Recent Trends in Adoption of Supply Chain Software

Posted on November 8, 2012 by Jim Preuninger

If the Supply Chain can’t be Simplified, New Strategies are Needed to Account for the Complexity

Recently, attendees at the Amber Road user conference had the opportunity to hear William McNeill, Senior Research Analyst at Gartner, speak about global trade trends and priorities. In particular, Mr. McNeill cited a survey of “Supply Chain Digest” readers conducted by Gartner that focused on the adoption of supply chain software. (For more observations on this study, see Dan Gilmore’s comments here.)

The survey of 259 senior supply chain executives found that nearly 35% of respondents identified supply chain visibility and event management (SCVEM) as the most important supply chain management (SCM) and execution (SCE) application for acquisition in 2014.

Of respondents that saw SCVEM as a strategic advantage for their business, 13% had purchased software as a service (SaaS) or cloud-based applications in the past and 26% expected to in the future. This seems to indicate that the companies that see the strategic value of SCVEM initiatives recognize that the best way to integrate with the third-parties that provide visibility data is through ubiquitous online access.

McNeill noted that many organizations are accustomed to exchanging information with supply chain partners through electronic data interchange (EDI). These companies have already seen the strategic value of sharing information with an extended network of supply chain partners and are willing to take the next step to cloud technologies.

In contrast, among those organizations that view supply chain visibility as a cost of doing business, only 5% have purchased SaaS applications and only 15% intend to do so in the future.

When asked about the top three obstacles to achieving their organization’s overall supply chain goals and objectives, 41% of respondents chose “difficulty or inability to coordinate and synchronize end-to-end supply chain processes” as one of their chief obstacles. Thirty-seven percent chose “lack of visibility across the supply chain” and 35% chose “supply chain network complexity.”

In contrast to the previous year’s study, the percentage of respondents citing supply chain network complexity as one of their top obstacles increased by 11%. McNeill sees this as an indication that while the supply chain is actually becoming more complex, supply chain leaders understand that they have to adjust their approach to deal with this inherent complexity. If it can’t be simplified, new strategies are needed to account for complexity.

One way to address these issues is with a SaaS/cloud based solution that integrates partner and visibility data into a comprehensive view of the supply chain. The survey data bears this out with the number of organizations that view online solutions as strategic business enablers and as a way to manage supply chain complexity.

Understanding the Recent Ruling on Conflict Minerals

Posted on September 5, 2012 by Anthony Hardenburgh

Existing Global Trade Management and Supply Chain Technology will need to Adapt to these Regulations

The US Securities and Exchange Commission (SEC) has proposed regulations that require US and certain foreign companies to report the use of “conflict minerals” from the Democratic Republic of the Congo (DRC) or adjoining countries in their products.

Conflict minerals are mined under conditions of armed conflict and human rights abuse. Areas notably affected are in the eastern parts of Africa, where various armed rebel groups within the DRC are largely responsible for using these natural resources to finance continued fighting, but neighboring countries such as Burundi, Rwanda and Uganda have also profited significantly. Conflict minerals mined in the DRC are typically passed through various intermediaries before being finally purchased.

At present, four minerals are listed as conflict minerals:

Columbite-tantalite, or commonly known as Coltan – used primarily in the production of capacitors, hearing aids, pacemakers, airbags, GPS, ignition systems, anti-lock braking systems, laptop computers, mobile phones, video game consoles, cameras, etc.
Cassiterite – used in production of tin, a common component of biocides, fungicides, high performance paint manufacturing, etc.
Wolframite – an important source of tungsten, used in fishing weights, dart tips and golf club heads, in addition to use in other metalworking tools.
Gold – used in jewelry, electronics and dental products.

In practical terms, what does this ruling mean for companies whose products use these minerals? According to the National Retail Federation, the regulations will apply not only to manufacturers but also to retailers considered to be “contracting to manufacture” private-label merchandise.

A retailer simply placing its brand on a generic product would not be covered, but those that have “some actual influence over the manufacturing of that product” would be covered, NRF explained. Retailers selling only third-party merchandise under the product’s own brand rather than the store’s brand are not affected. Companies are able to avoid the disclosure rules if they use recycled or scrap minerals.Companies will have until May 31, 2014, to make their first disclosures about whether the minerals they use are “conflict free,” meaning they did not finance or benefit armed groups in Central Africa. And for two years — four years for smaller firms — companies will be able to disclose simply that they could not determine whether the minerals were helping to finance fighting in the DRC.

Final Thoughts

Existing global trade management and supply chain technology will need to adapt to these regulations. Here are some initial steps companies can take to ensure they are ready for compliance in 2014:

Ensure that your source of global trade content lists sanctions against the conflict mineral countries and the minerals themselves.
Consider using questionnaires or surveys to determine whether your product suppliers are obtaining minerals from conflicted areas. Much the same way that suppliers certify eligibility for preferential duty treatment, they can also certify that their products do not contain conflict minerals.
Perform admissibility reviews on transactions that contain the minerals or products made with the minerals.
Update your standard operating procedures to include processes for requesting and capturing declarations from suppliers and for performing transaction reviews.

The Importance of Global Trade Content for Managing Free Trade Agreements

Posted on June 7, 2012 by Anthony Hardenburgh

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.

GTM Solutions Keep Businesses Plugged In

Posted on April 15, 2012 by Ty Bordner

Q: Why is it difficult for organizations to integrate true end-to-end global trade management?

A: True end-to-end global trade management (GTM) means managing and optimizing all the functions required to move goods across international borders. Organizations may argue that they are already doing GTM, when in fact they are only undertaking disparate pieces, such as international trade compliance or global transportation management.

GTM functions may be distributed among departments such as warehousing, shipping, and legal. It can be difficult to unite business processes and establish communication channels where none exist. Adopting GTM technology helps achieve this. Each section of the organization gains an understanding that its activities tie into larger objectives and can affect outcomes outside that department.

As with adopting any technology, organizations may struggle with managing change and pushing through the initial disruptions that a system implementation can cause. Today’s Software-as-a-Service solutions minimize the need for IT support, and dramatically decrease disruption to daily activities. This makes them a good option for organizations that don’t currently have any systems in place.

Q: What do customers look for in GTM solutions?

A: Customers want GTM solutions that are flexible enough to support different supply chain segmentation strategies. These tools must address the different needs of unique product segments within a company. They must also be flexible enough to accommodate the requirements of the company’s extended supply chain partners, such as suppliers, logistics providers, and customers. In particular, systems must be able to:

Extend processes to suppliers and logistics providers.
Manage logistics and compliance activities within one solution.
Tune or configure business processes to support each segment’s needs.
Provide a centralized view of the global supply chain across all segments.
Capture all associated data to support reporting and predictive analytics.

For example, an organization may need supply chain processes specialized to goods with unpredictable demand, as well as goods with more predictable demand that require steady replenishment. Similarly, other goods may have higher import and export compliance requirements that must be carefully managed.

Q: What are the most important criteria for evaluating and selecting a GTM solution provider?

A: Look for a GTM provider that has successfully deployed its solution at a company similar to your own, within your industry, with similar segmentation requirements, equivalent number of products, global shipping volumes, and within countries or regions that map to your own.

Global trade management can be very complex, and there’s typically no better indicator of future success than finding a vendor that has been there and done that with one or more companies that mirror your own.

Supporting the Segmented Supply Chain with GTM Solutions

Posted on March 1, 2012 by Ty Bordner

GTM Solutions Should Allow the Configuration of Specific Execution Rules for Each Distinct Supply Chain

Particularly among retailers with tens of thousands of SKUs and many hundreds of stores, there is a need for differentiated replenishment and logistics treatments across complex supply chains. For example, an organization may need supply chain processes that are specialized to goods with unpredictable demand, such as the latest fashion. The same organization may also provide goods with more predictable demand that require steady replenishment. Similarly, other goods may have higher import and export compliance requirements that must be carefully managed.

As organizations divide their product lines and SKUs into segments based on factors such as criticality, selling cycle and rate of sales, they are increasingly interested in global trade management (GTM) solutions that are flexible enough to support these segmentation strategies. GTM solutions must adapt to address the different needs of multiple supply chains within the same software system and shared network of suppliers, logistics providers and customers. In particular, systems must be able to:

Extend processes to suppliers and logistics providers
Manage logistics and compliance activities within one solution
Tune or configure business processes to support the segments’ needs
Provide one centralized view of the global supply chain across all segments
Capture all associated data to support reporting and “predictive analytics”

Those organizations that are proving to be successful at supply chain segmentation are able to meet the demands of their different customer segments without excessively increasing costs. One method to achieve this is to use a common platform, such as a portal, to ensure that parties along the entire supply chain can share information and eliminate errors that could slow shipments.

Multiple supply chains across thousands of SKUs introduces a degree of compliance complexity that is impossible to manage without a centralized product database that ties regulatory controls to product classification. Additionally, a GTM solution will determine needed documents and even assist with pre-clearing Customs to keep goods moving. Finally, automated screening and re-screening of trading partners across hundreds of restricted party lists ensures that each supply chain segment remains compliant with global denied party regulations.

A GTM solution should allow the configuration of specific execution rules for each distinct supply chain. Sophisticated workflow and rules processing engines make it possible to structure different processes for each replenishment strategy. A cloud-based network will facilitate the collection and analysis of business intelligence in a centralized repository to give an overall view of supply chain performance across segments.

Closing Thoughts

As you evaluate potential GTM solutions, ensure that the system can support a segmented supply chain strategy. Even the most sophisticated supply chain strategies won’t be an advantage if your goods and products can’t get across international borders.