into play, further spiking import costs.

Although most believe a swift post-election reversal is unlikely, it’s easy to see the two main party presidential nominees have different strategies on how they would carry out international trade and tariffs post-November. For that reason, the safest course is to be prepared for any outcome. Here’s what you should consider in the coming months to help your company prepare:

1. Speak up about exclusions
So far, the USTR has granted about 2,000 exclusions related to section 301 tariffs, and over 75 exclusions from other section tariffs – many in response to importers’ petitions. In fact, the USTR has announced exclusions to multiple product lists. And while comment periods are over for now, it’s important for companies to voice their opinion for or against tariffs as they’re proposed.

The refunds are retroactive, so some importers stand to gain millions in refunds for previously paid duties.

Since an early exclusion request can produce earlier duty exclusions, vigilance in monitoring and applying for exclusions is vital. But the submission process can be lengthy and complex, requiring businesses to record and report all import product categories that relate to each applicable tariff number or specific product. This is an instance where having a knowledgeable customs broker and trusted advisor, who you can rely on to help and provide expertise, can come in handy.

2. Reconsider drawback and deferment programs
The trade programs you ruled out in the past could be a financial boon now. For example, it may be worth revisiting duty drawback programs, which provide a refund on previously imported goods that are subsequently exported, so consider your current import/export balance. Also, consider if 301 tariffs were to subside, would continuing the program still be practical for your supply chain?

Because formal application to this program can be quite rigorous, consider handing this task off to a 3rd party expert.

You may also want to reconsider bonded warehousing or using a foreign trade zone. Companies that produce major equipment or large machinery, for example, often experience significant lag times between production and sale – incurring duty payments of $200,000 or more per machine.

If you’re not planning on selling major equipment over the next 6 months, it might make sense to import the product into a foreign trade zone and deploy duty deferment tools.

3. If you haven’t already, explore alternative sourcing or production options
The pandemic has reminded companies that diversification is key to business resilience. In practice, that may mean onboarding alternative suppliers or preparing to change production venues in the event of a coronavirus outbreak.

To protect margins as the price of Chinese goods, materials and tariffs climb, many U.S. businesses are turning to lower-priced suppliers in Vietnam and Malaysia. Not only do imports from these countries allow for the avoidance or reduction of tariffs, they can also provide the assurance of a ready workforce and steady material supply.

4. Above all, stay informed
Like most business processes, proficient supply chain management hinges on your ability to manage countless moving parts, and plan and anticipate likely change.

During a global pandemic, amid an economic downturn, and in an election year, change may be the only thing we can predict. Efficiency and preparedness have never mattered more.

Stay current on policy changes and new trade regulations. Consult the USTR website often. Sign up for automated logistics updates and trade advisories. Stay close to your trade association, like the National Association of Manufacturers (NAM) and other industry-specific groups. And turn to a proven 3PL before your internal logistics department becomes overwhelmed.

And then, fasten your seatbelt as we navigate the many changes on the horizon.

Transport Management

Quality Tips for Better Transport Management

With the world becoming more interconnected than ever, the pressure and expectations from the transport industry have increased exponentially. Everyone wants a smooth, safe, and secure journey whether they are moving for their jobs or to meet someone. Moreover, the expectations from the logistics companies have been increased too. 

Transportation management is no more about just moving freight at a lower cost. The technology has advanced and the structure of the supply chain is no more linear. Along with complex structures, many other factors are compelling shippers to improve their services in order to gain a competitive edge in the market. 

Increased demands:

Customers are looking for quick, efficient, and secure deliveries where they are constantly updated about the location of their products too. 

We cannot deny that in the context of supply chain operations,  logistics and transport management are interrelated. Transportation plays a major role right from manufacturing to the final delivery of the product. Better transport management can lead to successful order completion. There can be a different outcome if there is a flaw in the logistics or transport policies. Let us find out the things you can do in order to have a more efficient transport system network. Below, some tips to improve transportation networks are discussed.

Using Technology for Various Transport Operations

Technological advances in the communication and transport industry can help bring sustainability and adaptability in transportation networks. One of the most significant jobs belongs to the transport managers since they can encourage and advertise buying and adapting technologies that support cleaner and greener vehicles and eco-friendly technologies. Potential advantages include:

-Reduced emissions

-Lesser vehicle expenses 

-Less fuel utilization

Go for Automated Solutions

There is no simpler method to smooth out your transport management than to automate the whole process. An automated transportation network can simplify and streamline all operations. With automation, transport managers can constantly keep themselves updated and know:

-If the trucks are operating

-Real-time location of the fleet

-Their destination

ERP Framework:

One of the best approaches to examine and save money on working expenses is to embrace mechanized arrangements like an ERP framework. This product robotizes the whole cycle, guaranteeing each cycle runs rapidly and decisively so any blunders that lead to misfortunes can be limited. Moreover, the framework likewise empowers you to assess salary and costs for a specific period so you will have the option to plan your spending all the more carefully.

Big Data

Constant improvement in viable transportation the executives are currently regularly acknowledged by key transporters on account of the expanded utilization of technology and using air freight framework giving the capacity to obtain informative reports for meaningful business knowledge. This enormous development towards more utilization of the information to gather bits of knowledge made by measures inside innovation is known as “Big Data.” 

How Can Transport Software Help?

The latest transport management software can provide other facilities including:

-Keep a track of journeys 

-Organize delivery trips

-Monitor the usage of fuel per vehicle

-Allocate and track drivers 

-Analyze the collected data

Transit Applications

Develop transit applications to provide real-time information regarding the route and location of the vehicle. This can also help the drivers to adopt the best and the most efficient route and improve the overall services.

Analyze the Overall Performance

Time to time analysis of the performance is necessary. The initial phase in making economical arrangements is to completely investigate and understand everything related to the whole transportation including:

-Costs

-Policies

-Procedures

-Operations and activities

This gives the information to create noteworthy sustainable systems. Fleet managers can begin by exploring existing measurements and observing devices to evaluate the use of vehicles, patterns, and mileage. This will help spot all the pros and cons and new improvement open doors in various business zones.

Using Metrics

It is necessary to monitor the transportation footprint and network. One can do it by using metrics. With huge amounts of data, identification of key operating indicators can help you look for the right information. The management must have the ability to convert the data into useful information.

Identify the Needs and Priorities

The transport business is focussed on the need to satisfy the customer’s needs. A sustainable approach in transport management can lead to more profit and better performance.

To achieve this, the business policies and priorities must be understood thoroughly.  Business needs could incorporate operational data, for example:

-Where vehicles are based and how they are planned,

-Their journey

-Stacking 

-Strategy necessities

Sustainability

The pressure on companies to go for sustainable solutions is increasing. Ecological targets could incorporate carbon decrease, practicing air quality control, and improvement of the eco-management tracking. Sustainable measures can include:

-Driverless fleet

-Cleaner vehicles

-Inclusion of eco-friendly technologies

-E-cargo bikes

Self-Driving Trucks:

The innovation for self-driving trucks is still under the process of development and it needs to defeat certain hindrances, for example, improving driverless programming to make it ready to proficiently work on urban streets with heavy traffic. No one can deny that it’s one of the transportation future trends. Transportation organizations need to plan for upcoming innovation changes inside the business and begin including self-navigating management systems in their trucks that can learn from genuine drivers.

E-Scooters

According to reports, the popularity of scooters has increased and the number of bike users has increased exponentially. This indicates that citizens are also contributing to a greener environment.

Cargo e-bikes can reduce congestion and deliver faster. They are environmentally friendly as they are charged with battery and can be ridden on sidewalks. Amazon and UPS have already started delivering through them.

Don’t Miss Out on the Chances to Improve

A significant improvement can be brought by keeping a track of fuel expenses and its total consumption along with fulfilling all the arrangements and travel demands. Effective management of transportation is impossible without the worker’s awareness and his/her adherence to the company’s strategies. To promote a spirit of cooperation, teamwork, and commitment among the employees, the managers need to have:

-Continuous monitoring

-Improvements in the operation

-Acknowledgment of employee’s good performance

These improvements combined not only prove to be profitable for the companies but can also help them to have a stronger logistics network that can reduce:

-Accidents

-Traffic congestion

-Pollution

Scalable Business Operations

By going for scalable solutions, companies with larger networks can deal with demand and complexity issues. Joining all the separate supply chains can help view everything from a single lens. A centralized system can assist in analyzing the role of each department including customer service, marketing, and sales efficiently.

At the point when all the steps included are run manually and independently, it can become hard for the supervisor to recognize issues, screen progress, and take actions. That is why it is crucial to embrace a centralized structure that joins all the steps.

Appropriate Planning and Preparation

The first step towards effective transport management is to have proper planning. The reason to invest in planning is to achieve maximum output in a shorter amount of time. There are numerous components associated with this, from the acquisition of products and their storage to their final delivery. 

Other important things:

Other things that need to be taken care of are time, transportation, and expenses. Supply chain administrators must have the option to build up an extensive work process to guarantee the efficient running of operations. 

Unexpected Situations:

Though the planning is done to get the best possible results and efficient performance, yet the possibility of uncertain threats must not be overlooked. The best example of an uncertain situation can be taken from the recent pandemic which led to numerous supply chain problems all across the globe.  It is better to be prepared for surprising conditions, including:

-Bad weather

-Shortages 

-Delays 

-Damages to goods, etc.

Training and Guiding Employees

Your employees play an integral role in the growth of your business. No job should be considered trivial or unimportant. All the departments and all the workers including the drivers, delivery guys, warehouse workers must be given proper guidance and training for productive performance. 

Agility

It is the company’s job to improve their abilities and bring agility in the operations. They all must be well aware of the:

-Company’s rules

-Their jobs

-Technologies they are working with

A centralized HRM system can monitor the performance of the workers and help conduct training.

Streamline Your Warehouse Management

Transportation jobs can’t run easily without proper inventory management. The capacity of products and course of action of distribution centers influence the transportation cycle. In this manner, make sure that all things are organized.

Accessibility of Products:

Efficient transportation management takes into consideration the accessibility of materials and customer’s requirements, guaranteeing that those goods are ideally used and distributed. Moreover, the degree of consistency helps the transporter carrying out his job in a better way.  

-Accelerate the picking cycle

-Simplify forklift working

-Use barcode scanners to add more speed and accuracy

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Danielle Gregory is a full-time Writer, Traveler, and Marketing Expert who is Currently Working for QAFILA. Danielle’s writing relates to a range of subjects such as logistics and IoT. Besides writing, she enjoys traveling, Cooking, and Riding

supply chain

New Supply Chain Optimization and Transition to DSN

Supply chains are typically linear, with a straight progression of:

1. Plan

2.  Design

3. Source

4. Deliver

In traditional supply chains, each step depends on the one preceding it, and inefficiencies in one phase can cause a domino effect of similar inefficiencies in the next stages.

Stakeholders also have zero visibility of other processes, which restricts their capacity to react or manipulate their activities.

But today that’s changing. As supply chains are transitioning from a straight sequence into interconnected, dynamic systems capable of evolving into an optimal state with time and can easily incorporate ecosystem partners.

This transition from sequential, linear supply chain operations to a dynamic, interconnected open system will lay the foundation for how businesses will compete in the future.

We term this open interconnected system, a digital supply network (DNS). And brands who cannot optimize their supply chain for the transition to a DNS may lose out in efficiency to those that do.

How does a Digital Supply Network (DNS) Function?

DSNs integrate data from various locations and sources to push the physical task of production and distribution.

Many companies already on the way to creating DSNs are changing their focus from optimizing and managing discrete functions, like manufacturing and procurement.

Rather, they often use digital supply networks to focus more on how the entire supply chain can easily achieve brand objectives while informing portfolio strategies, corporate and business units.

So DSNs allow supply chains to steadily become an integral part of decision making and strategic planning.

Organizations can now create and leverage many DSNs to complement various aspects of their strategy and efficiently target particular needs.

Transitioning from a Traditional Supply Chain to DSN – the Impacts

The purpose of any successful supply chain majors in the movement of finished goods, capitals, materials, and other assets from location to location.

At its core, though, a supply chain comprises numerous transactions: the exchange of money, time, information, or physical goods for any other unit of value.

However, dramatic digital and technological developments such as enhanced computing power and decreased overall costs have affected the traditional supply chain in various ways, such as an increase in production innovation and a decrease in transaction costs.

Reduction in Transaction Costs

The boost in power and technology efficiency has revealed itself in the drastic reduction of transaction costs for company operations both externally and internally.

It doesn’t have to be prohibitively time-intensive or expensive to acquire insight into each segment of operations anymore, or to understand supplier or customer demand patterns in-depth.

Whilst the linear flow of design, creation, and movement of physical goods stays unchanged, all underlying data now moves around and through supply chain nodes, dynamically and in real-time.

These new interconnections between processes and subprocesses transform supply chains into predictive and efficient networks.

When transaction costs fall, the capacity to transact with other partners rises. This allows transitioning to networked supply chains as businesses can connect with different partners when necessary to deliver increased value.

Production Innovation

Production in the physical world is changing because of dramatic improvements in the way matter is manipulated and the computing power that facilitates such processes with the goal of production.

Enhanced capital equipment will lead to less of it being needed to begin production. And with less capital, the minimum efficient scale drops, and production is allowed to locate nearer to demand.

How to Shift from a Traditional Supply Chain to a Digital Supply Chain

Once you’ve decided to transition your supply chain from linear to DSN, you must consider how to configure your supply networks to execute your plan.

To configure and achieve a DSN driven approach you can execute many supply chain transformations.

Here’s a pictorial explanation of 9 strategic transformations brands can make via leveraging DSN and a list of tactics to achieve each transformation.

Take EasyJet, for example, that offers virtual walkthroughs via smart glasses to enable two-way communication between its central engineering team and remote technicians.

With this, technicians can perform complex maintenance jobs and eliminate downtimes. The real-time walk-throughs enable the supply networks to move without hindrance and ensures a smooth transition from linear to digital networks.

Implementing a DSN – the Optimization

For business executives accustomed to traditional linear communications and data, the transition to real-time access to intelligence and data changes the way they do business.

Once your organization chooses to adopt a DSN, consider how to create, connect, and utilize the various industry-driven innovations that power it.

Before you create a DSN, it’ll be helpful to take the pathway of information creation, analysis, and implementation as a loop.

Integrating digital information from various sources and locations drives the physical actions of manufacturing and distribution in a continuous cycle.

Real-time access to intelligence and data is largely driven by the cyclical and continuous flow of data and actions between the real and digital world.

The flow happens via 3 iterative steps called the physical-to-digital-to-physical loop:

Physical-to-digital: This step involves capturing information from the physical world to develop a digital record from the data.

Digital-to-digital: The digital to digital phase involves sharing information to uncover meaningful insights via advanced analytics, artificial intelligence, and scenario analysis.

Digital-to-Physical: This deals with the application of algorithms to translate digital-world strategies to valuable data able to initiate action and change physically.

Conclusion

Traditional supply networks are phasing out due to their limitations and the hitches they cause in the supply chain.

And because of this, many businesses are opting for a new supply chain optimization by transitioning to digital supply networks.

However, the transition is tough and may ruin a supply chain if not done properly.

But by following the tips and ideas in this piece, transitioning and optimizing these new supply networks should be a lot easier.  

If you have any additional ideas or questions regarding the optimization of the new supply chain, please leave a comment below.

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Will Schneider is the founder of InsightQuote, a match-making service for B2B services, and writes informative posts about fulfillment services at Warehousing And Fulfillment. He is passionate about helping businesses find the right solutions to improve their operations. When not working, Will enjoys coaching youth basketball.

cross-docking

What Warehouses Should Keep in Mind When First Implementing Cross-Docking

Warehouses that want to improve labor and space utilization without expanding to a new location or breaking ground may consider cross-docking because of its potential efficiencies. Unfortunately, it can also come with many pitfalls for those trying it for the first time.

Cross-docking requires a detailed understanding of your team, space, partners, and technology. For new warehouses, that means implementing cross-docking should come with significant testing and preparation, especially in terms of your inventory management, scheduling, spatial allocation, and the training you give your team and partners.

Test inventory management tools

Cross-docking prepares companies for just-in-time (JIT) shipping and distribution, making immediate use of inventory as it arrives. Companies that want to start utilizing cross-docking will need a robust inventory management system that can understand and differentiate these inbound shipments.

Your tools must be able to understand inventory utilization. If half of the goods on an inbound shipment are for JIT purposes, then the inventory platform must be able to split received goods and correctly update both inventory levels and the number of products you list for sale. If this action would require ongoing intervention from you or additional inventory counts, it could introduce higher labor costs that negate cross-dock benefits.

Ultimately, cross-docking can help with inventory management and often keep companies from needing to expand physical infrastructure for the products they hold. It might also help you expand operations to support backorders. This takes time, however, and requires tools that help you understand and manage inventory levels without adding burden.

Robust scheduling includes flexibility

Cross-docking is intense choreography. You’re going to need smart people and reliable technology to manage the planning of how people and trucks are moving in and around your site. Cross-docking and JIT operations demand having the people available to handle inbound shipments and process them while helping your team know what inventory is ready to use and what needs to be put away.

Dock availability and the time of truck arrivals and departures must be flexible so that your operations can run normally. Every cross-docking team plans on a smooth day where everything runs on schedule. However, that’s rarely a reality. Paperwork, traffic delays, accidents, or even someone needing to use the bathroom can cause a small delay. Something as simple as an employee driving through the parking lot can force a truck to wait.

If you schedule everything down to the minute and don’t give your team and partners flexibility, it’ll cause greater delays. In most cases, as you’re expanding and learning, arriving trucks will end up waiting because it’s hard to predict the time people need, but you also don’t want docks sitting empty for extended periods. So, ensure that you have people ready when trucks are there and test the time you give teams for inbound and outbound.

Dock door assignments should consider space and traffic

One other caveat that many warehouses don’t consider when they first start cross-docking is the physical space that people, trucks, and inventory required. Cross-docking effectively requires that dock door assignments be efficient and allow incoming and departing trucks enough space to maneuver safely and quickly. Adding extra points to a turn will slow the entire process down, for example.

If your warehouse wasn’t built with cross-docking in mind, test this thoroughly. Often, warehouses need significant reconfiguration of internal elements or will install new doors and adjust the building design to facilitate cross-docking. Multiple teams, doors, trucks, and the equipment everyone is using are going to take up extra space and need to be able to move freely and safely. Start by giving everything and everyone more leeway than you think they need.

Some new inventory and dock management platforms support cross-docking and can make suggestions based on timing, assignments, and other aspects of your operations based on historical and current data. When your tools offer this, try out their analysis and recommendations to see if you can maximize your efforts.

The entire supply chain requires competencies

Cross-docking is an advanced management and utilization technique for any warehouse or distribution center. You’re managing dock door assignments, transshipment, vehicle routing, product allocation, barcode scanning and putaway, new warehouse layouts, and the network and systems required to manage it all.

Your team needs competency in each of those areas and activities. Partners should have their own understanding plus the ability to support you. Inbound expertise is required, across the board, for JIT requirements and scheduling to be effective.

You’ll eventually want to build out appropriate penalties for time windows to keep things running smoothly, but that requires your team not to cause delays. In many instances, cross-docking is complicated mathematics disguised as people and trucks.

Take your time to test and implement it. Work with partners proactively to help understand what they need from you and explain what you need from them. Train your team specifically on the new processes and requirements. Simulate, test, and optimize procedures and layout continually.

Cross-docking can save warehouses significantly on a variety of costs and size requirements. You might reduce material handling and make labor more efficient. Customer satisfaction can be improved, too, as you’re relying less on backorders or older products. Achieving all of those wins is a lengthy process, and it’s important to walk into the situation with patience.

____________________________________________________________

Jake Rheude is the Director of Marketing for Red Stag Fulfillment, an ecommerce fulfillment warehouse that was born out of ecommerce. He has years of experience in ecommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.

disruptions

Preparing for Future Supply Chain Disruptions: Insights from the Field

Organizations across all industries—from automotive, consumer goods, and pharmaceuticals to transportation, electronics, and oil and gas—have felt the disruptive effect of the coronavirus pandemic. Turning the global supply chain on its head, COVID-19’s impact has cut across multiple facets of international trade, including manufacturing, import/export, logistics, compliance, and supply chain management. This disruption has been a wake-up call for organizations worldwide, prompting them to assess their readiness to respond reliably, expediently, and effectively to rapidly evolving risk factors going forward.

Disruption Is Inevitable

Whether driven by an unprecedented pandemic or events that are more familiar, like trade wars or frequent duty and tariff changes, future disruptions to the flow of goods are unavoidable and companies must be as prepared as possible. Case in point: on June 29, the amendments to the Export Administration Regulations (EAR) published by the U.S. Department of Commerce, Bureau of Industry and Security (BIS) came into force, impacting U.S. companies that export goods, software, and technology to China, Russia, and Venezuela.

A few days later on July 1, a new free trade agreement entered into force as the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement (NAFTA). While the USMCA is designed to provide “significant improvements and modernized approaches to rules of origin, agricultural market access, intellectual property, digital trade, financial services, labor, and numerous other sectors,” companies must respond efficiently to changes in import duties, tariffs, and rules of origin verification procedures in order to avoid compliance issues.

The current government’s uncertain trade relations with China, BREXIT’s unfolding impact on U.K. trade, and evolving pandemic predictions are just a handful of factors that may unsettle global supply chains going forward. With disruption an unavoidable consequence of doing business in 2020, successful companies are securing their supply chains by prioritizing operational responsiveness, agility, and adaptability in order to keep goods flowing while avoiding compliance violations and penalties.


Are You Prepared?

Today’s businesses are keenly aware of the importance of keeping a close eye on their sources of raw materials, parts, and finished products to ensure logistics costs do not erode overall profit margins. But COVID-19 caught many companies off guard, throwing their sourcing strategies and revenue flow into crisis.

Descartes’ 2020 Global HTS Classification Benchmark Survey of importers, shippers, logistics and supply chain operators, and customs brokers around the globe analyzed the impact of the supply chain disruption on companies’ operations and ascertained how they are addressing issues for the long-term.

The survey found that 35% of respondents were forced to research alternative suppliers or locations as a result of the pandemic. An additional one-third felt increased pressure to identify ways to reduce duty and tariff costs in order to shore up the shrinking bottom line.

Lessons Learned: Count On Technology

For those survey respondents forced to look for alternative suppliers due to COVID-19, many also looked to advanced technology solutions to address the more demanding workload and support the shift to a distributed workforce and the ‘remote working’ model.

In their leaning towards more advanced technology, approximately three-quarters of respondents were aiming to establish a workflow process for mass classification and to create an audit trail for proof of due diligence; sixty-eight percent were seeking a collaborative online classification process, while 55% sought configurable classification rule sets for different industries and product categories.

The Descartes survey also found that the majority of companies—not just those impacted by COVID-19—are adopting more advanced technology to enhance responsiveness to change and to increase resiliency. Regardless of the number of SKUs classified annually, businesses are recognizing the value of additional layers of protection against the unknown to help ensure their import operations remain viable during turbulent times.

Keep Agility and Responsiveness Top of Mind

Prior to switching to av more automated and integrated research and classification solution, most respondents surveyed were using labor-intensive and error-prone manual methods; a massive 81% were accessing multiple government websites to access classification data and 46% were looking up information in hardcopy books—an unacceptable drain on valuable time and resources and a serious impediment to pivoting swiftly in the face of disruption.

Respondents using advanced global trade intelligence solutions, with up-to-date tariff data accessed from a single system, reportedly accelerated the classification process by 30% to 100%. This increase in speed is a critical piece of the preparedness strategy, as companies aim to focus on agility to keep goods moving during market volatility.

Future-proof Your Organization

New disruptions to the global supply chain may be just around the corner. A proactive global trade intelligence strategy will help organizations continue to drive commerce while ensuring trade compliance in the face of inevitable change:

1. Take advantage of more advanced technologies to maintain compliance efficiency and accuracy as workload demands increase, as well as to better manage a more distributed workforce.

2. Look to technology solutions to increase the resilience and responsiveness of trade compliance programs.

3. Ensure a single point of access to research complex international trade information, including up-to-date HTS codes, duties and tariff treatments, rulings, and explanatory notes.

4. Use a robust solution to effectively exercise and establish a “standard of reasonable care” for product classification.

With the impact of COVID-19 on sanctions and export controls still not fully known, compliance professionals should re-evaluate their global trade compliance strategy, honing it to boost adaptability, agility, and responsiveness to change. By leveraging advanced global trade intelligence technologies, companies can better insulate themselves from the fallout of future supply chain disruptions while minimizing duty spend and achieving higher trade compliance rates in the process. For compliance professionals everywhere, the age-old Boy Scout adage rings true: Be prepared.

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.  

agility

4 Strategies Manufacturers Can Adopt to Increase Agility

In turbulent, transformative times like these, the term “business agility” seemingly appears everywhere. And though it’s easy to imagine even the world’s largest tech companies or consulting firms making a sudden pivot, it’s harder to picture a manufacturer with a factory full of heavy equipment doing the same thing.

So what does business agility mean in the context of manufacturing or construction? It’s less about the speed and scope of changes being proposed and more about communicating effectively across large, dispersed organizations. When disruptions break the supply chain or cause demand to plummet, manufacturers must be able to encourage an information flow across all corners of the enterprise. Agility depends on the free flow of information and the ability to guide a team directly.

The good news is that manufacturers are used to disruptions. They regularly deal with supply chain issues, sudden regulatory changes, or shifting market dynamics. Adaptation is in their nature.

The bad news is that COVID-19 puts a unique strain on the industry that makes agility more important yet less accessible. Specifically, factories and construction sites that have had to either scale back or shut down in response to public health requirements can’t exactly pick their work up remotely. Teams are spread out more than ever and cut off from core assets — and that includes everything from machinery to data.

These are circumstances manufacturers don’t have contingency plans for. Meeting the moment will require extensive brainstorming, aligned leadership, and quick and decisive action — but none of those things will be easy with stakeholders scattered to the wind.

Today’s Realities

All of this means manufacturers need a new concept of business agility along with a fresh sense of commitment.

Since the start of the pandemic, we’ve seen heavy-duty industries forced to shut down suddenly and reopen as quickly as possible. While opening, they’ve had to integrate new social distancing requirements into all aspects of operations and vastly expand health and safety measures. In some cases, they’re even learning how to stop sharing pens and clipboards. And those are just the implications for operations.

Unstable economic forces mean that supply and demand could be in flux for the foreseeable future. Granted, some manufacturers are booming right now — but others have seen business crater, and the long-term fallout of this pandemic remains to be seen. Manufacturers must reexamine (and in many cases revise) their plans, strategies, and fundamental business assumptions. Everything is up in the air.

On top of everything, this pandemic is accelerating the shift away from in-person interactions toward digital ones. Relationships with customers, suppliers, employees, and all other stakeholders are evolving because of the need to socially distance. More than that, though, this health crisis has underscored the fact that digital environments are more efficient, convenient, and customizable than the alternatives. This could prove to be a tipping point for digital transformation throughout the manufacturing industry.

It’s hard to overstate the pace of change right now. The degree to which some manufacturers have already responded is impressive; we’ve seen liquor producers start making hand sanitizer and sports equipment manufacturers adapt assembly lines to create face masks. Agility is possible in the face of this crisis, but manufacturers must take the initiative.

“Business as usual” stopped being relevant with the first COVID-19 cases, and there are serious questions about whether we’ll ever return to normal. That means something different for every manufacturer while still placing the same obligation on all of them: Stay agile or get swept under.

Building the Basis of Business Agility

Manufacturers need to grow agile as quickly as possible. Unfortunately, moving fast while staying coordinated is never easy. Apply these strategies to help guide your transformative efforts:

1. Share information in real time. People need answers right now, whether that’s about health and safety measures, new workplace practices, changing strategies, and everything else that’s been uprooted by the pandemic.

The less accessible this information is, the more disorganized things become. Sharing information in real time so everyone has the answers they need on demand keeps communication issues from making a bad situation worse. Strive to be as transparent as possible and to make information highly accessible.

2. Identify information bottlenecks. The pandemic exacerbated the existing information bottlenecks in organizations and created a number of new ones. Analyzing how internal communication works — how information flows through an organization — identifies where these bottlenecks are and suggests how they can be resolved.

Better access to information (of all types and at all levels) helps accelerate and improve decision-making. Before COVID-19, 86% of companies surveyed said frontline workers need more insights at their disposal. That priority is even higher now.

3. Lead from the bottom up. In any fast-changing scenario, insights from the front lines are what matter most. If executives ignore the ideas and perspectives of workers who are actually in the thick of operations, they miss both the red flags that require attention and the innovative ideas necessary to meet this moment. Information needs to flow freely and broadly within an organization, from one-on-one and small group communication all the way up to corporate messaging. Instead of giving lip service to this priority, make sure there’s a direct pipeline.

4. Create new touchpoints. Information from outside the organization — from customers or suppliers — is also immensely valuable right now. It’s vital to business agility because it helps a manufacturer explore how it can pivot without alienating the partners it relies on. Take those outside insights seriously and solicit as many as possible. Convenient digital touchpoints make it easy for others to supply complaints, suggestions, and praise, all of which inform a manufacturer’s next move.

Remember that agility is all about alignment. Any company — manufacturer or otherwise — can evolve on the fly as long as it can move as one. Communication is what cements that connection and helps achieve unity across the board.

_________________________________________________________________

Daniel Sztutwojner is chief customer officer and co-founder of Beekeeper, the single point of contact for your frontline workforce. Beekeeper’s mobile platform brings communications and tools into one place to improve agility, productivity, and safety. Daniel is passionate about helping businesses operate more efficiently. He has a background in applied mathematics and more than eight years of experience in sales and customer success.

Cultural intelligence

Leading in a Volatile World: How Cultural Intelligence and Political Risk Abilities will Define Winners in the New Global Trade Environment

The world economic environment has been roiled by the impact of a lengthy trade war, the far-reaching impacts of the COVID-19 pandemic, and social protests which have ramped up consumer scrutiny of company practices. This new and volatile arena presents stiff challenges requiring different skills from business leaders.  While some companies will fold under the strain of the lockdowns and global stagnation, others will survive but face a brave new world where many of the trade norms and logistics habits of previous years will have disappeared. Navigating this terrain successfully will, of course, require agility and innovation but also a profound understanding of global trends, diverse cultures, and the rapidly changing political and regulatory structures of international markets.

The growing importance of cultural intelligence in business leadership will sharpen in this multi-faceted trade environment, and political risk analysis will take a critical role in shaping company strategies. Leaders with strong cultural intelligence and an understanding of political risk in this unsettled business environment will have a significant edge in finding new customers, identifying strong partners for mergers and acquisitions, and in comprehending and partnering with the new political forces that will spring up in the wake of this global disruption.

The trade conflict between the U.S. and China forced many companies to decouple their production from established facilities in Asia and reevaluate business opportunities and partnerships in the global market. The tariffs alone caused some businesses, living as they were on slim margins, to fold. Others scrambled to develop, on short notice, new production facilities, and hurried global partnerships. Savvy companies recognized the crucial importance of properly vetting the political risk of potential new locations to ensure that they would welcome new investors for the long-term. They also had to make a sober assessment of which countries might be in the crosshairs of trade conflict in these uncertain times.

On top of the political risk concerns, leaders had to ensure that the working cultures of these new sites and new partners would align with their company values and communication preferences. How would they match up culturally?

Following on the heels of this abrupt and wrenching change to the global economy came the pandemic shutdown. The challenges that were brought on by the trade conflict pales in comparison to the economic impact we’ve seen over the last few months as businesses are cut off from their producers, employees and customers in ways never previously seen in the modern global economy. For the companies that survive this shutdown, the concern is urgent – how can they best position themselves to not only survive but thrive in the new international business environment? Only leaders with a firm understanding of the tenets of cultural intelligence and the tools of political risk analysis will be able to grasp and exploit the opportunities that are developing in the ‘new’ global market.

“Common Sense” is not a Common Currency

When working globally in this volatile environment, it is not possible to prepare for any and all potential outcomes, especially when there are such unpredictable variables in people. What may be “common sense” to one person may not be common to another. Each person is influenced by culture, personal experiences, and cognitive interpretation which impacts values, attitudes, and behaviors. So how do global business leaders prepare for the unexpected when there is no playbook for every situation and every person? They develop their cultural intelligence skills.

Cultural intelligence is an interpersonal skill that has emerged in the last two decades from the same body of research as emotional intelligence. It is the capability to function and relate effectively with others in culturally diverse contexts. Cultural intelligence is a crucial tool to help leaders adapt and work effectively with people who have different cultural orientations, values, and expectations.

How do political risk and cultural intelligence go together?

When leaders get involved in a foreign culture, there are many cues that can be easily missed or misunderstood. Most leaders will be familiar with objective culture cues, such as a country’s economic performance, political system, and social institutions. They may become familiar with social customs, history, arts, language, food, and kinship relationships. Market analysis reports and “Doing Business in…” books look at this objective data, comparing national measurements and the visible artifacts between two or more cultures. However, the subjective culture cues are harder to interpret and certainly challenging to measure. These cues are hidden psychological inputs such as values, beliefs, norms, and assumptions. For example, a leader may be well-read on the legal, political, and social frameworks of foreign culture but understanding how conflict is expressed (or not expressed) and resolved in a particular culture is the crucial domain of cultural intelligence.

Leaders with an individualistic and confrontational communication style may struggle when working with a counterpart who prioritizes relationships and harmony. If leaders are not aware of the subjective cultural cues, deciphering “silence” in those contexts may leave a wide interpretive space between compliance and defiance. If any leader assumes his or her own cultural perspective and behaviors are superior ways to “get things done”, that leader will almost certainly fail to build trust and succeed in a foreign environment.

Even great cultural intelligence does not deliver business success if politics threaten market stability. Thus, cultural intelligence needs to go hand-in-hand with an understanding of the relevant global and local politics and risks. A definition of political risk for global leaders is whether business interests and market stability are threatened by unexpected or chaotic government action. Those terms – unexpected or chaotic – highlight the difference between government action detrimental to business interests that is normal, and which can be forecast (regulations, new taxes, changes in currency exchange rates) from government action that is unexpected. This issue of ‘expected’ and ‘unexpected’ is a clear nexus between the arts of cultural intelligence and political risk: a profound understanding of a culture can help navigate political risk and reactions to outside pressure.

Everything is ‘unexpected’ if leaders do not understand the culture, but savvy and adept practitioners are much more capable of responding appropriately, in culturally intelligent ways, in the face of government actions and reactions.

How can global leaders sharpen their cultural intelligence?

Cultural intelligence and political risk analysis can be learned and share certain key characteristics. An ability to speak a foreign language not only improves your cultural knowledge, it also gives you a key tool to understanding the risk factors in a foreign market as you can delve into primary sources of political and business reporting.

While cultural competency is one component of Cultural intelligence, it is a skill that goes well beyond just facts and knowledge. It is made up of four capabilities, each of which can be developed and sharpened:

Motivational

What is it: This relates to the leader’s desire and ability to direct attention and energy toward learning about and functioning in intercultural situations.

One tip to improve it: Leaders who connect deeply with their motivation, it helps them persist and be open to work with people who think and behave differently from them. Some leaders enjoy travel. Others enjoy watching how other people solve daily problems. For others still, it may be the prestige of a successful merger & acquisition.

Cognition

What is it: This refers to a leader’s knowledge of the norms, practices, and conventions in different cultures. This is commonly addressed in trainings and in books on objective and subjective culture.

One tip to improve it: Learn the language, read about the culture, read the local news, and understand the socio-economic and political history of a culture. Be aware these are meant to build archetypes for understanding the mindset of a culture and not stereotypes to judge or question other cultural norms.

Metacognition

What is it: This refers to the leader’s cultural consciousness and awareness during intercultural encounters.

One tip to improve it: The culturally intelligent leader plans prior to an engagement. They ask questions about the culture, who they are going to meet, and about different possible cultural scenarios. During an engagement, they evaluate and assess what is familiar and what is not familiar and adjust accordingly. After an engagement, an effective leader will write down their thoughts and debrief from their cross-cultural experience. One of the most important assets to a culturally intelligent leader is having a trusted cultural attaché who is independent and can give a leader unbiased feedback, interpret, and connect some of the cultural dots.

Behavior

What is it: This refers to the leader’s ability to exhibit appropriate verbal and nonverbal actions appropriate for the intercultural interaction. A culturally intelligent leader must know when and be willing to adapt to most situations. They also must know and be able to communicate why they are unwilling to adapt in a given situation.

One tip to improve it: A leader must be aware of their own beliefs and behaviors. If a leader comes from an individualistic, competitive culture and is working in a culture that is more community-oriented and cooperative, they need to adjust how they give praise. Calling out an individual for an accomplishment may not be received well by the individual or the group.

While these may seem like “common sense”, when a leader is out of their cultural element, a leader with low cultural intelligence may become overwhelmed, disoriented, angry, or frustrated. Some leaders may retreat and appear withdrawn, while others may magnify their behaviors and come across as ignorant and insensitive. I’m sure we’ve all seen and maybe been that “Ugly American” at some point. Cultural intelligence helps leaders be more confident and effective in foreign and sometimes uncomfortable situations.

Moving forward in the coming decade

The 2020 Bloomberg Innovation Index selected the top 20 most innovative countries. The U.S. is #9. It is tempting to think that your own experience and common sense has shown you “the right way” to get things done. While that may be true in a familiar environment, it may not be the most effective way to get things done in other contexts (other families, companies, communities, or social systems). Great innovations come from harnessing divergent thinking. While the US emphasizes agile methods and shared leadership, other top innovative countries like Germany emphasize cooperative planning; South Korea culturally emphasizes hierarchical, top-down decision making. Both have outranked the US in innovation for the last five years of this index. None of those cultural approaches are necessarily superior. They are simply different ways innovation occurs in other cultural contexts.

As we look out over the next fifty years, with nearly 77% of the world’s population living in Africa and Asia, these economies will continue to benefit from young workforces, improvements in infrastructure and education, and a growing middle class. If you want to work in these regions, regardless of culture, people generally prefer to do business with people they can trust. Building trust requires both parties to adapt and find agreement on values, respect, and mutual outcomes. Understanding why how to adapt in each situation are hallmarks of a culturally intelligent person.

Peter Diamandis recently noted that if companies ‘are not disruptively innovating now, you are done. The old ways of working are done. We are going to see 20% of companies go out of business’ as a result of the pandemic lockdown. However, innovating successfully also requires that you use the tools of cultural intelligence and political risk analysis to establish your business in the right locations. Disruptive innovation will not pay dividends if you suddenly lose your valuable intellectual property in a country that does not value and support the rule of law.

Your global teams will not be successful or engaged in producing new solutions and innovative products if you cannot break down the communication and collaboration barriers using cultural intelligence. The U.S. represents only 5% of the world’s population. Despite being a wealthy, critical market for any conceivable service or product, it is just a sliver of the available total global market. Companies, stressed by an economic collapse which is unlike anything seen in a generation, must boldly jump into the global market with both feet to thrive. To succeed in this new world, modern leaders need to bring an analytical tool kit which is well-stocked with political risk insights and cultural intelligence methodologies. If business leaders don’t apply these key perspectives in their global strategies, the volatile market forces that continue to churn around us will disrupt even the best of business plans.

______________________________________________________________

Scott Rencher, a former Regional Director and Country Manager at Euromonitor International, is a CQ Certified, Cultural Intelligence evangelist and business strategist.

Kirk Samson, worked as a U.S. diplomat and international law advisor and is the head of Samson Atlantic LLC; a Chicago-based consulting company providing global political risk analysis. 

rural

RURAL EXPORT CENTER SUPPORTS THOSE IN THE AMERICAN BREAD BASKET SEEKING NEW GLOBAL MARKETS

The U.S. Commercial Service in July opened the Rural Export Center (REC) in Fargo, North Dakota, to promote rural America’s exports and equip its companies with the research and resources to compete and win in the global marketplace.

“The Rural Export Center addresses the unique needs of rural American companies by providing in-depth market research and training designed specifically for them,” explained Ian Steff, assistant secretary of Commerce for Global Markets and director general of the United States and Foreign Commercial Service.

“These companies are a crucial part of the continued growth of the American economy,” Steff continued, “and providing them with these essential, customized tools will help bolster their success in both the domestic and international markets and will increase U.S. exports worldwide.”

Companies from anywhere in rural America can request virtual consultations and assistance through the REC and many can apply grants from the Small Business Administration’s State Trade Expansion Program toward REC services. Armed with REC research, the company then collaborates with their local U.S. Commercial Service Trade Specialist to implement plans and strategies informed by REC analysis.

“Together, they leverage the global network of U.S. Commercial Service offices located in U.S. Embassies and Consulates in more than 75 markets around the world,” states a U.S. Commercial Service press release.

compliance

SUPPLY CHAIN COMPLIANCE CHALLENGES AND SOLUTIONS

In the current trade atmosphere both domestic and international supply chain players have a myriad of concerns to consider while determining the next step in successful operations. Specifically, in 2020, these concerns have challenged shippers, carriers, manufacturers, distributors and other trade players to mitigate risk in new ways on an almost monthly basis.

The year kicked-off with the highly anticipated IMO 2020 regulation disrupting ocean shippers and carriers. IMO 2020 left many scratching their heads and trying to figure out the best way to navigate compliance and the latest trade tariffs without halting operations. For the most part, shippers were prepared, and IMO wasn’t nearly as scary as doomsayers made it out to be. However, for those that waited until the last minute to implement required changes, the transition left some compliance pains and costs that were avoidable.

Fast-forward to mid-January, and the appearance of the COVID-19 pandemic. Global trade and its supply chains were abruptly impacted, as the coronavirus started in China and eventually moved on to Italy, South Korea and other global markets. Businesses rapidly started temporarily shutting down amid a global panic. Supply and demand shifted while talk of force majeure slips—acknowledgements that contracts cannot be fulfilled due to unforeseen circumstances—shined a light of hope for the devastated Chinese suppliers. As of the second week in March, the National Trade Promotion System confirmed the issuance of more than 4,000 force majeure certificates as the U.S. prepared for the virus to disrupt domestic markets and business.

“The virus is the primary cause of the supply-chain impact but the secondary causes coming from the virus include financial, regulatory, compliance and legal,” explained David Shillingford with Resilience360 at the 2020 Modex conference. “One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side.”

So, what do these things have to do with compliance? The answer is all-encompassing. These and other disruptions will ultimately prove which players in the supply chain can stand the test of compliance and regulation risk mitigation and which ones are simply unprepared. For now, companies across the supply chain would be doing themselves a favor by reviewing regulations, disclosures and other compliance-related documentation and processes to ensure the highest level of compliance is achieved, if not already. As the National Law Review puts it in the article “Managing the Commercial Impact of the Coronavirus: An Effective Supply Chain Response Plan:”

Public companies should review and make accurate required disclosures, in the event that business operations are impacted such that a reporting requirement is triggered. All companies who are parties to credit agreements and other financing arrangements should review existing MAC clauses, and potential impacts on the borrower’s financial covenant compliance, in order to determine whether any proactive conversations with lenders may be warranted.

The takeaway is simple: Proactive measures should be in place among all links in the supply chain before, during and after major industry disruptions and changes in policy, regardless of the specific market operations. Factors including transparent communications, emergency planning and navigating an evergreen supply chain atmosphere can prevent costly fines and waste. Shifts in supply and demand are inevitable and it’s not a matter of if regulations will be accounted for, it’s a matter of when they will be accounted for. Don’t wait until your business is required to prove compliance. Instances like a global health crisis are one of many examples of how noncompliant companies can create unneeded delays or worse if found to be noncompliant. Visibility is key and it starts with your business knowing every moving part of the chain and your involvement with its success.

Visibility tools are every company’s best friend when it comes to compliance, providing a new level of security for both small and large-scale operations. Compliance issues come in a host of various forms from cyber risk and government sanctions to ethical trade practices and supporting sustainable practices and demand. And more recently, global supply chains have been shaken by natural disasters and global health concerns. Whether it’s a natural or unnatural occurrence, there’s no reason to be unprepared when it comes to compliance and preparation. These are all issues that require accountability on behalf of the partners involved. Ignorance is not excuse in the modern age where technology advancements, procurement and systems of checks and balances are created at each point.

“Knowing who you’re doing business with and ensuring your supply chain is compliant isn’t just a necessity; it’s good for the bottom line,” states Hemanth Setty, senior product director, Supply Chain Management & Compliance Solutions at Dun & Bradstreet, in his blog “7 Steps to Supply Chain Compliance.” Setty dives into why and how companies are challenged with a new list of onlookers requiring compliance and an ongoing approach rather than quick fixes to placate regulators.

He notes that the modern supply chain player now has “investors, suppliers, partners, customers and the media” to satisfy when it comes to compliance. Solutions presented keep department collaborations and meeting the expectations of customers at the top. But before a company can meet expectations, they must understand exactly what is expected and that requires transparency from the beginning, throughout the chain. This includes a pulse check on data and ensuring it’s up to date and preparing for the unexpected. Setty also advises that all corporate policies and procedures are understood across the board to avoid inconsistencies when onboarding new vendors and adding to the business.

The subject of compliance doesn’t have to be messy. In fact, the solution to many compliance issues is clear. When compliance is a priority in business, all other parts of the chain follow suit. Keep communications open and well understood, keep ethics at the forefront of operations, and be mindful of the changing regulations and potential disruptors that can easily shake the bottom line. Understand what expectations are and how critical it is to meet them. Utilize technology to support large-scale supply chains and eliminate mistakes with updated data and processes.