Wednesday, 28 November 2007

The Inspection Chimera

The US Congress has mandated that all Containers be tested for radiation prior to dispatch for export to the US by 2012. Many in Congress have advocated 100% inspections of all Containers bound for the US, for all threats. None of this makes any sense nor will it ever be realized. 100% inspections of Containers for any threat will drive cost exponentially and bring trade to a halt while not markedly improving US safety.

Calls for such stringent inspections is political pandering at its worst, insulting to the trade community and to the American voter. The technology to inspect is flawed and the process of inspecting every container will impede trade. No one denies that the US (and EU and Asia) needs to protect itself and that protecting global trade is critical. Nor dose anyone in the Trade Community discount the need to improve the security of ocean Containers. The debate is not about the need, but about the how.

Knowledgeable people in the Customs and the Trade Community know that security is achieved through trade transparency and that smart or ‘targeted inspections’ is the only viable approach to mitigating risk. Transparency is achieved through knowing the stuffing, shippers and stripping stakeholders of a trade and end to end monitoring of a transaction and a container. Targeted inspections requires identifying high risk traders and Containers thru a variety of means, including verifying the source (at stuffing), tracking changes of custody (in transit), near continuous monitoring of the Container status (security breaches), knowing and monitoring the planned route (track & trace), alerting consignees and authorities of security or route deviations and verifying the Consignee (stripping) authenticity, allowing Customs to model and analyze the inherent risk of a trade, and thereby target its inspection resources on problematic containers.

Creating a transparent trade requires a monitored container, certification of exporters, LSPs and importers, utilizing integrated transaction management applications and applying risk modeling tools that enable Customs to effectively identify at risk trades; and then integrating these solution components into an integrated whole.

Many of the required components of the solution have been developed (Monitors, CTPAT, Risk Tools), but no integrated approach has been deployed. Short of an integrated approach, inspections will continue to be searching for the needle in the haystack.

Advocating 100% inspection is disingenuously perpetuating the problem, while not contributing to an effective security solution.

Sunday, 25 November 2007

Networked Supply Chains Require Better Visibility

As manufactures and retailers increasingly depend on extended rosters of sourcing companies, the resulting networked supply chain requires improved visibility.

Importers are using multiple sourcing vendors to improve their ability to respond to market demand and opportunities. With this increased sourcing agility comes the increased risk of delivery failure due to a supply chain disruption and, concurrently, the increased importance of visibility into each step of the supply chain.

The ability to in real time identify the location and status of the sourced goods gives the importer the ability to fine tune its distribution channels, its inventory management and its ability to fulfill commitments to its end users.

The ability to real time monitor the status of goods requires a combination of container based technology, back-end business applications and an extended network of logistics fulfillment partners.

In response to this emerging demand, many companies are offering RFID, GSM and similar technology based solutions that enable locating the container at defined way-points, others are providing software based tracking solutions that require input at defined way-points, and others are offering extended yard and plant management solutions. All of the offered solutions are dependent on proprietary applications and investment in an extended infrastructure of data capture or data input equipment and process intervention.

All of these services offer piece parts to the overall requirement, for end to end visibility. No one has yet to offer or adopt a true end to end robust solution.

Thursday, 22 November 2007

Compliance with regulations requires visibility

In response to the growth of global trade, as our economy is more dependent on the global trade, it is more vulnerable to threats and disruptions caused by increasing terrorism and differing quality standards. As a result, customs, regulatory and public safety officials have imposed new and complex regulations on trade fulfilment; materials transit management, financial controls and stricter reporting (such as US customs introduced the 24 hour advance manifest rule). Compliance with these regulations requires end-to-end visibility, accurate and timely data capture, custody audit trails and effective control of traders’ global supply chain. As an example: Customs tariffs remain a critical revenue source. In the EU, Excise fraud for alcohol amounts to €1.5B yearly, or approximately 8% of total excise receipts on alcoholic beverages, and VAT fraud is estimated to be 10% of VAT receipts.With such a large exposure, customs around the globe are demanding real-time reliable end to end data. In June 2005, the 166 customs administrations of the World Customs Organization, representing 99 percent of international trade, all signed up to adopt the Framework of Standards to Secure and Facilitate Global Trade (SAFE), a comprehensive set of standards aimed at enhancing the efficiency and security of global trade. As an expected result of the implementation, fraud can be prevented by having real-time reliable data available or similar activities done by different Agencies mutually accepted, which therefore could be shared among trusted trading partners.

WCO SAFE Framework:

EU coherent strategy against fiscal fraud:

Monday, 19 November 2007

Greater Globalization with tighter control

Globalization is accelerating at a phenomenal rate. Global trade is projected to grow at 10% plus, year over year for the foreseeable future. Businesses in the EU and US are increasing their investment in manufacturing and sourcing offshore.
This trend raises critical challenges for international supply chain, quality control, traceability and logistics management. Off shore sourcing provides lower cost, higher agility and greater performance advantages. At the same time, considerations on these advantages have to be balanced against higher logistics costs, supply chain fulfilment and supplier management risks. Many sourcing strategies underestimate the magnitude of the hidden costs of a longer international supply chain, including increased transaction cost and complexity, reduced flexibility, potential lost gross margin from delivery delays and cargo loss, resulting in production delays and or missed sales. As an example: The trade thumb rule indicates 3% more container traffic volume for each percent growth in GDP. This results in a projected container traffic volume of around 700 Million TEU by 2015 (+ 195%), whereas the capacity of the top 30 ports only increases by +37% in the same timeframe. In fact, some of the ports are already congested causing increase in port related charge and delivery delays. Such “isolated“ situations do have a great impact in today’s economy as they are a link of a global chain – and the chain is only as strong as the weakest link. It is necessary to rethink or even re-programme the way trade is executed, and new processes may need to be designed.