The explosion of global trade over the past decade or more, and the expansion of sourcing, transportation and distribution networks that enabled it, has stretched the resources of all but the largest multinational corporations. Demanding service levels and high costs—for everything from fuel to regulatory compliance—make supply chain management even more of a top priority in tough competitive conditions. Producers that have made cutbacks in their own organizations to reduce costs may even more than ever lack adequate logistics infrastructure, capable decision support tools, necessary capital and operating scale as a result of recession.
This worsens the tendency in virtually all industries to neglect in their strategic planning the transportation logistics of getting globally-sourced materials and components to the production line, and subsequently getting the final product in the hands of the distributor and ultimately the customer. The process of product and process design is typically a seamless one, as companies conduct testing simultaneously with planning the equipment and facility space needed for production. Similarly, the packaging, marketing, distribution and sales, public relations and advertising for getting the finished product to market are well thought out. Transportation and the logistics of the supply chain—the vital links that stretch to the production line and the consumer—are taken into account late in the game, if they are ever considered at all.
Yet transportation has the potential to generate such substantial hidden costs and delays that should be part of the initial planning phase for every product and production operation. Failing to investigate and consider the details in vital logistics factors can dramatically increase supply difficulties and overall costs for any product, no matter how great its potential demand. When logistics and delivery service providers are neglected as part of production planning, not only is production jeopardized but a company’s entire future could be lost due to sourcing problems that cause missed deadlines, halted production runs and delayed product launches.
Speed and Sourcing
In today’s business environment, a poorly constructed or outdated supply system with inadequate organization can create unnecessary storage and demurrage charges at airports and other freight centers, caused by information snags, missing or ill prepared shipping documents, and inappropriate cargo routing. Inadequate packaging, poor or incomplete documentation, and other such lapses in vendor responsibilities can bring rejection of goods during border crossings, customs delays, cargo loss and theft—all of which create huge and unexpected cost penalties that the importing producer must absorb.
In the world of global sourcing and shipping, speed is synonymous with planning and preparation. Inadequate preparation, reflecting incomplete information about customs and shipping requirements, is the most preventable, and most costly, problem when it comes to inefficiencies in global sourcing. The industry needs to realize that advance planning, with the help of a knowledgeable freight forwarder who knows what to plan for, can put shipments on the fast track while complying with even the strictest customs and security rules.
Case Study: Compliance Planning
A good example is the Customs-Trade Partnership Against Terrorism (C-TPAT), a cooperative cargo security effort between U.S. Customs and Border Protection (CBP) and supply chain participants. In it, CBP asks businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain. C-TPAT applications for validation involve meetings with and inspections by CBP agents to verify supply chain security measures.
Motor truck shipment between Canada or Mexico and the United States demonstrates how it works. Trailer and container integrity must be maintained by using a high-security seal which meets or exceeds government security standards. Written procedures stipulate how seals are controlled, to include procedures for recognizing and reporting compromised seals and/or trailers to CBP or the appropriate foreign authority. Only designated employees distribute container seals.
The advantages of being C-TPAT-certified mean that cross-border shipments move through customs and security faster and more efficiently. Pre-certification means a reduced number of CBP inspections, reducing border delay times and priority processing for CBP inspections, including front-of-the-line processing for inspections when possible. Being C-TPAT-certified takes planning, but it means that cross-border shipments move through customs and security faster and more efficiently while maintaining full security.
Case Study: Information Planning
Efficiency in shipment tracking is another example of building in efficiency from the start of the logistics process. For companies that source globally, inefficient supply chain documentation means delays, additional costs and inefficiency. The fundamental problem is typically lack of information, which can involve incomplete or missing data about the status of shipments, an inability to retrieve data when needed, or an inability to adequately document shipment status. It wastes substantial time and energy spent chasing information which ought to be readily available, and creates energy-wasting delays at ports, air cargo terminals, customs inspection points—anyplace that shipments should freely pass. Comprehensive electronic tracking can help eliminate this inefficiency by bringing optimal efficiency to aggregating and optimizing loads and routes, for transportation planning that reduces both the fuel consumption and carbon footprint of shippers.
Electronic tracking also helps eliminate inefficiency from physical keying or writing of routing numbers and freight identification. Every manual keying of a product code is an opportunity for a mistake, and then the products will cease to exist along the rest of the supply chain, forcing a company to stop everything and search—typically wasting fuel in the process.
The other inefficiency that electronic tracking eliminates is the sheer volume of paper. The International Air Transport Association (IATA) has estimated that each air cargo shipment carries with it as many as 30 paper documents—equivalent to 7,800 tons of paper a year, enough to fill 80 Boeing 747 freighters. As of 2010 IATA has launched an E-Freight initiative for participating freight forwarders that will replace 20 of these documents with electronic documentation. The result will be faster supply chain transit times, given that the ability to send shipment documentation electronically before the cargo itself arrives can reduce the industry cycle time by an average of 24 hours. Add the greater accuracy of electronic documentation, and the efficiency advantages are substantial. But only with advance planning and sophisticated supply chain design can these efficiencies be realized.
It should be apparent that planning and information control are essential to creating an efficient global supply chain. Accurate and instantaneous information supports efficient global logistics. Through advanced planning and sophisticated electronic tracking, an efficient supply chain will use cutting-edge electronic systems for sourcing that can improve both fuel efficiency and cost effectiveness because they help eliminate the guesswork and backtracking to find misplaced shipments and affords maximum flexibility in route and load planning. By taking these factors into account from the start of logistics integration, there is savings in fuel, energy, resources and time.
When producers, shippers and freight-forwarders all work together in an integrated process founded on initial logistics planning, it facilitates the movement of products around the globe, creating a supply chain with a minimal amount of inefficiency and maximum amount of flexibility. Strategic planning that makes logistics a key element is the only way to make sure mission-critical factors in a company’s supply chain don’t get lost through poor communication, which could result in missing supply documentation, disadvantageous shipping terms or inadequate planning for new supply chain regulatory requirements. Proper logistics planning, executed through the services of a freight forwarder, can help make the process work and goes right to the bottom line.
Simon Kaye is founder and CEO of Jaguar Freight Services with offices in London, New York, Philadelphia, Paris and Hong Kong and an operations network in Europe, North America, South America, Australasia, Asia, Middle East and Africa. The company provides a door-to-door freight solution including customs clearance, storage and distribution facilities, as well as a real time online information tracking system.
