Trending Now

Strait of Hormuz Traffic Stays Low as US-Iran Talks Continue;…

New Articles

The Pros and Cons of Local Sourcing

sourcing
Archives, Global Logistics, Global Trade Daily, International Trade

The Pros and Cons of Local Sourcing

Leave a comment

The Pros and Cons of Local Sourcing

Local sourcing is the practice of contracting suppliers located within your country or even city. This term also applies to the suppliers in your home county. However, there is always considerable debate over whether to prioritize the local suppliers or cast your net wider. To help decide, it is wise to look at the pros and cons of local sourcing.

The pros of local sourcing

Local sourcing means faster and more predictable delivery times

The news of supply chain disruptions is prevalent. Also, planning for survival in the new normal the pandemic has left us with is complex. So, it is no wonder that perhaps the most significant advantage of local sourcing is its reliability. Considering that the distance your cargo would need to travel is vastly reduced, the problems it can run into are fewer as well. You would not need to worry about ports or airports closing down and leaving your goods stranded. And, with that increased reliability, it becomes much easier to handle the risk factors of high-profitability deals.

You can work with suppliers much more closely

Another of the advantages of local suppliers is that you can work with them more closely. When dealing with an international supplier a whole sea away, it is natural that you can have at most one or two meetings in person a year. On the other hand, a short trip is all that would take to reach and discuss business with a local supplier. Of course, this means that you can also get them to customize some of their services for you, particularly if you need certain parts that need to be custom produced for your needs or a similar demand.

You would not need to manage your warehouses as meticulously

When your supplier is just down the street or a city or two away, timing deliveries right becomes easier. It means that, instead of having huge shipments that take up lots of space and cause logistics problems, it is possible to have a string of smaller deliveries. And, with the reduced risk and delay factors that we have already discussed, you can also order them, so they arrive before you need to have them shipped out. In turn, this would ensure that your warehouse is kept busy but never overflows or has shipments clogging up space better used for something else. And you could even manage with much smaller warehouses.

You could more easily make last-minute orders

Making a last-minute order is not something you should turn into a habit. However, if any of your suppliers run into problems, or you have a sudden order of goods yourself, you would be able to resolve the situation much more easily. A quick trip or a phone call would allow you to check in with your partners and look for additional goods. And the proximity would make getting the goods to you a breeze, as well. In the end, this extra wiggle room would let you approach your business in a much more relaxed way than ordering goods from overseas. After all, a missing shipment in such cases might take weeks to make up for.

You would not need to deal with import taxes

It is impossible to avoid worrying about taxes when trying to import goods. For any legitimate business, it is not too difficult a hurdle to cross. However, it can be tough to manage when you are just starting, and they are cutting into your profits. That is why, especially for brand new businesses, local suppliers that allow them to bypass this expense are an excellent choice. There are plenty of rare and common U.S. customs clearance issues you would entirely avoid by choosing to go through a local supplier, too.

Enhancing Sustainability and Reducing Carbon Footprint

One of the most significant advantages of local sourcing is its positive impact on the environment. By reducing the distance that goods travel, you contribute to lower carbon emissions and minimize the ecological footprint of your supply chain. With growing awareness of environmental concerns and increasing consumer demands for sustainable practices, opting for local suppliers can significantly boost your company’s reputation and attract eco-conscious customers.

Fostering Community Growth and Support

When you source locally, you actively contribute to the growth of your community and support the local economy. By providing business to nearby suppliers, you help create job opportunities and stimulate economic development. This, in turn, can lead to increased consumer spending within the community, benefiting other businesses as well. Additionally, building strong relationships with local suppliers can foster a sense of camaraderie and collaboration among businesses, creating a supportive network for mutual growth.

The cons of local sourcing

The local supplier might grow over-dependent on your business

It might sound odd. But be it for the supplier or the business, over-dependence is not great. If a supplier starts to prioritize the demands of the company they rely on for the majority of their profits, it can seriously impact their competitiveness in the market. They can grow too specialized to grow their business, and it can be challenging to secure new contracts. There is also the matter of their new product development slowing or halting entirely. It means that they might eventually be left behind and lose their chief source of income as well. It would make demand planning for the buyers difficult as well if planning to branch out to new products.

Canceling a contract can incur a lot of backlash

Hiring local suppliers and helping the local economy is fantastic for PR. However, if you ever need to move on from those contracts, you would be facing an equal amount of backlash and ill-will. No matter how justified your decision might be. The public could still view it as abandoning those same businesses and economies you were lauded for helping.

You might not be able to obtain the best or latest products

Local suppliers might not be able to offer you top-of-the-line goods. They are likely solid and reliable manufacturers, yes. But with the world as a stage for your business, it is always possible to find someone producing better versions of the product you are interested in. So, you are more or less choosing between reliability versus quality. Of course, there are exceptions.

Local suppliers can be less efficient

Even though they are more reliable, local suppliers can have efficiency problems. They tend to be smaller and have a smaller production capacity. Of course, as you work together and prosper, they might expand their business and build more facilities. But then you run the risk of our first cons: their reliance on your purchases growing to the point they practically only cater to you.

It is hard to ensure objective supplier selection

You might, over time, develop a tight-knit bond with the local suppliers, especially if they have been there for you since the foundation of your company. That is natural. However, if your company is developing faster than they are, you might find yourself in need of new partners to keep up with the demand you are facing. At such a time, due to your friendship or perhaps fear of public backlash, it wouldn’t be easy to objectively select another supplier better suited to your needs.

Limited Access to Specialized Products

While local suppliers offer reliability, they may not always have the capacity or expertise to provide highly specialized or cutting-edge products. In industries where innovation is crucial, you might need to explore international options to access the latest advancements and unique offerings.

Higher Costs and Reduced Cost Competitiveness

Local sourcing might come with higher production and labor costs compared to countries with lower manufacturing expenses. This can affect the cost competitiveness of your products in the global market. As a result, careful cost-benefit analysis is essential to ensure that the benefits of local sourcing outweigh the potential price disadvantages.

Dependence on Regional Vulnerabilities

By relying heavily on local suppliers, your supply chain could be susceptible to regional vulnerabilities. Natural disasters, economic downturns, or political instability in the region could disrupt your supply chain and affect your operations. Diversifying your sourcing strategy can help mitigate these risks and ensure a more resilient supply chain.

Final word

Now you know the pros and cons of local sourcing, so it should be easier to make an informed decision. Whether you decide to pursue local or international suppliers, remember that your priority is always the development and future of your company.

 

demand
3pls, Archives, Global Logistics, Global Trade Daily

KEY COMPONENTS TO KEEP UP WITH SKYROCKETING BUSY SEASON DEMAND

Leave a comment

Inventory management horror stories that clog newsfeeds make one feel that The Grinch is now running supply chain, not Santa. According to market researcher International Data Corp. (IDC), the supply shock that started in China early in 2020, and the demand shock that followed it as large swaths of the global economy shut down, exposed vulnerabilities as well as resiliencies in supply chains around the world. Retailers, the research firm finds, faced supply and demand disruptions, navigating inventory held up in factories, global lockdowns, evolving trade policies and surges related to hoarding behaviors for essential items such as toilet paper. 

IDC’s report on the implication of COVID-19 for the future of the retail notes that retailers were confronted with accelerating e-commerce sales and rising demand for safe shopping, transparency and omnichannel fulfillment. And they faced massive economic shifts resulting from high unemployment and shifting shopping patterns, including the massive losses in shopping resulting not just from changes in everyday habits but also from decreased travel activity.

The crunch showed once again that to meet customer demands and stay competitive in a world where expectations for product availability and delivery speed continue to rise, every link along the supply chain must operate efficiently. From warehouse management to order fulfillment to juggling multiple channels, there are often countless points in a single product’s journey where eliminating errors and delays could mean increasing profit and optimizing the customer experience. 

“While it’s painful for grocery retailers to order products from hundreds of discrete suppliers, it’s also painful for the suppliers to receive orders and payments from hundreds of retailers that are not communicating by digital means,” says Robert Pinkerton, CTO of Vori, a technology platform and digital marketplace for retailers. “They’re sending emails and faxes, calling the order desk, texting sales reps. … the list goes on and on.”

Here are just a few ways businesses can use the right solutions to quickly adapt to changing demand this season: 

Inventory Visibility

One of the fundamental ways to ensure this happens is to improve inventory visibility: the ability to see the status of every SKU across all locations (warehouses, stores, suppliers and third-party providers) in real time. The key to having full inventory visibility is to leverage a supply chain network connecting all stakeholders. 

Having accurate inventory insight isn’t just great for your customers and trading partners; it’s also beneficial for overworked and overstressed teams. Manually tracking inventory is a mundane way to use employee time and detracts from their ability to build better customer and partner relationships. Plus, it can result in out-of-date information that makes decision makers’  jobs more difficult.

Real-Time Information

When both suppliers and retailers have real-time inventory data at their fingertips, they eliminate common time and cost efficiency drains. By integrating and automating inventory information, businesses get a leg up on improving internal processes. That’s because real-time inventory data is immediately actionable and helps to make better decisions, allocate product optimally and streamline transactions with your supply chain partners.  

For e-commerce businesses, knowing their inventory levels makes it possible to sell across multiple channels, while giving customers accurate availability information. Instead of frustrated customers, e-merchants create satisfied ones. 

Better Forecasting

Stockouts are customer loyalty killers and having better inventory visibility helps merchants avoid them. Modern inventory management platforms help by using historical data to better predict how much product is needed where and at what point in your business cycle. Using current data in real-time makes it possible to maintain healthier, more balanced inventory levels in all the places where the goods need to be. 

Full data trove control helps create timely, smarter replenishment strategies and better respond to volatile demand hikes—without devolving into chaos. 

Reduced Costs

Many supply chain players are leveraging powerful technology solutions to better manage order processing, warehouse management and fulfillment. But many others still use separate, siloed solutions that don’t provide enough visibility. Unified commerce solves this problem by bringing omnichannel operations together using integrated technology.

Comprehensive visibility relies upon a central “inventory hub” that acts as the aggregator of inventory information across the extended enterprise–products in the warehouse or in transit to it, at a third-party logistics provider (3PL), in a returns facility and even in the finished goods warehouse of a supplier. 

Ideally, such a hub should also include inventory positions and movement within each retail location. This gives businesses the advantage of up-to-the-minute product availability so that features such as available-to-promise (ATP) can help suppliers allocate products in short supply, providing valuable fulfillment transparency for partners.

Another tool to improve retail partners’ supply chain visibility is called vendor-managed inventory. A modern VMI platform offers insight into stock levels at retail partner locations and establishes automatic reordering thresholds, so products arrive just in time. This keeps warehouses lean on both ends and improves the customer experience with fewer stockouts.

Advanced VMI features leverage your data to an even greater advantage. This is crucial in an environment where customers are choosing products that can be delivered the next day or even the same day.

An integrated e-commerce platform is another way to improve inventory visibility to everyone’s benefit. With online shopping on the rise, it is important to give customers accurate information about what is available. After all, no customer wants the experience of hitting “order,” and then receiving an “oops” email due to out-of-stocks. 

Ideally, the aforementioned “inventory hub” should be working in conjunction with an organization’s e-commerce system so digital buyers always see the correct availability. All of this results in minimizing the chance of an “oops” moment and helps the “order hub” or ERP system determine the most cost-effective location, time and shipping method to get the order filled. 

With an excellent ROI and measurable benefits for all parties involved— retailers, suppliers and customers —leveraging technology to increase your inventory IQ is a smart way to dethrone The Grinch and empower supply chain Santa yet again. 

_______________________________________________________________________

Haitham Ghadiry has been the vice president of Sales and Marketing at TrueCommerce, Inc. since joining in December 2009. Mr. Ghadiry oversees marketing communications, demand generation, new customer acquisition, install-base account management, professional services’ sales, sales enablement and indirect channel sales.

Prior to joining TrueCommerce, he served as director of Global Sales and Strategic Accounts for Trimble Navigations, Ltd., a publicly traded supplier of advanced location-based solutions, and director of North American Sales at Everest Software, a leading business management software provider. His extensive history of generating superior sales results and leading top performing teams will contribute to further propelling TrueCommerce into the market leadership position. Haitham graduated with a bachelor’s of science degree in Tourism and Hotel Management from Helwan University in Cairo, Egypt.

import
Archives, Global Trade Daily, International Trade

Xinjiang US Import Sanctions Looming Over Global Supply Chains

Leave a comment

On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act (the “UFLPA”), which passed Congress with strong bipartisan support. With the UFLPA, the US has targeted imports of goods sourced from or produced in the Xinjiang region of China in an effort to address allegations of forced labor. Until now, similar orders had focused only on certain products – computer parts, cotton and cotton products, silica-based products, apparel, and hair products – from Xinjiang or from certain Xinjiang producers. The new measures will affect a wide range of industries and supply chains around the world. Companies are obliged to apply heightened diligence and transparency requirements in Chinese-based supply chains, and anticipate extended shipment delays for US imports and possible shifts in global apparel, food, solar, electronics, and automotive sectors, among others.

Background

The UFLPA was a bipartisan effort following on the heels of congressional action dating to 2019 in reaction to alleged human rights abuses against ethnic minorities in Xinjiang. It was enacted as part of a whole-of-government effort to combat alleged forced labor abuses in Xinjiang:

-US Customs and Border Patrol (“CBP”) has issued Withhold Release Orders (“WROs”) applying to cotton, tomato, apparel, hair products, silica-based products, and computer parts from Xinjiang.

-The Bureau of Industry and Security (“BIS”) of the Department of Commerce added more than 50 Chinese entities on the Entity List.

-The Office of Foreign Assets Control (“OFAC”) of the US Department of the Treasury designated more than a dozen persons on the Specially Designated Nationals and Blocked Persons List (“SDN List”) under the Global Magnitsky Human Rights Accountability Act.

-The US Department of State imposed visa restrictions against China Communist Party officials “believed to be responsible for, or complicit in, the unjust detention or abuse of Uyghurs, ethnic Kazakhs, and members of other minority groups in Xinjiang” as well as their family members.[1]

The UFLPA calls for a ban on the import of “all goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of China, or by persons working with the Xinjiang Uyghur Autonomous Region government for purposes of the ‘poverty alleviation’ program or the ‘pairing-assistance’ program.” These programs, per the UFLPA, subsidize the establishment and operation of manufacturing facilities in the Xinjiang Region.

In fact, CBP’s authority to withhold release of imports suspected of involving forced labor already has existed for almost 100 years under Section 307 of the Tariff Act of 1930, which prohibits importing into the US any product that was “mined, produced, or manufactured wholly or in part by forced labor, including forced or indentured child labor.” CBP enforces the prohibition through the issuance of WROs.

CBP first began issuing WROs relating to Xinjiang in 2016. Most recently, in 2020 and 2021, CBP issued a series of WROs. Some apply to listed companies and their subsidiaries while others apply to the entire Xinjiang region:

In one of its first major actions under the Biden Administration, on June 24, 2021, CBP issued a WRO instructing ports of entry to detain shipments containing “silica-based materials” that are “derived from or produced using” products manufactured by Hoshine Silicon Industry Co. (“Hoshine”). Hoshine is one of the largest global producers of metallurgical-grade silicon, the raw material needed to produce solar-grade polysilicon that is used to create solar cells. In addition, BIS added Hoshine and four other Chinese companies to the “Entity List,” banning exports, re-exports, or transfers of US goods and technology to the listed entities. When the new order under the UFLPA goes into effect, the 2021 restrictions will be viewed merely as a preview to a much more pervasive region-wide and not sector-specific import ban that will reverberate through a wider variety of supply chains.

The US government has identified the following industries as involving heightened risk due to potential forced labor in Xinjiang:

Where there is suspicion that the goods contain materials originating in Xinjiang, these industries’ products will likely be held at customs as banned from imports into the US on suspicion of being sourced with forced labor.

What does the Uyghur Forced Labor Prevention Act do?

Pursuant to the UFLPA, 180 days after enactment of the Act, on June 21, 2022, CBP will apply a “rebuttable presumption” that applies to any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Region or produced by the entities listed by the Task Force. This “rebuttable presumption” will apply except when the CBP determines that the importer has:

(a) fully complied with the guidance described in the China forced labor strategy and any regulations issued to implement that guidance;

(b) completely and substantively responded to all inquiries for information submitted by the CBP to ascertain whether the goods were mined, produced, or manufactured wholly or in part with forced labor; and

(c) shown, by clear and convincing evidence, that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor.

CBP advises that the importer may be required to submit time cards, wage payment receipts, and daily process reports that demonstrate the employment status of the employees in order to meet the burden of proving the lack of forced labor. In fact, textile companies whose cargoes got held up at US ports pursuant to Section 307 have needed to prove such evidence to CBP to get the goods released.

Finally, the UFLPA calls for increased enforcement of WROs. Within 30 days of making its determination, CBP will submit a public report to congressional committees identifying the good and evidence it has considered. The UFLPA provides for the Forced Labor Enforcement Task Force (the “Task Force”), in consultation with the Secretary of Commerce and Director of National Intelligence, to develop a strategy for supporting enforcement of CBP WROs.

What does this mean for companies?

The UFLPA is distinguished from a CBP WRO, which subjects to detention at US ports of entry products produced by listed entities or, in many cases, any products derived from or incorporating such products because the UFLPA’s rebuttable presumption will subject any and all goods sourced from or produced in XUAR to the import ban. The release process under the UFLPA will be what it has been for WROs.

To release the goods from detention, the importer must either re-export them from the US or provide evidence demonstrating that the goods were not manufactured with forced labor. In practice, goods subject to a CBP WRO are banned from entering the US until and unless the importer can convince CBP that it should not be withheld.

For example, in January 2021, CBP stopped a UNIQLO shipment of men’s cotton shirts that had arrived at the Port of Los Angeles / Long Beach pursuant to the XPCC cotton WRO. UNIQLO was required to provide various detailed records of the production chain (including timecards, salary records, and transportation records) from the raw cotton grower to the bulk trader to the yarn maker to the finished product. While UNIQLO argued that the shirts were not produced by XPCC, the burden is on the importer to prove the negative; even if UNIQLO eventually succeeds in convincing CBP, the shipment will have been delayed for months. Thus, the new WRO will also trigger shifting of supply chains by companies that do not want to take that risk.

In addition to customs consequences, a variety of measures may be applied to Xinjiang-affiliated entities. For example, an Entity List designation prohibits exports and reexports of all US goods, software and technology to those entities absent a license from BIS. Even more, those listed on the SDN List are prohibited from dealing, directly or indirectly, with US persons and are likely blocked from the global financial system altogether.

1. Shifting of Supply chains

When the rebuttable presumption under the UFLPA becomes effective on June 21, 2022, all goods sourced from or produced in XUAR – including any goods incorporating or derived from such goods in any amount – will essentially be banned from entering the US pending a favorable determination by Customs.  In other words, there is no de minimis requirement for the import ban. Therefore, companies should expect and plan for global supply chain pricing and sourcing issues.

For instance, as 40-45 percent of the world’s solar-grade polysilicon comes from Xinjiang, the US solar projects industry will start to suffer even greater supply chain headaches. Currently, the WRO only applies to silica-based materials if the silicon was produced by Hoshine. Under the rebuttable presumption, it will extend to any products containing either silicon or polysilicon produced in China. This is expected to impact the supply and pricing of polysilicon worldwide. China produces more than 65% of the world’s silicon and around 89% of the world’s polysilicon. Most of the polysilicon production is believed to be outside of Xinjiang. Since Xinjiang is not a transparent place at present, it is hard to say exactly how much. US importers will likely encounter third-country suppliers who are reluctant to dig as deeply as the UFLPA demands.

In order to avoid import delays, component and product manufacturers in third countries (for example, Germany and South Korea) will seek to shift their supply chains to products that are not sourced from or produced in XUAR, if possible. Those efforts are beginning now in anticipation of the June effective date.

2. Heightened Supply Chain Transparency and Recordkeeping Obligations in Affected Sectors

Companies – especially those in industries listed above as identified by the US government to be higher risk – need to establish heightened supply chain transparency obligations. Supply chain transparency will help companies in the uphill battle of meeting the burden to prove the absence of forced labor. Up to now, transparency in Chinese in-country supply chain has been lacking, which makes it difficult to forecast the future impacts of the UFLPA. Without such transparency, it will be nearly impossible for companies to convince the CBP, “by clear and convincing evidence, that the good, ware, article, or merchandise was not mined, produced, or manufactured wholly or in part by forced labor.”

Transparency and recordkeeping will go hand-in-hand, and both will be necessary to navigate the UFLPA waters. In addition to requiring transparency on all levels of the supply chain, companies also need to keep records of the entire supply chain to be able to quickly and easily provide such records to CBP as evidence of lack of forced labor, if and when necessary.

3. Reputational and Banking risks

Aside from US sanctions enforcement risks, reliance on Xinjiang suppliers in any aspect of a supply chain presents significant dual-sided reputational risks. For example, due to reputational concerns, major brands, such as Calvin Klein, Gap, H&M, IKEA, Patagonia, and Tommy Hilfiger, stopped purchasing or committed to stop purchasing cotton sourced from Xinjiang.

There is also reportedly backlash from Chinese authorities and consumers. Brands that issued statements against sourcing cotton from Xinjiang, such as Burberry, thereafter faced a public backlash from Chinese consumers. Intel issued an apology to its Chinese customers after facing backlash for telling its suppliers that it would not be using forced labor or goods sourced from XUAR.

Banks in particular are highly attuned to OFAC primary and secondary sanctions-enforcement risks, as well as the above-mentioned reputational risks. In view of the 9- and 10-figure sanctions-related settlements, even non-US financial institutions are generally conservative in their sanctions compliance and risk appetite. Sanctions pose an existential risk to some banks that rely on access to US correspondent banking accounts in order to deal in US dollars. Thus, aside from the CBP order, banks and companies continuing to engage in transactions directly or indirectly with sanctioned Chinese producers risk having their transactions rejected or blocked by the US and global financial systems.

__________________________________________________________________

Vedia Biton Eidelman is an associate in Eversheds Sutherland’s International Trade Practice. She advises clients on a wide range of regulatory matters, including sanctions (OFAC) and antiboycott matters; antidumping, countervailing duty and safeguard actions before the US International Trade Commission (ITC) and the US Department of Commerce (DOC); export controls (ITAR and EAR); national security controls on investment in US entities (CFIUS); trade policy issues such as free trade agreement negotiations; customs matters; and transactional due diligence.

[1]  M. Pompeo, “The United States Imposes Sanctions and Visa Restrictions in Response to the Ongoing Human Rights Violations and Abuses in Xinjiang,” (July 9, 2020), https://2017-2021.state.gov/the-united-states-imposes-sanctions-and-visa-restrictions-in-response-to-the-ongoing-human-rights-violations-and-abuses-in-xinjiang/index.html.

sourcing trade
Archives, Global Logistics, Global Trade Daily, News

“New Kid on the Block” Networking Platform Addresses Sourcing Amid Supply Chain Crisis

Leave a comment

Best known for bringing manufacturers, reps, and merchants together, B2B networking platform company, Factrees, announced the release of its newest platform aimed at addressing nearshore sourcing bottlenecks amid the supply chain shipping crisis.

Driven by the power of artificial intelligence, the newly launched platform provides a reliable resource library consisting of searchable U.S. manufacturers, independent sales reps, distributors, wholesalers, and retailers for customers to select for sourcing. Companies can network and connect based on product lines, territory, services offered, and business relationships.

“We are creating a sourcing community that simplifies and expedites the process of finding quality sourcing partners while reducing the dependency on word-of-mouth and tradeshow marketing for driving growth,” said Keith Williams, Factrees Co-Founder and CEO.

“Factrees is the new kid on the block,” he adds.

Adding to the platform’s appeal is the option for companies to share their experiences with manufacturers and distributors — including reviews, ratings, and the option of messaging and real-time video meetings.

“There is a groundswell of realignment between manufacturers and sales representatives,” said Ron Smith, President & CEO of Curtis Stout. “Factrees is offering valuable tools; a professional approach to connect and match all manufacturers with quality sales agents.”

Through a series of straightforward and simplified steps, companies can utilize the platform and begin connecting once a profile has been created and claimed. This process supports efforts in getting products to customers from the factory.

“I have been in the industry for 30 years. Factrees is a very creative concept supported by a very helpful web interface, said Paul Entwistle, COO Hardware Industry. “I believe those who use it will have an advantage over those who don’t.”

To learn more, visit: www.factrees.com

AI
Archives, Global Logistics, Global Trade Daily, Software

AI Beyond the Hype: This is Our Moment to Embrace Digitization

Leave a comment

AI for business is one of the most talked-about innovations and for good reason. As in other areas of our lives, it holds the potential to fundamentally alter the processes and structures humanity has been accustomed to for decades and, in some cases, even centuries.

Yet, like many other groundbreaking technologies before it, when it comes to real-world business processes, it’s understandable to feel that the recent attention around AI’s value has outpaced the current reality. Yes, today AI can more precisely tailor content recommendations in social media apps like Instagram, Twitter and YouTube and help refine the photos we take on our phones.

But where is the AI-driven revolution in the way we work—helping us do our jobs better, more efficiently, and unlocking value in unexpected places? We believe it’s here, today.

How do we know? Because at BT Sourced, our new standalone procurement company within the BT Group, we’ve already started to see the benefits. We’ve come to believe that, properly implemented, AI can be a game-changer—and that while there’s a lot of excitement about the future of AI, we’re proof that the future is now. Here’s why.


Why AI—and Why Now?

Out of sheer necessity, the COVID-19 pandemic accelerated what had been a gradual shift toward the rapid digitization of procurement. In the face of disruption, from remote work to shortages of goods and services across the value chain, having the adaptability to quickly source the best suppliers became critical. Agile procurement teams armed with cutting-edge technology were and will continue to be, best positioned to streamline sourcing, driving long-term growth and value for the BT customer and operating model.

Deloitte’s 2021 Global Chief Procurement Officer Survey found that driving operational efficiencies was the new No. 1 priority for CPOs, replacing reducing costs for the first time in the report’s 10-year history. In this next normal, procurement must modernize and simplify its processes to become faster and more agile for the near and long term.

The biggest barrier to transforming procurement is changing the way people work. Critically, the new AI-powered platform BT Sourced is using enables us to collaborate from any location by improving visibility, workflows, and communication across all functions. Increasing agility and efficiency is also key to achieving another important goal: enabling a greater focus on strategic initiatives and collaboration.

Adopting AI, along with tools that feature analytical intelligence and enable self-procurement, means our teams can now study recurring behaviors, empower end-users and discover new areas to contribute value. These new platforms are giving us the insights to make fast, data-driven decisions that benefit everyone throughout our value chain. They can be shared across the business, enabling us to work more closely than ever with our stakeholders while AI manages manual and repetitive tasks in the background.

AI for Good 

The financial benefits of AI and automation in procurement are clear. But what about other important goals such as inclusion and corporate social responsibility? How can AI in procurement support workforce development and contribute to the greater good?

At BT Sourced, we’re committed to expanding economic opportunity and reducing our environmental impact. In many ways, AI supports our commitment to more sustainable sourcing—from driving new efficiencies to enabling deeper analysis and awareness of environmental, social and financial risks throughout our supply chain. Now more than ever, we’re able to more precisely track compliance with our global responsibility model, sustainability criteria and principles of responsible behavior for suppliers regarding ethics, conduct, social issues and the environment.

We’re also leveraging AI to support supplier diversity and inclusion, expanding our network to include qualified alternatives from a base of top-performing, diverse small and midsize companies, increasing access to innovative service providers that may have otherwise been overlooked.

The Present and Future of AI

As the last year has proven, AI is no longer procurement’s future—it is our present and, without question, our future. Agile, value-added procurement requires the insights and efficiency that only AI and automation can deliver at scale. The pressing need to develop more responsible, inclusive supply chains and practices only makes the case for digital transformation stronger.

We have an unprecedented opportunity for change. Companies have a unique opportunity to move quickly to modernize their procurement technology and achieve benefits for both their stakeholders and their broader communities. We’ve arrived at the right moment to disrupt traditional models and processes, making the vision of a more efficient, sustainable and inclusive AI-powered future, a reality today.

_________________________________________________________________

Cyril Pourrat is the Chief Procurement Officer at BT Group

covid-19
Archives, Global Logistics, Global Trade Daily, Stories

HOW COVID-19 TOOK THE SUPPLY CHAIN TO A NEW PLACE

Leave a comment

The COVID-19 pandemic is not a one-off supply and demand disruptive event that will disappear into obscurity. It has left indelible marks on supply chain practices and practitioners. The not-so-strange thing is that many of these marks are positives. In the spirit of “never waste a good crisis,” supply chain practitioners and technologists face a post-pandemic recovery armed with a set of new systems and practices. 

Two of the most important of these new systems and practices involve supply chain agility and supply chain risk management. 

Supply Chain Agility: Supply chain agility is how well a supply chain responds to uncertainties by quickly adjusting operations (and sometimes tactics) while still meeting crucial success metrics. Agility wasn’t born in the pandemic. It came from the digital transformation of the supply chain. The combination of large volumes of real-time data from the IoT and advanced analytical techniques to mine new insights led the way for supply chain practitioners to pursue supply chain agility. However, the pandemic exponentially accelerated the adoption of supply chain agility and transformed it from a practice to a strategy. 

The chief supply chain officer of a multi-billion-dollar consumer goods company wrote during the peak of the lockdowns that for every dollar spent on supply chain agility, the return is 10x against traditional supply chain planning methods. Supply chain agility contradicts what many practitioners have been taught over the past decades. Experts have traditionally focused on efficiency and consequently pursued the lowest unit cost dream. By utilizing optimization techniques, we have sought to minimize procurement costs while absorbing larger order quantities and longer lead-times. We plan for longer manufacturing runs to drive a higher return on assets and full-container load land and marine freight to reduce transportation costs. Agile supply chains exist almost as the antithesis of efficient supply chains.

Supply Chain Risk Management: As companies emerge from the pandemic with an eye on recovery, there is a new appreciation for the role risk management plays in supply chain operations. Supply chain is essentially a decision-making game. Experts decide how much to make, move, buy, and sell. Supply chains have traditionally been driven by the financial cost of such decisions: procurement and production costs, the cost of expedited freight, and the cost of unmet orders. However, the COVID-19 crisis has taught us what should have been obvious to many, that risk trumps cost. Risk, if not properly managed, poses an existential threat to a manufacturer. So why has it been ignored, or relegated to a strategic supply chain design role?

Risk must be identified, evaluated and, when appropriate, mitigated. When making a supply chain decision regarding material sourcing or production, the risk spectrum will take its place alongside profitability in the process.

The pandemic has lifted the importance of supply chains within the boardroom. No longer just a cost center or necessary evil, supply chain is now viewed as a source of transformational and competitive differentiation. Thanks to COVID-19, thanks to toilet paper shortages, and long lines at Costco, my children now understand what a supply chain is. No longer do I need to explain what I do in my job.

__________________________________________________________________

Shaun Phillips is director of Product Management at QAD DynaSys, a division of QAD Inc., which began solving planning issues for food and beverage companies from an old bakery in Strasbourg, France, three decades ago. QAD DynaSys is now a leading provider of digital supply chain planning solutions in the areas of forecasting, planning and supply chain optimization. 

niche
America's Leading EDCs, Archives, Global Logistics, Global Trade Daily, Stories

SMALL POWERHOUSES: NICHE SPECIALTIES MAKE THESE 20 COMMUNITIES STAND OUT

Leave a comment

Niche cities are playing a key role in our nation’s economic development, according to the McKinsey Global Institute’s July 2019 report “The Future of Work in America.” Some of the cities, which the report’s authors call “small powerhouses,” are currently enjoying the fastest economic growth rates in the nation.

Inspired by this, we found 20 niche communities around the U.S. and outlined what it is that makes them special.

MATAGORDA COUNTY, TEXAS

Rice

For the past 120 years, rice has been a staple crop for Matagorda County, which is located in the coastal prairie region of Texas. So much so that the crop brings in $135 million every year to the county and surrounding area, according to the Matagorda County Economic Development Corporation. While drought in recent years has taken a toll on the farms, rice farmers have lately been diversifying with new enterprises and even niche marketing. Even with recent losses, the Texas Farm Bureau says Matagorda and nearby Colorado and Wharton counties account for 60 percent of the rice grown in the state.

TULARE, CALIFORNIA

Soil

Considered one of the most productive agricultural areas in the world, Tulare County sits atop old Tulare Lake, which accounts for the incredibly fertile soil. Farmers and agro-scientists have raved over the land for easily the last century. “The soil is known to contain in exact proportions the elements needed for the growth of citrus trees,” states the 1910 Report of the California State Agricultural Society. Today, the county grows a variety of citrus, stone fruits, nuts, berries and silage crops. Farm employment accounts for a quarter of all jobs in Tulare County, which has 45 crops worth more than $1 million in farm gate gross value, according to the Tulare County Farm Bureau.

CHESTER COUNTY, PENNSYLVANIA

Mushrooms

An astonishing half of all mushrooms grown in the U.S. comes from Chester County. Though mushrooms can grow anywhere (in fact, commercial mushrooms are typically grown indoors), since the late 1880s, farms started springing up in this part of Pennsylvania, according to a 2012 NPR report. Today, there are 60 farms here, producing a half-billion pounds of mushrooms every year. That’s about $400 million worth of Agaricus (also known as white button), Portobello, Cremini (also known as common), Shiitake and Oyster mushrooms every year. Agaricus mushrooms alone have 12.6 million square feet of growing space, according to the Chester County Agricultural Development Council.

ROCKFORD, ILLINOIS

Screws

Rockford calls itself the “Screw Capital of the World,” so you know it’s legit. Around the 1940s, when the city’s furniture-making industries began closing, the manufacturing of fasteners began to take off. By the 1960s, according to the Rockford Economic Development Council, the city was the fifth-largest fastener manufacturer in the nation. Though the city today is home to numerous automotive and aircraft manufacturing plants, it still produces many of the screws, bolts and fasteners we use.

ELKO, NEVADA

Gold

Nearly 80 percent of all the gold mined in the U.S. comes from mines in and around Elko, which is located in northeastern Nevada. The more than a dozen mines there produced about 5.6 million troy ounces of gold in 2018, all worth about $7 billion. Though gold production has historically followed a pretty harsh boom and bust cycle, the geologist John Muntean told Elko Daily Free Press in July 2018 that the area has been experiencing a gold rush “for close to 50 years.”

BROWNFIELD, TEXAS

Grapes

Located in West Texas, Brownfield and surrounding Terry County have very dry air, which while great for grape production, was for a long time hindered by the local government’s prohibition-dry politics. But that relaxed a few years ago, and now wine is booming there, thanks to 3,000 acres of grape production. In fact, Brownfield grows most of the grapes in the entire state of Texas. “I think Texas loves vineyards because it’s Jesus’ first miracle,” Katy Jane Seaton, co-owner of Farmhouse Vineyards, told KCBD in 2018.

PLANT CITY, FLORIDA

Strawberries

Considered the Winter Strawberry Capital of the World, Plant City (and surrounding Hillsborough County) has about 8,000 acres in production, according to the Florida Strawberry Growers Association. Given the area’s mild subtropical climate and extremely fertile soil, this is easy to understand. The fields add up to Florida being the nation’s second-highest strawberry producing state, behind California. The Florida growing season runs from around Thanksgiving to the end of March, which is when they’re typically the most affordable at the supermarket.

WICHITA, KANSAS

Aircraft

For the last century, manufacturers in Wichita have produced more than a quarter million aircraft—more than any other city on Earth. In fact, Wichita business leaders dubbed it “Air Capital City” way back in 1929. Today, more than half of the world’s light civilian airplanes came from plants in Wichita—Bombardier Learjet, Cessna, Hawker Beechcraft and so forth. The list of aircraft types includes trainers, biplanes, racing planes, crop dusters, seaplanes, personal aircraft and business jets. Plants in Wichita also supply huge quantities of parts for other aircraft manufacturers.

HATCH, NEW MEXICO

Chile peppers

Hatch is a tiny town (pop. 1,680) with a huge reputation. Chile peppers are a huge crop in New Mexico, and much of them are grown here. Hatch chiles are world famous, known for their earthy taste and slow-burning heat. When roasted, they’re almost buttery. Some say the soil in the Hatch Valley provides the key to the peppers, while others point to the area’s 4,000-foot altitude (the peppers need hot days and cool nights to grow). “Hatch is considered the Napa Valley of chile,” Chris Franzoy, owner of the Hatch Chile Factory, told The New York Times in December 2019.

MORTON, ILLINOIS

Pumpkins

Officials in the village of Morton, located just outside Peoria, consider their little hamlet the “Pumpkin Capital of the World” because an astonishing 85 percent of all canned pumpkin on the planet comes from the plant there constructed back in 1920. Nestle USA/Libby’s owns the plant now, and it covers 5,000 acres. “There are also pumpkin farms surrounding this whole area,” Village President Ronald Rainson told a CBS Chicago reporter back in 2014. Morton gets good sunlight, farmers say, and the soils are varied, allowing for both early and late planting.

ELKHART, INDIANA

Recreational vehicles

When you see a big RV rolling down the road, there’s a very good chance it came from Northern Indiana. That region—and the town of Elkhart, especially—manufactures about 80 percent of all RVs found in the world. According to author Al Hesselbart, who documented Indiana’s manufacturing history in his book The Dumb Thing Sold… Just Like That, it all started in the 1930s when three guys decided to start making trailers in their Northern Indiana backyards. The area made sense, given that it’s located in the heart of America, making it easy for plants to ship their trailers around the county.

SANDERSVILLE, GEORGIA

Kaolinite

Somewhere between 50 million and 100 million years ago, massive quantities of aluminum silicate began washing down from the Piedmont Hills in Georgia. Eventually, these particles settled in a prehistoric sea that covered what is now Sandersville, located about halfway between Augusta and Macon. Known as kaolinite, this mineral is a vital ingredient in more than 100 modern products, including paper, ceramics, cosmetics, paint and even rocket nosecones. Every year, about 2.5 million tons of kaolinite is shipped out of Georgia, much of it from in and around Sandersville, where officials say the mining is an $800 million business and the Peach State’s largest volume export.

SOUTHERN ILLINOIS

Horseradish

Three counties in Southern Illinois—Madison, Monroe and St. Clair—account for between 60 percent and 80 percent of all the horseradish grown in the nation. According to a 2018 article in St. Louis Magazine, there are three reasons for this. First, families that initially began farming horseradish back in the late 1880s have chosen to stay put. Second, much of the land is potash—extremely fertile soil that was once covered by the Mississippi River. And third (and most surprising): The sulfur pollutants released by the old steel mills in the area actually proved beneficial to the horseradish, actually giving the plant its characteristic heat, which is a product of its grating. In fact, the sulfur was so good to the horseradish that farmers today add it to the soil, making up for its loss from the closure of the steel mills.

DALTON, GEORGIA

Carpet

Dalton makes wall-to-wall carpet. Since the 1890s, mills there have produced so much carpet that today it’s said that 90 percent of all wall-to-wall carpet in the world was made within 65 miles of Dalton, which is located in the Blue Ridge Mountains. In 2015, Atlas Obscura reported that the mills in and around Dalton produced a whopping 12.2 billion square feet of carpet every year—“enough to cover the entirety of Hong Kong in a thick, rich shag.” Built atop a mammoth bedspread industry that dated to 1895 in Dalton, the carpet mills benefitted from close proximity to dyeing and finishing firms.

WENATCHEE, WASHINGTON

Apples

Since 1872, people have grown apples in Wenatchee, located in north-central Washington. According to the Wenatchee Valley Museum and Cultural Center, city boosters in the first decade of the 20th century pointed to the area’s volcanic soils, sunshine, abundant water, the absence of high winds and cold nighttime temperatures as reasons why apples thrived there. And they still do—today, there are more than 1,700 fruit growers in the area surrounding Wenatchee, producing more than half the fresh apples consumed in the country.

SACRAMENTO, CALIFORNIA

Caviar

Though caviar has been raised in the Sacramento area (specifically, the tiny nearby town of Elverta) since the 1970s, it was only recently that the area won the distinction of producing the best fish eggs in the nation. Today, sturgeon are commercially raised in the Sacramento area (they have long thrived in the Sacramento River), thanks in great part to the poaching, over-fishing and pollution that damaged other caviar spots in the United States. In fact, the Los Angeles Times reported in 2013 that Sacramento sturgeon produce 70 to 80 percent of all American caviar produced every year.

HIGH POINT, NORTH CAROLINA

Furniture

High Point, located between Greensboro and Winston-Salem in North Carolina, is the largest producer of furniture in the nation. The earlier furniture built there dates to the late 1700s, and access to nearby forests made it easy for furniture-makers to thrive. The industry really took off in the late 1800s, when the Southern Railway came to town, allowing for easy distribution. According to a May 2019 story in House Beautiful, the city today boasts 12 million square feet of showroom space, which is roughly the equivalent of 200 football fields, and it hosts the massive High Point Market showing off the industry’s latest designs every April and October.

BEND, OREGON

Microbreweries

According to the Bend Chamber of Commerce, there’s one brewery in Bend for every 4,500 residents in the state—the highest per capita rate in Oregon. There are breweries (and brew festivals) throughout Bend, which is located about three hours from Portland. Situated by the Deschutes River and the surrounding mountains and forests of Ponderosa Pine, Bend’s 20 or so breweries are legendary in the craft and microbrew scene. In fact, Deschutes Brewery is the eighth-largest craft brewery in the United States.

JAMESTOWN, NORTH DAKOTA

Honey

Bees are big business in this tiny North Dakota town, which is located near the middle of the state. Many of the state’s 350,000 hives are located in and around this town of 15,000 people, according to the American Bee Journal. Throughout the Peace Garden State, hives produce as much as 31 million pounds of honey, often leading the nation in production. The state’s wide-open prairies and low population make for a perfect habitat for bees, National Geographic reported in 2016, though many North Dakota farmers are increasingly converting their land to corn and soybean growing, diminishing the land available for bee production.

LEWISVILLE, TEXAS

Men’s shirts

Thanks to Hong Kong-based The Apparel Group opening a 250,000-square-foot distribution center in Lewisville, one in six men’s shirts in the U.S. came from this town, located just north of Dallas. While the shirts are made in Asia, they’re designed in Lewisville, according to a 2017 Dallas Morning News story. The warehouse itself can hold a quarter-million shirts on hangers. The center opened in Lewisville to be close to the buying and distribution centers of Dillard’s and J.C. Penney, which are located in nearby Fort Worth.

strategy
Archives, Global Logistics, Global Trade Daily, Warehousing

Setting Up Your E-Commerce Supply Chain Strategy

Leave a comment

Amid the COVID-19 pandemic, e-commerce implementation has become more relevant and important for businesses to keep up with competitors and adapt to the new normal. Before implementation, however, businesses must consider what strategy makes sense and what resources are needed to overcome challenges and potential delays.

Whether your business has already implemented e-commerce or is considering steps to take for the successful implementation of e-commerce operations, the following tips from experts at ARPAC will help you begin to understand what it takes and what to expect when navigating domestic and international markets. From inventory all the way to customer service, these e-commerce strategy tips are helpful for a variety of industries looking to transform operations to meeting consumer demand.

Setting Up Your E-Commerce Supply Chain from ARPAC