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How Coronavirus Impacts Ecommerce Business and Beyond

ecommerce business

How Coronavirus Impacts Ecommerce Business and Beyond

There is no vaccine to prevent the spreading Coronavirus, yet, and that holds lessons for ecommerce businesses and the people who work at them. Today, we’re facing a time to prepare and hopefully limit exposure and risks at work.

For businesses, preparation and the possibility of illness are going to reshape the day-to-day. After reviewing scenarios and government guidance (here’s your list of cleaners that can take out COVID-19), we’ve put together some thoughts on the most significant impacts we’ll see soon and how companies can respond to protect their people best.

Sending people home is best but expensive

Many ecommerce businesses are small shops, though we’ve been impressed to see some grow significantly in recent years. It’s always a fantastic thing to witness, but their scrappy nature usually means staff are perpetually busy and wearing multiple hats.

Unfortunately, that might mean the COVID-19 threat will hit you especially hard.

Your best bet to keep everyone at work safe is to let anyone go home when they feel even the slightest bit sick. If that happens, document the person arrived and left, plus who they came into contact with at work — employees and anyone who might’ve visited — and how they got to work. This can help medical professionals who are already going to be stretched thin.

The best practice here is going to cost you, but it could also save your team from significant harm, and that is to pay your team to stay home. Help people use their sick days and vacation time if they have it. If someone doesn’t, review your budget to see what you can offer.

If people can’t afford to stay home, they come into work even when sick. That’s a danger none of us can afford right now.

Wash your hands and everything else

There is a little bit of a silver lining in the ecommerce world: most of the products moving through your warehouse are going to be safe. You’re watching for people above all else.

This is because most coronaviruses, including COVID-19, struggle to live on surfaces. So far, we haven’t seen evidence of contaminated food products, which is generally where you’ll first see illnesses spread by products/goods.

For products, the risk is a “smear infection” where someone coughs or sneezes onto a product or package, and a new person touches that and then their face. The virus is believed to have a short lifespan in smear cases, so your team should be relatively safe. Maximize their safety by prioritizing handwashing. Have your team wear gloves at all times, but still make them wash up after unloading a truck.

What ecommerce and other businesses will want to be aware of is the route their goods are taking to get to warehouses. If something is passing through areas where there’s been an outbreak or if you learn that a delivery person for a specific company has fallen ill, pay extra close attention to cleaning these products and packages.

For goods that have been traveling to your company for days or weeks by ocean, there’s minimal product risk from that leg of the trip, but local infections may be possible. Air travel is fast enough that you could have higher smear risks.

So, wash hands, wear gloves, and clean everything as you go.

Alternatives may become scarce

Some impacts are already rippling through the global supply chain. One significant shift is that companies are scrambling to find alternative sources for products and raw materials. Not only are prices for some materials already rising, but there’s growing lane congestion.

This will be a double hit for businesses.

If you’re not manufacturing your own goods, then you need someone to do it for you. New partners can be expensive to source. At the same time, your competition will be turning to them as well. Also happening concurrently, manufacturers will be looking to secure new sources of raw materials. Shifts, such as nearshoring production and buying local, all come with increased costs and supply chain changes.

The other impact is that it could generate more congestion for local delivery and fulfillment options. Companies may face the cost of shipping their goods rise, as well as see delays in fulfillment times. Those delays are already happening in areas where there have been cases of the virus.

Your business will pay more, but you might not be able to pass on additional expenses to customers. Delays in fulfillment times will hit the ecommerce sector hard because customers already expect two-day shipping options. Now, you’ll have to tell them it could be longer and cost more, which may see them take their business elsewhere.

Outsourcing will increase

Expect companies to start diversifying the way they get goods to customers. One particular method is going to be outsourcing fulfillment to companies that have multiple warehouses. It’s a smart way to avoid supply chain bottlenecks because it minimizes the chances that a local outbreak will impact your entire fulfillment operations.

For some ecommerce companies, this outsourcing may come with a small benefit of reaching customers more quickly (once they get stock to third-party logistics providers), while also protecting some workers. If we see sustained infections and spreading of the virus, there’s a potential that many small ecommerce businesses will start outsourcing their entire fulfillment operations.

In the short-term, that could cause some issues with warehouse space and fulfillment staff. In the long run, it might cause cost reductions and lead to greater product availability.

Companies who can figure out how to avoid delivery slowdowns — such as large ones able to own and use their own delivery fleet — will dominate the market. The U.S. has faced a truck driver shortage for years, and growth in outsourcing may help curb some of that, but it would come with higher wages for those who have a greater potential risk of being exposed to the Coronavirus and other health concerns.

Our world will look different tomorrow

We’ve fully embraced the gig economy and home delivery, and there’s a potential it all comes crashing down. Whether these employees continue work amid growing exposure (and even after becoming sick) or if services start slowing down, it’ll impact the daily lives of many Americans.

Businesses will also face changes in the way we bring people to the office, help staff pay for healthcare, and what processes we no longer choose to do to protect ourselves. The global, interconnected supply chain is already changing, and nothing but time will tell us how profound and varied this impact is.

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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.

4PL

ONE, TWO, 3PL … or 4PL? DETERMINING WHICH MAKES THE MOST SENSE FOR YOUR BUSINESS

The supply chain ecosystem is becoming more demanding as consumers are conditioned to expect nearly instantaneous free shipping and where order delays can inflict serious damage to brands. As a result, shippers must carefully select their supply chain partners, as their performance has a much greater potential impact on customer satisfaction and the bottom line than ever before.

However, shippers are often perplexed when faced with the choice of partnering with a 3PL or 4PL to tackle their logistics and transportation challenges.

“Every shipper is unique, but many face the same challenges and share the same goals: reducing costs, optimizing their network, consolidating shipments, changing behaviors, improving customer service, and improving visibility, to name a few,” says Ross Spanier, senior vice president of Sales and Solutions at GlobalTranz, a Phoenix, Arizona-based tech company that provides a cloud-based, multimodal transportation management system (TMS) to shippers, carriers and brokers.

“The common thread that links these challenges and goals is data,” Spanier continues, “and many companies lack the data they need to make truly informed business decisions.”

He should know. Spanier brings more than 17 years of experience—which includes stops at C.H. Robinson and Logistics Planning Services—to the discussion of 3PL versus 4PL partnerships. Shippers, he maintains, should focus on the capabilities of the prospective partner and seek out partners that combine the technology, people, multimodal services and solutions they need to in gain a competitive advantage.

“Many shippers really cannot afford to staff and maintain an internal transportation and logistics team,” he notes. “Finding a partner that can act as an extension of their business is key. It’s also extremely important to make sure your partner can provide technology and experience in implementation, execution and integration. That can be a significant cost and a disruption for businesses that attempt to do that by themselves.”

Whether you’re a medium-sized business or listed on the Fortune 1000 annual list, deciding between a 3PL and a 4PL sets the stage for all moving parts.

“A common misunderstanding is that a 3PL is just a broker, when the reality is they can be much more than that,” Spanier says. “At GlobalTranz, our managed solutions are a great example of that. We can offer a more strategic and consultative approach for our customers including having ‘skin in the game’ on the broker side, where we’re taking on pricing commitments, service level commitments, managing the risks and owning the contracts.

“Many times, that is one of the common misunderstandings because a 3PL can act very strategically with customers and not necessarily need a fourth party. The 4PL typically offers strategic insights and management of a company’s entire supply chain, and often if one goes back to the question of ‘what is the difference between a 3PL and 4PL,’ 4PLs are the right fit for much more mature, large or complex organizations.”

GlobalTranz positions itself as a leader in customized solutions for a wide variety of shippers across many industry verticals. From LTL to truckload, final mile or white-glove service, intermodal, ocean, air, and cross-border Mexico transportation … are all part of the GlobalTranz offering. In addition, the company offers an award-winning TMS. The company takes pride in collaborative efforts between the people driving their technology as an integrated solution offered to their customer base.

“Whether a customer is best-suited for a 3PL or 4PL solution is typically not already known when we walk in the door, Spanier explains. “We like to show where a customer can gain the most value based on the solution and its capabilities. More times than not, it’s about voicing that to the customer and understanding where their constraints are and how we can put a solution together–a 3PL or a 4PL solution.”

GlobalTranz boasts a different approach when it comes to serving its customer base. Its robust managed solutions offerings serve a variety of needs that can be tailored upon identifying where the client’s business needs it the most. The experts at GlobalTranz take the process of solution identification one step further by evaluating the needs and configuring a solution from there. There is no “one-size-fits-all” solution, which is exactly how GlobalTranz separates itself from the rest as a leader in logistics solutions–whether that be a 3PL or 4PL solution.

“People, processes, and technology are important, and it’s crucial to establish relationships and communications that are aligned with company goals,” Spanier contends. “Without strong relationships in place, technology and process won’t deliver the needed support or what they’re looking to get out of a partner. When you have a customer looking at a 3PL solution, you want to make sure that a 3PL has the ability to bring in carriers no matter what markets they operate in. This is critical because they may be in one market today but with growth, both organic and through acquisitions, and the changing dynamics in customer demand and expectations, the footprint could expand and it’s important to have a partner that is quick to react and agile in respect to their carrier partners as well.”

So, when deciding on what makes the most sense for your business, consider partners that not only provide solutions but are agile and customizable based on specific business goals.

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As the GlobalTranz Senior Vice President of Sales and Solutions, Ross Spanier leads the enterprise sales organization as well as the design and delivery of innovative and customized supply chain solutions that drive efficiency, cost savings and competitive advantages for current and prospective customers. With more than 15 years of experience in the supply chain and logistics industry, Spanier has developed and grown sales and operations teams specializing in best-in-class service execution of LTL, TL, expedite, supply chain management, projects & heavy haul, white glove and managed transportation service lines. Prior to joining GlobalTranz in 2017, he held sales and operations leadership roles at both C.H. Robinson and Logistics Planning Services (LPS).

modex

MODEX Day Two: Coronavirus Impacting More than Just Trade Operations

Day two for MODEX 2020 concluded with industry players addressing the now-notorious coronavirus and what this means for both domestic and international markets fortunate enough to continue operations without disruption. From what we learned during the session, “Coronavirus and Global Supply Chains” the wave currently felt in China, Italy, and beyond, will eventually make its way to the U.S. and companies have no reason not to be prepared.

Researcher Philip J. Palin, John Paxton with MHI, and David Shillingford with Resilience360 took the unsettling topic head-on and addressed concerns without hesitation. Traders be aware: for domestic and untouched international markets, the worst isn’t over. The coronavirus creates more than just health concerns. It impacts trade operations, legal concerns, and causes financial turmoil as we’ve already started to see.

“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 Shillingford. “Another risk to think about is workforce risk. How many of the workers that left for Chinese New Year have been able to come back, and for those that have returned, are they able to work with open factories or are they still under quarantine?”

“The good news is, the extraordinary supply and demand disruption we’re discussing in terms of China is being released. It’s slow but it’s happening and it’s giving us a benchmark of for how long domestic disruption will be,” Palin stated after announcing the first containership from China arrived at the Port of Los Angeles in almost 10 days on Monday.

Shillingford goes on to explain the shifting patterns in consumer behavior as well, noting that due to worldwide panic, demand is shifting and challenging the logistics sector. Buying habits have undoubtedly changed in recent weeks along with mindsets. Interactions are now limited to a fist-bump or elbow touch rather than a handshake and the numbers of public events cancelled are going up.

“Other things we are seeing involve personnel movement. It’s not just transportation impacted,” Shillingford added.

On the legal side of the crisis, Chinese suppliers are having an issue with certificates and contractual obligations. Shillingford urges industry players to understand the importance of knowing if suppliers have been issued force majeure slips.

“One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side,” he concluded.

What does all this mean for the U.S.? At the end of the day, it’s a matter of preparation and strategizing for the more fortunate markets without the disruption of a complete shut-down.

“There was a hidden, horrible problem in the Hubei province that required a draconian measure to prevent transmission of the virus. We should be ahead of that curve as well as the rest of the world, even with this very contagious virus,” explained Palin. “And even if we are behind that curve, we don’t have 300 million workers separated from their place of work.”

coronavirus

The Impact of the Coronavirus on U.S. Trade Proceedings

The coronavirus (COVID-19) has had an undisputed impact on health and travel around the globe during the past two months. It has also stifled trade with China, where it originated. The pressure from tariffs and the ongoing trade war is beginning to shift to pressure from supply chain disruptions caused by the coronavirus. Importers and manufacturers that source from China have been particularly affected, as have maritime, construction, and global supply chain entities. But as trade with China has taken a hit, how have U.S. agencies handled the administration and enforcement of ongoing proceedings involving China?

Of all U.S. federal agencies with oversight over trade with China, the Department of Commerce (“DOC”) is perhaps the most directly involved. The DOC administers antidumping (“AD”) and countervailing (“CVD”) cases, as well as Section 232 tariffs that target Chinese imports. The Office of the United States Trade Secretary (“USTR”) administers the Section 301 tariffs specifically targeting China.

The virus has had a lesser impact on the administration of Section 232 and Section 301 tariffs because this is handled almost entirely in Washington. However, in AD/CVD cases DOC officials must regularly travel to China to conduct onsite verifications of Chinese producers examined in these proceedings. The DOC is currently overseeing nearly 200 ongoing AD/CVD cases against China. Of these, new investigations require verifications, and in the remaining annual reviews the DOC must verify Chinese producers at least once every three years. Each verification takes at minimum a week and involves two or three officials. That adds up to significant travel to China during an average year.

So how has the DOC been mitigating the impact of the virus on its ability to administer trade remedy proceedings? For one, many AD/CVD verifications have been put on hold indefinitely due to health concerns and because major airlines have suspended flights to China. This can be good or bad depending on which side of the case one is (i.e., U.S. companies that brought the cases vs. the importers that have to pay the duties). If the case is likely to result in high margins, importers and their Chinese suppliers would likely want verification so that they can personally prove to DOC officials that they are not dumping and do not receive illegal subsidies. On the other hand, if the AD/CVD margins are projected to be low, then U.S. producers may want the Chinese producers verified, and conversely the latter would prefer not to be audited.

The DOC has also been generous about granting extensions for submissions to Chinese respondents in AD/CVD cases. The agency recognizes that responses to its questionnaires require access to information which has been difficult for Chinese employees to access. Many of them are in quarantined areas and unable to get to work, let alone respond to DOC’s requests. Chinese legal counsel and accountants that regularly support respondents in DOC’s proceedings also are less able to reach their clients.

The DOC may even consider a less conventional approach – tolling of AD/CVD cases. Tolling would allow for ongoing proceedings to be paused or delayed. There is little precedent for such action in response to a foreign emergency or crisis. The DOC last tolled deadlines in its proceedings during the U.S. government shutdown in January 2019. But that was necessitated by domestic federal government concerns. With the coronavirus, a close comparison could be made to the 2004 Asian tsunami crisis, but that event did not necessitate tolling of DOC’s AD/CVD cases involving shrimp from Thailand and India whose seafood industries were decimated.

The DOC has the discretion to toll its deadlines. However, an action that changes AD/CVD duties would require Congressional approval. Hence pleas for a reduction in such duties would face an uphill effort and encounter resistance from domestic producers (as it did when Thailand asked to have dumping duties on its shrimp reduced after the tsunami).

Although the coronavirus itself appears to have become a non-tariff barrier, the Trump Administration has given no indication of backing off its trade deal reached with China in January. Under the agreement, China promised to increase purchases of U.S. crops and meat products by $20 billion in 2020 in exchange for a reduction or delay on current tariffs. Indeed, in late February, USTR Robert Lighthizer and Agricultural Secretary Sonny Perdue insisted that the Administration will hold China accountable for its commitments, even as the outbreak disrupts global supply lines.

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*Mark Ludwikowski is the leader of the International Trade practice of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and mludwikowski@ClarkHill.com

congress

DRIVING CONGRESS TO ACT ON NATIONAL SECURITY TARIFFS

Volkswagen GTI is turbocharged with room for…tariffs?

The Volkswagen Golf GTI is a perennial winner of Car and Driver’s 10Best award. The German-built sport hatchback combines “speed, handling, build quality, an attractive interior, and room for the family,” all for under $30,000. Car and Driver raves about the GTI’s turbocharged engine and notes it’s a formidable challenger to competing “hot hatches.”

Apparently, the U.S. Department of Commerce believes that the GTI poses another challenge — maybe a turbocharged threat to America’s national security.

In a still-confidential 2019 report, the Department reportedly found that imported autos like the GTI “threaten to impair the national security” and recommended that the president impose tariffs as high as 25 percent.

All revved up

The president would enact these tariffs under Section 232 of the Trade Expansion Act of 1962. As TradeVistas’ Andrea Durkin has detailed, Section 232 is a little-used Cold War-era law under which Congress delegated broad authority to the president to restrict imports for national security reasons. The law is also the basis for current controversial duties on steel and aluminum.

The proposed tariffs have generated opposition from vehicle manufacturers, suppliers, economic analysts and members of Congress. The Alliance of Automotive Manufacturers notes that a 25 percent tariff on autos and parts would raise the price of an average imported car by an estimated $6,000 (and add $2,000 to a U.S.-built car) while potentially leading to the loss of over 600,000 American jobs. The Association of Global Automakers (now merged with the Auto Alliance to form the Alliance for Automotive Innovation) questions how passenger cars and light trucks are relevant to national security, suggesting that “America does not go to war in a Ford Fiesta.” Statements from Administration officials suggest that the “national security” justification for auto tariffs may be a pretext to gain negotiating leverage in other contexts.

Sourcing of US Light Vehicle Sales 2017

Congress may put the brakes on Presidential tariffs

With the possible exception of avid inventor Ben Franklin, America’s founders would be astounded by the GTI. They might be equally astonished, however, by the Trump Administration’s assertion of broad authority to impose tariffs. After fighting a revolution against “taxation without representation,” the founders believed it was vital to entrust the power to impose tariffs and other taxes to the people’s representatives. Specifically, Article I, Section 8 of the Constitution vests Congress with the “power to lay and collect taxes [and] duties.”

Since 1934, after its disastrous experience with the Smoot-Hawley tariffs, Congress has increasingly delegated specific trade and tariff powers to the president, subject to a variety of limitations. Presidents have generally used these powers judiciously and to reduce tariffs to expand trade. For example, when President Kennedy signed the 1962 Trade Expansion Act (which enacted Section 232), he emphasized the importance of opening trade and reducing trade barriers and warned against “stagnating behind tariff walls.”

President Trump has taken a maximalist approach to his delegated powers to impose tariffs, particularly for “national security” reasons. In response, Congressional critics from both parties point out that under the Constitution, Congress should be the ultimate driver of tariffs, not the president.

Other concerns with the Administration’s application of national security tariffs include a lack of transparency in determining tariffs and administering tariff exclusions, its use of an overly broad definition of national security, and the cascading impacts on U.S. producers from higher metal prices. Legal experts are also concerned that the Administration did not follow the law when it imposed new tariffs on derivative steel products (including nails and bumpers) and when it extended its review of auto tariffs when time limits under Section 232 have likely expired.

Cost of Autos 232 Tariffs

Time for a trade law tune-up?

Congress could rein in presidential national security tariffs by simply repealing Section 232. However, even critics of current tariffs recognize that there are circumstances where the president might need authority to adjust trade in response to national security threats. Accordingly, Congress has focused instead on bipartisan proposals to place additional limits on the president’s ability to employ Section 232.

The Trade Security Act of 2019, introduced by Senator Rob Portman (R-OH) and Representative Ron Kind (D-WI), would bifurcate the Section 232 process. The Department of Defense (DoD) would first investigate whether there is a national security basis for restricting imports of an article. If DoD finds that an article poses a security threat and the president decides to act, the Commerce Department would then recommend tariffs or other measures to address the threat. The Portman-Kind bill would also enable Congress to disapprove any Section 232 trade restriction imposed by the president through a resolution of disapproval that would itself be subject to a veto by the president. This legislation would not impact current Section 232 tariffs on steel and aluminum.

The Bicameral Congressional Trade Authority Act of 2019introduced by Senator Pat Toomey (R-PA) and Representative Mike Gallagher (R-WI) would also require DoD to take the lead in investigating whether an article poses a national security threat, while also adopting a tighter definition of national security. Notably, under this legislation, no proposed Section 232 action by the president could take effect unless Congress first passes a resolution of approval. The Toomey-Gallagher bill would also (i) repeal current steel and aluminum duties unless Congress passes an expedited resolution of approval, (ii) direct the independent U.S. International Trade Commission to report to Congress on the economic impacts of Section 232 actions, and (iii) require that the USITC administer the tariff exclusion process for future Section 232 actions.

Two bills in Congress to brake 232

Getting out of neutral

For the past year, Senate Finance Committee Chairman Chuck Grassley (R-IA) has been attempting to meld the Portman and Toomey bills into a compromise measure that would attract veto-proof majorities in Congress. Despite considerable bipartisan support, Grassley notes that this effort has faced two challenges. First, there’s opposition from Republicans who see the legislation as a rebuke of President Trump. Second — as any student of U.S. trade history could have predicted —interests that benefit from new national security tariffs are now lobbying intensely to retain these tariffs. Despite this opposition, Grassley has vowed to continue efforts to enact Section 232 reform in 2020.

More potholes ahead?

Meanwhile, Volkswagen’s GTI and other imported autos will continue to face the threat of national security tariffs. And that threat won’t necessarily subside if a Democratic president takes office next year. Some Democrats have already proposed using the Trump Administration’s expansive reading of Section 232 to advance their own policy goals — particularly to address the climate crisis. Carbon-emitting autos like the GTI would be a prime target for new tariffs.

The GTI was designed for Germany’s smooth, high-speed autobahns. When it comes to U.S. national security tariffs, however, the GTI’s road ahead may continue to be full of potholes.

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Ed Gerwin

Ed Gerwin is a lawyer, trade consultant, and President of Trade Guru LLC.

This article originally appeared on TradeVistas.org. Republished with permission.

outsourcing

Myths vs. Realities of Global Sourcing

Axia Sourcing released the following six telling myths and realities related to global sourcing, breaking down common misconceptions about language-barriers, outsourcing partnerships, quality control and more. Global businesses can apply this knowledge to successfully navigate the world of sourcing while expanding business operations with confidence, regardless of the industry.

Global Sourcing: Myth Versus Reality from Axia Sourcing
costs

10 Tips for Cutting Costs and Improve Customer Service in Supply Chain Logistics

As organizations continue to create and source raw materials from overseas, controlling expenses remains the number one priority for players involved in international trade.

One critical factor that executives should monitor closely is logistics management. This sector covers important activities relating to procurement, transport, and storage of goods. In most industries, supply chain logistics account for 5% to 50% of a product’s total cost.

Some of the issues that affect logistics costs include fuel prices, complex international trade laws, and security. High transportation fees are mainly caused by high fuel prices delays in ports. Complex international trade laws increase warehousing costs by lengthening delivery times.

As technology evaluation.com reports, air-freight shipment takes about eight to twelve days. During these days, the cargo is on ф route around 5% of the time. 95% of the time is spent lying in warehouses waiting for compliance checks and documents. So, how can you cut down costs and improve customer service in supply logistics? Keep reading!

1. Use your space efficiently

Using your space efficiently will save you a lot of money in the long run. As you already know, storing your supplies in a warehouse comes at a cost. Figure out whether you are making the most out of your space or not.

You might discover other ways of finding spaces that are best suited for your business. As we’ve seen, supplies, spend most of their time in warehouses waiting for compliance checks. The more efficient you are at warehousing; the more profits you’ll generate at the end of the day.

2.  Automate your processes

Organizations that use technology solutions to automate compliance processes have the power to speed up the process four times as much compared to organizations that rely on manual work. Automating tasks such as document preparation will eliminate expensive mistakes and errors.

Automating your processes also leads to fewer delays at crossing points thus resulting in timely deliveries, increased customer satisfaction and avoidance of expensive fines.

3. Inform decision-makers

According to dissertation service, providing decision-makers or your customers with the costs of freight associated with each service level, the reliability of every lane and the total cost of transporting inventory will make it easier for them to make informed decisions and work with you in the future. In most cases, your customers will select the cheapest option that complies with the laws to meet their needs.

4. Figure out the real costs of sourcing overseas

Before sourcing overseas, you need to calculate freight, brokerage, duty, and transportation costs to support these long supply chains. You should factor in other costs such as engineers flying overseas. Once you figure out the total landed cost and its impact on your business, you might discover that domestic buy is quite attractive. For instance, sourcing from Ohio to your plant in the US might be cheaper in the long run compared to sourcing from China.

5. JIT inventory management

There are many benefits to implementing Just-in-Time inventory management. With this system, you can order and receive inventory only when you need to. In the long run, this will reduce your inventory transportation costs, protect against write-downs attributed to dips and eliminate unnecessary overhead costs caused by excess inventory.

6. Sales and operations planning

For a supply chain to function at its highest efficiency, sales, and operations planning is required. Optimal performance greatly depends on creating proper plans. However, it can be complicated and expensive in the long run.

By working with a third-party logistics provider, your team will eliminate waste and redundancies thus enabling you to analyze data, forecast and enhance visibility so that everyone is involved. During the sales and operations planning process, you should address issues such as unrestrained stock-outs, obsolete inventory, inaccurate forecasts and adjusting demand and production schedules.

7. Package your products well

Packaging your products well will result in less or no damages during the shipping process. Ensuring that the people responsible for packaging your products do it properly will minimize quality costs and build your reputation. As the saying goes, it’s the smallest things that matter the most.

8. Assess your performance

You have to measure the performance of your strategies to forge the way forward. Doing business without assessing your performance regularly is a recipe for disaster. By not assessing your performance, you’ll have a hard time determining how much money you are spending and saving. Come up with your key performance indicators and gauge how well your business is doing.

9. Eliminate variability during transit times

The more variable the transit times, the higher the likelihood that the receiving party is using premium freight, ordering more quantity than is necessary to compensate for the uncertainty of creating buffers of inventory. When you understand these dynamics, you’ll realize that paying for higher freight costs will enhance variability and save your company loads of cash in the long run.

10. Choose your mode of transport.

Which mode of transport is the cheapest? Trains? Airplanes? Automobiles? In most cases, rail is cheaper when transporting bulky goods than air or trucking. Also, water is cheaper than air. Regardless of the delivery model, it’s important to get all the quotes from different modes of transport available.

Conclusion

Managing a supply chain logistics company is not the easiest thing to accomplish. You have to make the right move every time out to avoid expensive mistakes and losses. The ten tips discussed above will help you reduce your costs and grow your business. You owe it to yourself to assess your situation and determine what needs to be changed or implemented.

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This guest post is contributed by Kurt Walker who is a blogger and college paper writer. In the course of his studies he developed an interest in innovative technology and likes to keep business owners informed about the latest technology to use to transform their operations. He writes for companies such as Edu BirdieXpertWriters and uk.bestessays.com on various academic and business topics.

manufacturing

How You Can Avoid Problems When Manufacturing to China

If you haven’t worked with a Chinese manufacturer before but are intending to start now, this article is for you. From the onset, we must inform you that you are in for a lot of positive gains, but you need to be ready for occasional production problems. One day you are panicking after a factory delays your products, the other day you are petitioning a manufacturer for refusing to rework substandard goods and another time you are running after a supplier who walked out on you without prior warning. Don’t get us wrong: There are many good manufacturers in China, but there is no harm in being cautious.

To set up a company in China, you must know and avoid the pitfalls that rogue manufacturers have led many foreign companies into. Remember that when it gets to product development, you have your own customers waiting for your deliveries, so you need a manufacturer who delivers quality products and in a timely manner. That being said, which mistakes must you avoid when manufacturing in China? How do you avoid them?

1. Entrusting manufacturers with your business interests

Trust is vital in business, but you must not trust anyone with your business interests. Do not forget that learning some words and phrases is crucial at the point so that you could do some basic communication. For more complex communication, a company that provides Chinese translation services needs to be hired so that no misunderstanding happens. When working with a Chinese manufacturer, avoid the mistake of allowing the manufacturer to control the quality of your products or the delivery time. Many entrepreneurs have made the mistake of sticking around even after realizing that a manufacturer or supplier is incompetent, probably because they are afraid to lose their pre-paid deposits. Tell you what; you would rather walk away and lose a small deposit than stick around and end up with substandard goods that will ruin your existing reputation.

Also, a small deposit may not be worth the frustrations that you will cause your customers by keeping them out of supply for long.

Another way of protecting your interests when dealing with a Chinese manufacturer is to always have an inspector or an agent on-site, constantly updating you on every stage of your product development process. A Chinese recruitment agency can help you find and recruit a reputable agent for that role. If the manufacturer tries any underhand strategies, you can easily stop them in their tracks. You will always be a step ahead of them.

2. Prioritizing fast delivery over quality

For what it is worth, quality must always come before delivery speed for as far as product development is concerned. Product development requires tons of time and effort to be successful. And because your customers want top-quality products, you must not compromise quality for anything. The challenge that is unique to China, however, is that when you pressurize the manufacturer too much, they may not tell you outright. Instead, they will lower the manufacturing standards so as to avoid possible delays.

On the other hand, there are reported cases of Chinese manufacturers’ hiking production costs upon realizing how much value you’ve attached to the quality of your product.

How, then, do you find a workable balance? Again, sending a local agent to supervise the manufacturing process would be a great option for you. Because the agent understands the Chinese business culture and language perfectly, he/she will know how to send your message across without scaring away good manufacturers and/or falling into the trap of quack manufacturers who hike production costs for no apparent reasons.

3. Relying too much on a manufacturer’s past reputation

Previous success can be used to gauge the performance of a manufacturer in the west, but not necessarily in the east. Chinese companies with reasonably good reputations have in the past frustrated many foreign investors, sometimes to the point of collapsing entire investments. Don’t make the mistake of trusting a manufacturer based on your past experiences with them; always be on high alert knowing that they can disappoint you at any moment.

The fact that a Chinese manufacturer hasn’t failed you yet isn’t a guarantee that they will not unexpectedly drop their manufacturing quality and damage your reputation.

There are many manufacturers in China today who are holding onto projects such as yours as their only means of survival. If you allow them the chance to rebuild using your money, they will fancy their chances without looking back. There are also manufacturers who are protected by government bureaucrats, so they don’t care too much about their reputation with foreign businesses. They will mess you up and continue with their daily operations as if nothing happened. You must, therefore, never drop your guard: Always be hands-on and control the behavior of your Chinese manufacturer.

supply chain

How to Select the Best Supply Chain for Your Business

All businesses, no matter how small, need a reliable supply chain so they can deliver their products to their customers in the shortest time possible. The delivery system needs to be accurate, prompt and cost-effective.

Standards to consider when selecting a suitable supply chain

If the existing supply chain is missing just one of the above three elements, then you should consider redesigning it. In addition, business owners need to understand that supply chains have three different classifications:

-High inventory turns and low inventory volume – equivalent to Just-In-Time inventory

-Low inventory turns and high inventory volume – applicable when you have a long lead time with suppliers

-High inventory turns and high inventory volume – if your business is in the fresh or frozen food industry, you need sufficient produce to replace any expired or spoiled goods

When creating or adjusting your supply chain, other essential elements should include:

-Location of your business, customers, and suppliers

-Local regulations and tax laws

-Logistics lead times

-Logistical costs and savings

You can also measure your supply chain’s success based on the following:

-Flow of goods

-Costs of the flow of goods

-The time needed for such goods to flow

Ultimately, you will need a delivery system that will satisfy all your customers at the lowest possible cost. To determine which supply chain is most suited to your business, consider the following factors.

The location of your typical customer

-Do you ship globally, regionally or locally?

-Do customers come to you to pick up their orders?

For example, if you have to ship your goods across the globe, it can take up to two months for buyers to receive them. Therefore, you will need to design a supply chain that can handle international freight and customs issues.

However, if your customers pick up their purchases personally, then the delivery element can be the extension of your inventory and management control.

If your business requires fast order-to-delivery lead time, you will need a high inventory but low turns. This will mean that you need to allocate more resources to your inventory, but at least this will keep your customers happy.

If your product is in high demand or is perishable, you also need to keep a high inventory and deliver it quickly before the expiration date.

Accounting for supply chains

To successfully manage your product deliveries, you will need to know:

-What exactly you have in your inventory

-Where your stocks are located

-The costs of procuring your products

-The costs of holding them until they are sold or delivered

If you have hundreds or thousands of products, you will need a warehouse management system. Alternatively, you can hire a third-party logistics provider to take care of your inventory management and sales deliveries.

However, if you are just a small business, these options may prove to be too much of an investment. Despite the lack of huge resources, you still need to know your exact inventory. Fortunately, you can keep track of this information using spreadsheets and accounting software such as QuickBooks. This accounting service provider has several resource articles that can help you decide which software is most suitable for your business.

As your business continues to grow, you will need specific software that includes a component called enterprise resource planning (ERP). This system incorporates all the internal and external data in your electronic records and departments, such as accounting and sales.

Accountants, and specifically cost accountants, use the supply management chain as a tool to improve a company’s purchasing, manufacturing and inventory processes. This is a technique that analyzes the movement of goods; for example, from the raw materials to the finished products.

Locate your suppliers

You will have a long supplier lead time if the products will only arrive after

-Two months of sea travel. Shipping them by air is much quicker, but very expensive and the costs are usually unjustifiable

-Lengthy manufacturing cycles

High inventory volume and low inventory turns are normal for businesses such as Apple, although this tech company is using its market position to reduce its high inventory costs. For example, if you are an Apple supplier, you ship the products to the company, but it won’t issue an invoice upon receipt. You only receive payment once Apple releases the products to its retail stores.

Conclusion

In the end, the supply chain you choose must satisfy all your customers’ requirements so they can receive your products whenever and wherever they want. Nevertheless, the cost to you should also be reasonable. Achieving this goal requires a smart strategy and careful planning. However, the financial side of the supply chain will entail employing the services of an accountant who specializes in cost accounting. They will probably recommend a supply management system to monitor every process in the chain.

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Written by Nishi Patel, founder of Northants Accounting.

 

global footprint

Global Footprint Checkup: A Scorecard to Measure Success

Modern business means global business and the fast-paced, competitive technology landscape demands technology OEMs have a global footprint capable of reaching new customer segments and global buyers. In fact, according to the Computing Technology Industry Association (CompTIA), the global tech industry this year represents a $5 trillion opportunity for those manufacturers operating beyond their local markets to not only reach new customers, but also a wider selection of resources, expertise and innovation.

Establishing your organization’s global footprint is a key component in moving your globalization strategy forward. However, completing this step doesn’t mean your organization has completed or fully executed your global strategy. Establishing a foothold in the global marketplace is just one component of many in an OEM’s strategy to reach organizational supply chain goals. So, keep reading to see how your company measures up.

Your Global Footprint Scorecard

Once the initial groundwork has been laid, going global offers opportunities for expansion, optimization and even simplification. To assess how well your organization is doing, you’ll want to dive into a few critical areas and ask yourself these five questions along your global supply chain journey.

CUSTOMER EXPERIENCE – How customer-centric is your global supply chain?

All too often, OEMs focus internally-out when strategizing their expansion efforts rather than following one hard and fast rule that applies to all aspects of their business—you can never go wrong when you do what’s right for your customer. The same is true for your supply chain. It’s not about having the mindset that you’re simply delivering a product. It’s about giving your customers the ultimate experience wherever they are in the world. That means the right product or part at the right location, at the right time and at the right cost.

EXPERTISE – Have you established the right team of supply chain experts to support your current and future globalization needs?

The complexities introduced with such geographical expansion require a team that understands not just your products and customers, but the bigger picture of what you’re trying to accomplish. One of the greatest challenges in globalization is simply breaking out of what you already know and understand about your business domestically in order to think more broadly.

When you expand your operations globally, it means more than applying your current practices and simply shipping to an international address. As operations expand, it’s easy to overlook elements of your business that are vital to providing global markets with the same level of quality, service and speed currently delivered to domestic customers.

Additionally, if you have domestic challenges within management, manufacturing, supply chain or other core business areas, those are going to carry over into your new regions as well. That means ensuring you have the right team—or partner—to effectively handle all aspects of a global supply chain today and into the future.

OPERATIONS – Is your company still spending time and resources on basics like order taking, invoicing, procurement and warehousing?

This really comes down to whether you’ve been able to offload some of the more mundane supply chain tasks—say to a global distribution expert—allowing your staff to focus on what really moves the needle for your organization: continuing to innovate and deliver market-leading solutions to your customers. It’s a classic case of focusing on what you do best and letting others handle what’s left to drive greater business outcomes all around.

FLEXIBILITY – What ability do you have to flex up and down to meet changing regional market demands?

Whether you’re breaking into the global market or already established internationally and looking to expand, ensuring the right distribution model and footprint with the ability to expand as needed is critical. Markets change and demand fluctuates, which means your supply chain needs to have the same level of flexibility. If not, it might be time to leverage a supply chain partner that can.

ANALYTICS – Have you been able to incorporate real-time visibility into at least some parts of your global supply chain?

An international presence is often necessary to meet your customers’ demands. But to ensure success, one of the most important first steps is to identify your specific supply chain goals and what that success might look like down the road, which can vary from OEM to OEM.

Going global is not a one-size-fits-all undertaking. For example, are your service level targets going to be the same for abroad as they are domestically? If so, is that going to be enough to compete with local competitors that already have a foothold in your target regions? And ultimately, what triggers will signal global footprint achievement? These metrics will form your ongoing checkpoints to gauge your progress along the way but only if you are able to incorporate some level of data analytics and real-time visibility across your supply chain, a critical aspect of any globalization effort.

If you checked less than three of these boxes, you could be on the right path, but may benefit from the help of a global supply chain management expert who specializes in identifying the gaps and the best possible solutions to get you back on track. For example, the right partner can provide a single, easy-to-use portal into your international supply chain providing you with the real-time data required for course correction. Beyond providing an instant global distribution footprint, they can also give you the cultural expertise and guidance required in each region, including everything from language barriers to local regulations and tax implications.

If you checked more than three boxes, congratulations! You’re on your way to new levels of growth and success, confirming a global footprint was the right step for your organization. The key now is staying on course and revisiting this checklist again down the road to ensure further progress in the right direction.

On the surface, the idea of globalization seems simple—you want to sell your products to customers outside of your country’s borders. In practice, globalization is a complex set of initiatives, processes, management structures, communication streams, workflows, physical locations and more. All of which require checks and balances to ensure you’re achieving your initial goals. Whether you go at it alone or alongside proven partners who can help you avoid the pitfalls, don’t forget to check in along the way and adjust accordingly for success.

Jay Fraze serves as the Director of Supply Chain Management Services within Global Lifecycle Management, a specialized solutions business at Tech Data.