Supply Chain Frontiers Issue #18. Read all articles in this issue
Think of all the places where your international supply chain can be disrupted. Chances are national borders are probably high on the list. That’s why companies employ teams of trade compliance experts to shepherd cargo from one country to another.
The problem is that while these specialists are still needed, their services are no longer enough. Globalization and stricter security regimes have made transborder movements more complex, putting the integrity of end-to-end supply chains at much greater risk.
To mitigate these risks and make their supply chains more resilient, companies need to re-evaluate how they manage shipments that traverse national borders. They need to go beyond traditional trade compliance and take a more strategic view of the transborder supply chain. This is one of three key components that international supply chains must have to be competitive. Those components are: Secure, Transborder and Resilient, or STAR, supply chains.
There are numerous stumbling blocks at national borders that can delay shipments. Some derive from cultural differences that catch importers and exporters unawares. An example is the hold-ups caused last summer in Brazil, when customs operations effectively shut down, because the national soccer team was playing in the World Cup. But cultural differences are just the tip of the iceberg. Customs clearance procedures and goods classification codes vary tremendously from country to country, even from region to region, causing delays when shippers are not prepared.
More stringent supply chain security represents another major speed bump at border crossings. As governments extend security mandates deeper into global supply chains, companies must meet multi-dimensional security needs to keep their goods in motion.
In October 2006, President Bush signed into law the Security and Accountability for Every Port Act (SAFE) that requires the US Department of Homeland Security (DHS) to develop plans to resume trade and minimize economic loss should a terrorist act occur at a port. SAFE also reinforces various security measures such as the Container Security Initiative, which requires foreign ports to notify the US government of shipments bound for the United States.
More security initiatives are in the pipeline. The DHS wants to improve the quality of the information available on import containers bound for the United States, before the boxes are shipped. It has proposed the so-called “10 plus 2” initiative, which requires 10 data elements be submitted 24 hours before a vessel is loaded (e.g., manufacturer name, address and country of origin) and two additional elements from carriers (the vessel stow plan and container status messages).
In addition, global businesses are more vulnerable than ever to unexpected supply chain disruptions. Finely-tuned just-in-time (JIT) and build-to-order manufacturing systems are intolerant of border delays.
Even so, many organizations continue to relegate the crucial transborder component of supply chains to its usual functional slot — a role largely confined to making sure that customs entry documents are filed on time and cargo is cleared expeditiously. There are a number of ways to update this role. Overall responsibility for transborder movements can be elevated in the management hierarchy. Traditional silos that separate functions such as transportation and sourcing can be removed to establish more cross-functionality in the management of cross-border movements. And information systems can be aligned with this multi-disciplinary approach, a change from the common practice of managing exports and imports in unconnected spreadsheets and databases that reside in different departments.
Moving goods across borders used to be the sole province of the import department and the customs broker. Companies that recast the transborder supply chain as a crucial component of global operations can gain competitive advantage from increased resiliency and a more efficient end-to-end supply chain.
This piece is based on an article written by Jim Rice, director of CTL’s Integrated Supply Chain Management Program, and Phil Spayd, president of Global Trade Systems, that will be published in the February 2007 issue of Supply Chain Strategy. For more information on the transborder supply chain contact Jim Rice.