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Five Tips for Streamlining Supply Chain Success

Five Tips for Streamlining Supply Chain Success

At the core of every successful business is a well-oiled, well managed system with an honest, strategic approach to operations and communication. Without these foundational elements integrated within supply chain management, the operational structure becomes even more unpredictable and scattered than what’s worth gambling. Furthermore, your company’s reputation can suffer from avoidable mistakes. The method of prevention is as simple as a high-level risk management evaluation.

An article from Supply Management (Chartered Institute of Procurement & Supply) titled, “Five Tips to Streamline Your Supply Chain” focuses on taking your operations and looking at what’s working, what’s not working, and what steps to take to ensure efficiencies are being made.

The article focuses on five priority areas that begin with reviewing the current situation through a high-level, but granular lens. This approach takes a bit of skimming and a whole lot of knowledge of the internal workings. Additionally, it takes some honesty. It’s okay to confront an inefficient practice as there’s always room for improvement. Rather than a “Don’t fix what’s not broken” approach, think of it as an “Optimize over settling” method, or as the article put it, “surgical action and further reduce costs and pass savings along to their customers,” (Supply Management).

Utilize the magic of data integration within each and every aspect of the supply chain data library. With digital solutions becoming more of an industry standard, this one comes as a no-brainer. Take the insights and hard numbers, integrate them, and provide an even faster delivery of information than before. Efficiencies do not come without some form of expedition and urgency. It’s about mastering the art of quality and quantity.

The integration of data is a great segway to the flip-side – data duplication. Try to eliminate this as much as possible and save the business from petty errors and confusion. Technology creates a new way for duplication to be managed by providing on-the-go options via mobile devices and real-time updates.

Keep up with the times, but respect the original system. Many data systems allow for merging, creating a seamless transition of information without re-doing the entire process. Businesses can  leverage the lessons from the past that spotlight customer needs, strategic trends, and industry success. Don’t let history repeat itself, learn from it.

Proactive versus reactive is another no-brainer on the list. When plugged into this mindset, businesses have the capability of providing customer needs before they are even identified, providing reliability and optimization.

Summarized, the strategic use of information and data integration combined with forward-thinking can make or break the near future of supply chain management.

To read the full article, visit: Supply Management

GLOBAL ECONOMY EXPECTED TO SLOW

History imparts many lessons, and among them are that all good things come to an end. In the early stages of 2019, all signs are pointing toward slowing economic growth both domestically and internationally.

Global economic growth appears to have peaked in 2018 at 3 percent, and analysts at the trade credit insurance firm Atradius estimate global growth to ease to 2.8 percent this year. The slowdown will be felt in both developed and emerging markets and will be driven by monetary policy decisions, a fading U.S. fiscal stimulus, increased volatility in financial markets and rising uncertainties about future trade relations.

Theme of the Moment: Uncertainty

While global trade growth remains relatively strong, it is decelerating, reaching 4.7 percent in 2017, 3.7 percent in 2018 and predicted to further slow to 3 percent in 2019. The overarching threat to global economic growth in 2019? Uncertainty.

No matter what form uncertainty takes, it tends to have the same effect: lower business investment. A large source of uncertainty at the moment is the unfolding trade war between the U.S. and China. While conversations have begun and will be focused on intellectual property and technology transfer, should these countries significantly ramp up their trade conflict, the forecasts for 2019 economic growth would likely be revised downward.

Another big area of uncertainty is another looming U.S. government shutdown. Although a short-term agreement was reached at the end of January, it remains to be seen what will happen next. Will the government remain functional for some time? Or will it come to another impasse? At this point, it’s nearly impossible to say, and the 35-day shutdown has already made its mark on consumer confidence.

A Snapshot of the U.S.

The U.S. is not immune to the slowdown trend, but several economic tailwinds continue. According to Oxford Economics, real GDP growth is predicted to slow from 2.9 percent in 2018 to a still robust 2.5 percent in 2019, with increased downside risks related to trade and monetary policy decisions.

By the middle of this year, if the current pattern holds, the economic expansion in the U.S. will have lasted 13 years, the longest on record. So far, private consumption has been the engine behind the economy’s growth, aided by record low unemployment and wage growth in line with inflation.

All that said, various factors are making the U.S. economy increasingly fragile. Business investment and overall growth face challenges from trade protectionism and monetary policy, which are simultaneously increasing input costs and borrowing costs. In addition, U.S. housing data is beginning to look weaker, which is not much of a surprise given rising uncertainty, a lack of material wage inflation and a rising rate environment.

The Federal Reserve increased interest rates again in December 2018 to 2.5 percent, reflecting the Fed’s perception of ongoing strength within the domestic economy but quickly shifted to a more dovish tone by January. Although analysts expect the pace of tightening to slow, with no further hikes forecasted in 2019, the future is currently difficult to predict with monetary policy expected to be data dependent moving forward. Based on historical data, the flattening yield curve and tight treasury yield spreads could suggest a looming recession though the Fed balance sheet looks significantly different from past economic cycles.

The Corporate Sector

U.S. corporate insolvencies decreased a respectable 8 percent last year, but as business risks mount due to the recent rise in interest rates, significant levels of corporate debt and overall trade policy uncertainty, business failures are expected to decline by only 2 percent in 2019, according to the Economic Update published by Atradius in January.

A similar slowdown is expected elsewhere. Although 2018 brought a 3.6 percent decline in insolvencies in advanced markets in North America, Asia-Pacific and Europe, analysts at Atradius predict 2019 will likely see a more modest 1.7 percent decrease. In emerging markets, the picture is slightly worse, as global financial conditions become more volatile and some countries face unfavorable domestic policy situations.

One current area of concern the business sector faces is credit risk. Corporate balance sheets show significantly more leverage than they’ve had in previous economic cycles, with a large proportion of BBB-rated debt. As a result of the fiscal stimulus following the 2008 financial crisis, many companies took advantage of the easy (and cheap) access to financing in order to fund growth. However, heavily leveraged corporate balance sheets could now face meaningful refinancing risk in light of the significant interest burden coupled with expectations for earnings growth pressure.

Event risk also remains inescapable within the corporate sector. In worst case scenarios, event risk can drive insolvency situations as seen recently with both PG&E and Toys R Us. Event risk refers to a business facing material financial risk after a specific external event, such as when PG&E filed for bankruptcy after facing significant potential liabilities related to the California wildfires. In the case of Toys R Us, media coverage suggesting the toy retailer had hired well known restructuring advisors resulted in supplier fear leading to global supply chain issues and ultimately, insolvency. The lesson here is that anything can happen—whether it’s natural disasters, a fast-paced media controlling a company’s narrative, or sudden unexpected changes in trade relations that translate to disruptions in supply chains.

Areas of Opportunity

As early indications suggest slowing global economic growth in 2019 and the continued uncertainty surrounding trade policy are cause for concern, the need to know your customer increases in importance. Whether trading domestically or internationally, areas of opportunity exist and businesses across industry sectors reflect varying degrees of financial health and stability. No matter the economic cycle, businesses should take steps to mitigate risks. Trade credit insurance, for instance, protects company’s accounts receivables, providing peace of mind for continued growth and sustainable cash flow. It is always a smart idea to monitor corporate debt levels and the payment practices of trading partners in an effort to understand whether they have a balance sheet that can weather a slowdown.

 

 

David Culotta, CFA, is the senior manager of U.S. Buyer Underwriting for Atradius Trade Credit Insurance Inc. located in Hunt Valley, MD. In his role, David is responsible for providing strategic direction for the U.S. underwriting platform and for monitoring the development of the U.S. portfolio and adapting the risk management approach as necessary. David earned his MBA at Loyola University Maryland and is a CFA charterholder.

Credit: Atradius

White Paper Identifies Ways to Reduce Supply Chain Costs

Today’s global supply chains must contend with global issues, like tariffs, severe weather events and labor disputes. To provide relief from these challenges and help companies control their supply chain costs, C.H. Robinson has made available a white paper on the benefits of global freight forwarding.

The paper describes three areas where companies can use freight forwarding to reduce cost and complexity in global supply chains.

The first area is cargo consolidation. Companies can take advantage of space in ocean and air shipping containers to realize potentially big savings. The second area is risk management. Understanding the risks to cargo can help companies properly protect their shipped goods. The final area is customs management. Knowing how to navigate compliance requirements can keep goods moving across borders and help companies avoid costly fines.

The white paper is available for free download at: https://www.chrobinson.com/en-us/lp/GlobalForwarding/global-forwarding-saving-opportunities/.

Digital Solutions: Breaking New Ground for Global Supply Chain Management

A live-tracking shipment device called Smart Visibility is creating boundless tracking capabilities for international logistic providers. The most recent of them being Hellmann Worldwide Logistics based in London.

The features offered go beyond real-time tracking and management of shipments, providing information pertaining to the temperature,  humidity, vibration, incident of light, door openings and deviations of schedule through dashboard managed viewing and email updates, according to a release from Hellman this week.

Jochen Freese, Chief Commercial Officer of Hellmann expressed his confidence in the product in the release: “Thanks to the innovative and uncomplicated return logistics of the device, it is possible to guarantee companies the greatest possible flexibility so that an on-demand tracking service can be implemented.”

Customers can operate even the most complex of supply chains with ease from start to finish regardless of the transport unit. Trucks, pallets and parcels, transport carriers and beyond have the opportunity to leverage the pay-as-you-go option, creating financial flexibility for all types of customers while delivering the most accurate and detailed information through a convenient, on-demand platform.

“Especially in times when decisions in supply chain and inventory management are computer-controlled, it is extremely important to have reliable real-time data on the flow of goods. With Smart Visibility, we deliver just that. The tool enables an extremely broad target group to use real-time transparency to their competitive advantage,” Freese said.

Technology and digital solutions are changing the platform and standards for supply chain and logistics management companies worldwide and Smart Visibility is another example of this. Through the utilization of digital solutions and time efficiencies business incentives are supported and improved  while company goals are maximized.

For more information about this newly integrated solution, visit: Hellmann.com

 

 

 

Intelligence Report

Supply chain management (SCM) in 2018 is a term so widely used that it’s hard to imagine it’s only been in existence for roughly 35 years. The strategic coordination of processes and functions across a given company’s supply chain, the end goal of good SCM is exceptional value for the customer, all the while removing inefficiencies and bottlenecks along the way. Urban lore has it that the term first surfaced in the early 1980s when a consultant at Booz Allen Hamilton referenced the “management of supply chains, or supply chain management” in an interview with the Financial Times. SCM caught fire and the rest is history.

As with any fundamental, and fast developing business niche, firms need people specialized in that area to gain a competitive advantage. This is where the Master of Business Administration (MBA) in SCM comes into play. A typical MBA program will, of course, touch on SCM concepts, but SCM will be one of perhaps 10 or even 15 concepts within the overall degree. For generalists, an MBA is excellent. But if SCM is the focal point, an MBA in SCM is the intelligent route.

Putting together the pieces and making sure everything functions smoothly are SCM at its core. The MBA in SCM is for you if you enjoy organizing moving parts, managing people (often simultaneously locally and around the globe) and staying on top of global trends. The MBA in SCM provides core business foundations but with a singular focus on operations.

A common question is: What types of jobs are available for folks with an MBA in SCM? To start, such positions as inventory control manager, purchasing manager or vendor managed inventory coordinator are commonplace. These are mid to even upper level positions at some firms which often lead to top-level management positions down the line.

In the eCommerce world, SCM is taking new forms, an omnichannel approach that considers customer preferences digitally across a range of interaction points to meet their requests as efficiently as possible, no matter their location.

The MBA in Operations and SCM from Michigan State University is one of the premier choices for those seeking a higher degree in SCM. While it is hard to pin down which institution first began to offer SCM courses, Michigan State was the first to offer the SCM degree and continues to count on a world-class faculty base and pedagogy that is second to none. Manufacturing Design and Analysis, Integrated Logistics Systems, Total Quality Management and Service Supply Chains are just a handful of the classes incoming students have access to.

Another fantastic option is the MBA in SCM at Pennsylvania State University. To the chagrin of Michigan State, Gartner Inc. rated the MBA in SCM at Pennsylvania State No. 1 a couple years back, propelling this two-year program to the forefront. An interesting wrinkle with the Penn State program is during the last spring term students have the chance to travel abroad as part of the Global Immersion program to witness SCM and other business facets in play at leading firms everywhere from Turkey to China to Peru or India.

The hype around SCM is real and growing. A quick search of leading programs is a great first start, options are plentiful, and the future indeed bright.

Trump Administration Trade Battles Continue

There have been several important developments in regard to (1) U.S. use of Section 301 of the Trade Act of 1974 to restrict imports of various products from China and (2) U.S. imposition of global trade restrictions on steel and aluminum imports pursuant to Section 232 of the Trade Expansion Act of 1962.  The Trump Administration asserts that the former are justified as a result of unfair intellectual property policies and practices maintained by China and that the latter are necessary to prevent emerging threats to U.S. national security.  As summarized below, the conflict between the United States and China continues to intensify, but there are signs that the Administration is looking to de-escalate the global conflict over steel and aluminum.

Developments in the U.S.-China Trade Relationship

On June 15, the Office of the U.S. Trade Representative (“USTR”) issued two lists of Chinese goods that would be subject to a 25 percent tariff surcharge as a result of its Section 301 investigation.  The first list covered approximately $34 billion in goods and was comprised of machinery and mechanical appliances; electrical equipment; vehicles, aircraft, vessels, associated transport equipment, and parts thereof; and measuring, checking, precision, medical or surgical instruments.  The second list covered approximately $16 billion in goods and was comprised of lubricants; plastics; machinery and mechanical appliances; electrical equipment; locomotives, vehicles, and parts thereof; and measuring instruments.  The duties for the goods on the first list were imposed starting July 6, while those for the goods on the second list were imposed starting August 23.

Shortly after USTR’s June 15 announcement, China announced its intention to retaliate against the United States by imposing a 25 percent tariff surcharge on certain U.S. goods being imported into China.  China issued two lists of targeted goods, with the first list covering agricultural products, cars, and aquatic products, and the second list covering mineral fuels, chemical products, and medical machinery.  The duties for the goods on those lists were imposed starting July 6 and August 23, respectively.

President Trump responded to China’s retaliatory measures by ordering USTR to develop an additional list of $200 billion worth of imports from China to be subject to a 10 percent tariff surcharge.  Shortly after that announcement, China promised to fight back with “qualitative” and “quantitative” measures.  On August 3, China announced new duties in the range of 5-10 percent on imports from the United States valued at $60 billion, and those duties were imposed starting September 24.

On September 18, USTR issued its third list of Section 301 tariffs, covering approximately $200 billion worth of imports from China, dwarfing the value of imports covered by the first and second lists.  The products targeted are subject to an additional tariff of 10 percent, effective September 24, which increases to 25 percent starting January 1.  The list contains 5745 tariff lines, covering a wide range of products, including live animals and animal products; vegetable products; prepared foodstuffs; mineral products; chemical products; plastics and rubbers; rawhides, skins, and articles thereof; wood and articles of wood; paper; textile articles; headgear; articles of stone, ceramic, and glass; pearls; base metals and articles thereof; mechanical and electrical equipment; vehicle parts; photographic and cinematographic equipment; and miscellaneous manufactured articles.  On October 12, U.S. Customs and Border Protection (“CBP”) confirmed that imports from China that qualify for reduced or suspended duties under the recently signed Miscellaneous Tariff Bill will still face the specified Section 301 tariffs.

USTR has established a process by which U.S. stakeholders (such as purchasers or importers) may request the exclusion of particular products from Section 301 tariffs covered by the first two tranches.  Notably, the notice for the third list did not indicate that there would be an exclusion process.

The deadline for requests regarding the first list lapsed on October 9, but the deadline for the second list is December 18.  USTR prefers electronic submissions made through the Federal eRulemarking Portal: www.regulations.gov.  Exclusion requests should include certain information, including the following: the applicable 10-digit subheading of the HTSUS; physical characteristics that distinguish the proposed excluded product from other products within the covered 8-digit subheading; the ability of CBP to administer the exclusion; the annual quantity and value of the Chinese-origin product that the requester has purchased in each of the last three years; and the percentage of total gross sales in 2017 accounted for by sales of the Chinese origin product.

Section 232 Tariffs on Steel and Aluminum

In March of this year, the Administration announced global tariffs on imports that it found to threaten U.S. national security – a 25 percent tariff on steel and a 10 percent tariff on aluminum.  Several countries negotiated their own deals to avoid the tariffs.  Australia is exempt entirely but is likely to be monitored for import surges.  Argentina, Brazil, and South Korea are subject to quotas (not tariffs) on steel.  Argentina has a quota for aluminum, but Brazil and South Korea did not reach a similar agreement and therefore are subject to the tariff on aluminum without any quantitative restriction.

The original, global Section 232 actions can be adjusted on a country-by-country basis.  For example, in August, the tariff for imports of steel from Turkey was increased to 50 percent in response to the depreciation of the Turkish lira – the concern there was that the depreciation of the lira had made imports of Turkish products less costly and thereby undermined the effectiveness of the original Section 232 tariffs.  Canada and Mexico are reportedly negotiating for quotas to replace the Section 232 tariffs as early as this November.  And the Administration recently notified Congress of its intent to negotiate trade agreements with Japan and the European Union, which could involve quotas to replace Section 232 tariffs.

The product exclusion process has been a key focus since imposition of the Section 232 measures.  Product exclusions may be requested by U.S. stakeholders on a rolling basis.  According to the Commerce Department, a product exclusion will be granted if the article is not produced in the United States in a sufficient and reasonably available amount or at a satisfactory level of quality, or if there is a specific national security consideration warranting exclusion.  The product exclusion process was recently extended to imports from the quota countries.

The Administration has made some important changes to the product exclusion process since it was established.  First, domestic companies can seek “expedited relief from quantitative limits” for existing supply contracts.  Second, since early September, rebuttals (responses to objections) and surrebuttals (responses to rebuttals) are allowed and the Commerce Department has facilitated tracking of requests through its website (www.commerce.gov/page/section-…).  Third, parties are now permitted to submit confidential business information in support of requests or comments.  These last two changes were implemented in response to significant criticism of the process from companies and Congress.

At present, over 3,500 exclusions for steel and aluminum products have been granted (about 10 percent of posted requests).  In all but a few cases, the exclusions that were granted had been unopposed.

How Does a Company Take Advantage of a Product Exclusion?

As of today, the Administration has not granted any requests for exclusion from the Section 301 tariffs on imports from China.  The Administration has, however, indicated that such exclusions would be effective for one year upon publication of the exclusion determination in the Federal Register, apply retroactively to July 6 for products on the first list and to August 23 for products on the second list, and cover all imports of the product in question.  (As mentioned above, no product exclusions are planned for the third list, but Congress is raising concerns with the Administration on this point.)

For product exclusions from the Section 232 measures, requestors must closely track the regulations.gov dockets (Steel 232 docket BIS-2018-0006 and Aluminum 232 docket BIS-2018-0002) for the status of requests.  Once granted, an exclusion is valid for one year and is limited to the product description, quantity, supplier(s), and country(ies) of origin as defined in the request.

After a decision is posted, the Commerce Department notifies CBP, but the importer of record is nevertheless required to inform CBP in advance of importation.  More specific guidance on claiming an exclusion can be found at CSMS #18-000378.  If an exclusion is granted, companies are eligible for a retroactive refund of Section 232 tariffs back to the date the request for exclusion was posted for public comment at regulations.gov.

It is especially important to remember that, other than with respect to the first list of products covered by the Section 301 tariffs, U.S. stakeholders who believe a product should be excluded from the application of Section 232 or Section 301 tariffs may still be able to file an exclusion request.

 

Written by:  Matthew R. Nicely, Dean A. Pinkert, Julia K. Eppard and James Ton-that at Hughes Hubbard & Reed LLP

 

How to Prevent Kinks in the Global Supply Chain

Knoxville, TN – Working with talented professionals, customer service, agility and reducing cost are just a few of the key issues on the minds of senior level supply chain executives in the US manufacturing and retail sectors, says Dr. J. Paul Dittmann, executive director of the Global Supply Chain Institute at the University of Tennessee – Knoxville.

Meeting in Chicago recently, the Institute’s Advisory Board shared its insights on solutions to some of the most critical issues facing the global supply chain. The board is comprised of 25 high-level managers from some of the largest companies in the country.

According to Dittmann, the executives feel that having “the right people in the right positions” is the key to every solution with companies needing to develop “better processes to assess, identify, recruit, develop and retain top talent, especially since supply chain talent is increasingly scarce.”

Understanding the customer’s current and future needs was also seen as absolutely critical, he says. “They understand that their customers should lead their supply chain strategies and they know that their customers should be better educated on the cost-service tradeoffs.”

AGILITY, COST REDUCTION, REGULATORY COMPLIANCE

Near the top of the list, says Dittmann, are developing the “agility to adapt to changing environments,” given the increasing volatility in the global marketplace and a “need to stay current with technology on many fronts, from warehouse and transportation management systems to network optimization tools and inventory planning systems.”

Cost reduction “will always be a priority and supply chain executives know their companies expect them to take the lead in that area, while still improving service,” he says. “They know that they need to be more creative and proactive. They also understand that they must reduce cost while simultaneously redesigning their supply chains and leveraging the global environment.”

Also critical are developing efficient ways to comply with the growing list of government regulations, as well as optimizing performance despite the condition of the country’s “crumbling transportation infrastructure.”

Supply chain executives, says Dittmann, “understand they should have a better process to identify, prioritize and mitigate supply chain risks that can seriously damage their companies. Even weather must be considered, especially given the extreme challenges of last winter.”

08/27/2014