Monthly Archives: June 2012

Supply Chain Control Tower: What is Old is New Again

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The concept of a supply chain control tower has been gaining momentum over the past year. A control tower is a single command center for visibility, decision-making and action, based on real-time data. According to Capgemini Consulting “A supply chain control tower is a central hub with the required technology, organization and processes to capture and use supply chain data to provide enhanced visibility for short and long term decision making that is aligned with strategic objectives.” (Capgemini Consulting, “Global Supply Chain Control Towers” May 2011)

It’s also a new name for a concept that has been around for a while: 4PL. Companies are increasingly realizing that supply chain must become a core competency, and taking on the 4PL role offers them the ability to accelerate collaboration and achieve higher levels of performance. The control tower represents the common processes that are enabled by cloud-based technologies, such as configuring a set of services to business units and trading partners across a supply network. These services start with basic plumbing ‑ collect and aggregate all orders, shipments, inventory and status. This information is linked to other enterprise systems to provide global visibility, then transformed to become the input for supply chain execution solutions.

The control tower is a hub that must go beyond visibility to provide integrated global logistics and trade compliance services. Based on a company’s supply chain segmentation strategies, these services must be configured to support the needs of business units and the key fulfillment attributes of a product line. Control tower managers can decide how to distribute the services by determining the correct mix of centralized and decentralized execution for their supply chain design.

Having one global supply chain system and standardized processes give companies the flexibility to plug in new logistics providers as needs change or quickly assimilate new businesses. The control tower reduces the “lock in” of using an external provider’s system, and changes the balance of power in a relationship. Control tower managers now have the visibility and data-driven analysis of service levels to objectively manage each provider. Similarly, new businesses can be plugged in with standard interfaces and highly configurable processes.

By collecting the mountain of data from the daily orchestration of supply chain processes, control towers also offer unique insight into performance. With business intelligence tools, managers can perform “what-if” analyses to optimize sourcing or distribution decisions, pinpoint a process breakdown that results in inventory builds, and right size inventory based on actual cycle times and variability.

No matter what you call it ‑ a control tower or 4PL ‑ the technology is available today to enable global supply chain teams to tame complexity and control their own destiny.

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The Importance of Global Trade Content for Managing Free Trade Agreements

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Users also need to Understand the Trade Content that Powers their Solutions

On May 14, 2012, President Obama signed the presidential proclamation that put the US-Colombia free trade agreement into force. Designed to promote the flow of certain goods and services between the countries, the free trade agreement was years in the making.

According to the Office of the US Trade Representative (USTR), the tariff reductions in the Agreement will expand exports of US goods alone by more than $1.1 billion, supporting thousands of additional American jobs. The ITC also projected that the Agreement will increase US GDP by $2.5 billion. The Agreement will remove significant barriers to US goods from entering Colombia’s market, as over 80 percent of US exports of consumer and industrial products to Colombia will become duty free immediately, with remaining tariffs phased out over 10 years.

Because the agreement specifies changes in rules of origin and HS codes, it is critical that any organization using global trade management software ensure that its vendor made the appropriate updates to the underlying trade content and put them in place immediately. In fact, the US-Colombia FTA is affecting over 20,000 HS codes and over 800 rules of origin. This is a significant amount of content that required collection, analysis and interpretation so that it could be implemented in conjunction with the president’s signature.

Especially for organizations already doing business with Colombia, the FTA could mean substantial reductions in landed costs due to preferential treatment as of the effective date. Supply chain managers should be able to run scenarios that reflect preferential rates as they make sourcing decisions that may now include items from Colombia.

Don’t be afraid to speak with a representative from your GTM software vendor. Find out whether it anticipated the formalization of the agreement with the necessary updates to its trade content. You may also want to ask about how many trade specialists are on staff to monitor government information feeds from around the world as trade regulations change. Those specialists should have extensive backgrounds in compliance and global trade, as well as speak the languages of their countries of expertise.

Final Thoughts

GTM software users need to understand the importance of the trade content that powers their solutions and the critical role it plays in areas like free trade agreement management. As countries continue to expand the scope of these preferential programs, choosing a GTM vendor that offers both depth and breadth of trade content will become even more critical.