Monday, 4 August 2008

What are the Impediments to an Effective Global Trade?

If you define an ‘Effective Global Trade’ as a trade that is executed on schedule, without damage to the cargo and at planned cost, then your threshold for an ‘Effective Global Trade’ is too low.

If you define an ‘Effective Global Trade’ as a transaction that is on schedule, at cost, end to end visible, continuously monitored, agile enough to enable redirecting the container and inventory while in transit, with managed and authorized custody, all transactions executed on line, 100% compliant with Customs and regulatory rules, and with fulfillment data integrated into your supply chain management system and ERP’s, then your concept of an ‘Effective Global Trade’ is aspirational.

What challenges do Consignees or traders, LSP’s and Regulators face in trying to realize an aspirational “Effective Global Trade’?

Consignee, LSP’s and Regulators: the consignee, fulfillment and regulatory takeholders
business practices and culture attributes that impede an effective trade include:

· Consignees Practices: Non-integrated transaction systems, incompatible importer and supplier transaction systems, multiple documentation requirements, redundant document updates and edits, errors and omissions, the constant of manual interventions to expedite an order.

· 3PL Business Practices: Opaque service offerings, dependency on proprietary systems, ‘after-the-fact’ reporting of events, generous lag time built into delivery schedules, a dependency on ‘accessorial fee’s’, a focus on operations performance vs. services to clients, and a reliance on vessel operators to ‘book’ business are the common hallmarks of all but a handful of global 3PLs.

· Vessel Operator Business Practices: The focus on maximizing vessel capacity utilization by leveraging their physical position as a ‘choke point’ to the movement of goods; reliance on antiquated terms of business; limited use of asset optimization (of containers) or yield management practices, vulnerability to fuel cost spikes, vessel operating costs and service and throughput capacity limited by incompatible business processes.

· Port Operators: Port operational effectiveness is a key to enabling trade and port operational performance varies widely by geography and operator. US port congestion is well recognized as a constraint on the world’s largest market; inadequate investment in infrastructure and imposition of port fees by local governments contributes to the problems. In the EU, a handful of ‘global’ ports dominate the transit of goods and create the probability of choke points unless other regional ports upgrade operations. In China, despite heavy investment in port facilities, the huge demand for services threatens to constrain thru put.

· Regulators: Customs Procedures & Regulations have a focus on enforcement, collection and security vs. collaboration and facilitation of trade; inadequate human and technological resources, incompatible and contradictory processes and regulations creating transaction, reporting and compliance impediments. Initiatives to harmonize Customs regulations, processes and systems are underway, but the pace of adoption is glacial.

And in more general terms, common industry practices that impede smooth trade fulfillment transactions include:

· Documentation Challenges: The reliance on proprietary EDI systems and the excessive number of documents, with continuously changing requirements creates a ‘perfect storm’ of paper that impedes effective trades. The ‘conventional wisdom’ is that a global trade requires 35 + separate documents that are modified or updated at least 150 times – an incredible tsunami of paper and waste of money. Adoption of e-docs and WCO data standardization would greatly reduce the burden existing documentation practices place on consignees and logistic service providers.

· Ineffective Technology: Proprietary systems; manual updates; incompatible transaction systems; lack of systems interoperability; legacy systems & technology, minimal adoption of effective track, trace and cargo monitoring technology, and reliance on incompatible RFID and similar infrastructure dependent (and costly) solutions impedes effective trading.

· Inefficient Supply Chain Practices: lack of ‘in-transit’ visibility as goods move through the trade lanes, multiple custody hand-offs, LSP’s trade transactions not integrated into suppliers and importers ERP’s or ‘back-ends’ creating silo’s of transaction data, that result in costly safety stocks, transactions and inflexible supply chains, and finally, Consignee acceptance of LSP business practices that impede optimized supply chains.

I suggest that all of the above are the impediments to an effective global trade. Individually, no one challenge materially impedes trade, collectively; the sum of the whole creates a great drag on the effectiveness of global trade.

Eliminating the ‘collective drag’, or trade friction, requires:

Consignees: Need to demand end to end trade transaction and cargo visibility, and to:
- Re-engineer their supply chains to leverage trade transaction visibility
- Measure the performance of their 3PLs and service providers
- Integrate their supply chain operations with their 3PLs and suppliers, and
- Insist on fulfillment performance.

3PL‘s: Need to recognize their dominate role in fulfilling a trade, no one is closer to the Consignee nor has a better opportunity to integrate their operations with the clients. The best 3PL’s offer:
- One-Stop services including end to end logistics planning, management, reporting and performance services to consignees,
- Integrate their logistics processes and IT systems with their Consignees, offer consignees consulting services to improve their supply chain processes
- Ensure end to end custody authentification (who, when, where)
- Offer collaborative services, including inventory management, financing, insurance and Customs clearance services, and
- Ensure end to end visibility and real time event & alert response at each step of the trade.

Vessel Operators: Need to integrate their operations with a cadre of 3PLs to ensure effective fulfillment, develop “code sharing” arrangements with other operators to manage capacity and reduce transit times and reduce their reliance on supplemental charges. Further business practice improvements should include:
- Create collaborative service models with 3PLs and their customers (See 3PLs above)
- Focus on service vs. capacity or utilization: collaborate with the major consignees and consignee pools to ensure capacity availability
- Transition from proprietary EDI systems to web based services
- Create, support or participate in global ‘market places’ of booking services to manage bookings while resolving capacity anomalies (imbalances of vessel capacity & container availability), and
- Ensure end to end visibility and real time event & alert response for containers in their custody – in collaboration with the 3PLs and Consignees.

Port Operators: As choke points in the physical fulfillment of a trade, Port and Terminal Operators, like Vessel Operators, dictate the throughput of trade, the efficiency of fulfillment and the effective impact of consignee supply chain optimization initiatives. Port & Terminal Operators need to focus on:
- Infrastructure, Infrastructure & more infrastructures: facility congestion is a lame excuse for impeding trade fulfillment (constraints are by-passed by traders!)
- Collaboration with 3PL and Vessel Operators on facilities automation,
- Invest in ‘open platform’ technologies – technologies that will be globally adopted (GPS, GSM, CMD vs. proprietary RFID etc) to facilitate container handling
- Insist on pre-notification of vessels, vessel loads and 3PL schedules
- Continued investment in systems integration: linking Port, 3PL, VO and Consignees supply chain systems, and
- Participate in global ‘market places’ of trade booking services, becoming part of an integrated.

Customs: Global Customs modernization and harmonization initiatives must be supported, encouraged and implemented. Governments have a responsibility to collaborate in facilitating trade for their economic benefit. To realize these, Customs agencies need to:
- Transition from an ‘enforcement’ mind set to a ‘collaboration & facilitation’ strategy
- Embrace UN e-docs and reporting requirements
- Join Customs unions and drive for data & reporting standardization
- Harmonize processes with trading blocks, and
- Eliminate hard copy paper and manual processes, transition all work and reporting processes to the web.

These are my thoughts about making global trade more effective. What do you think the LSP industry should do to improve trade effectiveness?

(by Arthur Radford)

Friday, 4 April 2008

US CBP suspends GTX Program

A senior U.S. Customs and Border Protection official said this week that CBP has suspended its plans to develop a global trade exchange system that would have expanded the amount of trade data collected by the agency. In his prepared testimony for an April 3 hearing of the House Appropriations Subcommittee on Homeland Security, Deputy Commissioner Jay Ahern also recommended that 100 percent scanning of U.S.-bound maritime cargo containers be limited to high-risk trade lanes. Ahern discussed the progress CBP has made in implementing its various supply chain security programs, but he pointed out that these efforts are focused on the ocean environment and that there are other areas that need to be addressed as well.
Ahern told the committee that after considering comments from the trade community CBP has concluded that “further consideration of the GTX concept is premature at this time and may not be a prudent use of limited resources.” CBP is still finalizing its so-called 10+2 security filing, which will require additional data elements from importers and vessel carriers, and Ahern indicated that CBP will assess the benefits of that initiative before going ahead with efforts to gather even more supply chain information.GTX was envisioned as a privately operated, self-sustaining (e.g., user-fee based) system that would collect commercial transaction data not currently available to CBP from parties in the supply chain who have contracted or provided services for the production or movement of international shipments. CBP officials said this additional information would allow the agency to be more precise in identifying risks and to thus conduct fewer and better-targeted cargo inspections. Homeland Security Secretary Michael Chertoff characterized GTX as a preemptive move designed to forestall congressional efforts to impose strict supply chain security mandates, like 100 percent physical inspection, that could hinder the flow of trade. The trade community, however, has consistently expressed concerns about what information would be required, who would have access to it and how GTX would benefit supply chain security and the participating companies.

read more here ...

Tuesday, 1 April 2008

Seriously Flawed Decision-Making

I found this article written by James Giermanski under, where you can find the full article. Here an extract:


Recently I met with a small group of former FBI agents at a monthly
breakfast. The conversations, usually connected to past Bureau activities,
moved to the discussion and criticism of Department of Homeland Security (DHS)
and Customs and Border Protection (CBP). The flavor of comments follow:
they’re out of touch with industry in the container security area; they’re in
the pocket of big business; they lack vision; they’re arrogant; and they don’t
have leadership; they lack talent; and more. However, while some old crusty
ex-agents said it was “all of the above,” the consensus, if there was one, was
that the fundamental problem within the Department was weak and sometimes flawed
leadership. While I would expect those comments about DHS from a
competitive agency, thinking about the breakfast discussion later that day, it
occurred to me that, perhaps, this really is a core problem, especially with
container security. Therefore, I put together three examples of what I
believe represents seriously flawed decision-making important to our security
and reflective of questionable and inept leadership within the
Department. All examples involve decision-making tied to container
security. The first example involves leadership incongruence within DHS as
demonstrated by CBP’s focus on and fascination with the electronic sensing of
“doors only” access or entry into a sealed container. The second is the
commitment to radio frequency (RF) devices for container security such as either
RFID (Radio Frequency Identification) tags already in use at our ports, or
according to CBP’s Request for Information (RFI) dated December 12, 2007,
the potential use of Bluetooth-related technology using prescribed frequency
ranges published and available through the Federal Communications Commission
(FCC). The third example is CBP’s incredible reliance on import security
programs with their inherent core concern for “inbound” container security to
the exclusion of “export” container security. Only short examples of
each of these three fixations will or should demonstrate the level of competent
leadership within DHS, perhaps making credible the talk around the former
agents’ breakfast table.

Full article

Monday, 17 March 2008

Rebuilding Public-Private-Partnership

Global Trade is reliant on an efficient Public-Private-Partnership to enable, grow and facilitate trade while concurrently achieving business objectives and complying with public policy regulations. Global business continuously strives to find ways to reduce trade transaction costs and increase trade volumes. Concurrently, Governments are challenged to effectively use only a limited budget to meet economic, customs and security policies without impeding trade. While these private and public roles are complementary, they are also a point of trade transaction friction. The sources of the friction include tightening customs, regulatory and security requirements, limited public infrastructure, port congestion and incompatible Business-to-Business and Business-to-Government processes. As globalization increases, the cost of this friction increases. In order to reduce this friction and sustain trade, it is necessary to see the Public-Private-Partnership in a new light. The new Public-Private-Partnership to facilitate trade is becoming a different method of procuring public services and infrastructure by combining the best of the public and the best of the private sectors capabilities – sharing activities in a trusted environment..
EU and China customs organization have already agreed to make it a target to align customs procedure, and make it consistent across the borders, enabling one single customs declaration for a shipment for both importing and exporting countries with mutual recognition of customs rules and regulations. An China-EU Joint Customs Cooperation Committee was set up to meet regularly to discuss problems and issues encountered in bilateral customs cooperation since the entry into force in April 2005 of the China-EU Agreement on Customs Cooperation and Mutual Administrative Assistance. While customs organizations are setting the stage for a new era of partnership, it will require commercial parties to step up to the new partnership by investing in sharing their best capabilities mechanism, but in return they will enjoy incentive from customs for faster clearance. The number of public-private partnership is growing significantly. The trend is not just in growing in number of such partnerships, the relationship has also deepened in the partnership. The EU ITAIDE initiative, which is about testing the new ways of electronic Customs clearance procedures and data sharing schemas, is not just a Government-led initiative; it involves academics and commercial parties in working out a mutually beneficial way of sharing electronic data among public and private sectors. A new era of partnership is being born. Unlike the old partnership that is most often point to point between commercial parties, it is a new kind of multi-directional public-private partnership with a new kind of dynamics and interactions.

Tuesday, 26 February 2008

The Box or the Chocolates?

I believe it was Vance Packard, in his seminal book, The Hidden Persuaders that told the story of how Whitman© Chocolates used to spend more on developing and producing the box in which the chocolates were sold then on the chocolates themselves. The packaging was more important then the chocolates to selling the product. Human nature? Perhaps. A sustainable solution? No.

Think Lindt ® chocolates.

This same myopic approach seems to be driving the discussion about Container security and monitoring solutions. The technology discussion is trumping the business imperative. Truth is, after determining the technologies reliability, flexibility and ease of use, users -- the 3PLs and their clients, the consignees -- don’t care about the engineering or hardware.

Think iPod®.

The optimal container monitoring solution recognizes:

  • The box (Container) is not important: it’s the goods inside the Container that matters
  • The truck or Vessel that delivers the goods is not important: it’s the goods in the box’s on the truck or Vessel that matters
  • The cost of the box is not material, the cost of the cargo is

Net net ,,, it’s the contents that matter, not the box, not the vessel, not the truck and not the technology. The monitoring industry needs to recognize that importers and exporters will not adopt a solution that’s proprietary, infrastructure dependent, inflexible, complex or expensive.

The importers and exporters will adopt a monitoring technology that is:

  • Flexible, portable and reliable
  • Infrastructure free to be deployed globally
  • Interoperable with existing supply chain solutions and client applications
  • Configurable to the clients business requirements
  • Beneficial to the business, reducing costs and improving financial performance

Again, think iPod®.

And think universal, flexible, portable, globally deployable, interoperable, configurable and beneficial.

  • Flexible: monitoring service can work with dry, reefer or tank containers
  • Portable: monitoring device moves to the container, any container, as required
  • Reliable: 99.9% service availability for global track, trace and monitor
  • Globally deployable, infrastructure free, the service follows the cargo, not vice versa
  • Interoperable: monitoring service can be integrated with other technologies (RFID, Bar Code and emerging technologies) and applications, ERP’s, SC solutions and client proprietary applications
  • Configurable: the monitoring service sensors, business events, alerts and reporting has to be client configurable to the requirements for the specific trip.
  • Beneficial: the service must enable clients to recognize real costs savings from the supply chain, thereby improving overall financial performance.

Any monitoring service that is dependent on the container (the box), difficult to deploy globally because of a dependency of external infrastructure, layers on an incompatible application, and fails to produce financially beneficial results, won’t be adopted by the logistics industry or their clients, the consignees.

For proof of this assertion, look at the existing adoption rate of deployed container monitoring solutions, it won’t take you long.

(by Arthur Radford)

iPod® is a trademark of Apple Corporation.
Lindt® is a trademark of Lindt & Sprungli

Thursday, 7 February 2008

Beijing-Hamburg freight service completes maiden journey

This latest news from Deutsche Bahn is another evidence, that Globalization, compliance and sustainability challenges create new business opportunities for LSPs!

Real-time visibility certainly can support these new business opportunities.


Beijing-Hamburg freight service completes maiden journey
by Staff Writers

Hamburg, Germany (AFP) Jan 24, 2008

A goods train from Beijing arrived in Hamburg on Thursday after having crossed six countries in a journey organisers said could ring in a new era of rail transport between Asia and Europe.
The "Beijing-Hamburg Container Express" left the Chinese capital on January 9 with its cargo of shoes, toys and electronic goods and covered the distance of 10,000 kilometres (6,200 miles) in 15 days, Germany's state-owned rail operator Deutsche Bahn said.
The company's logistics chief, Norbert Bensel, said the inaugural journey on the new rail route had delivered its cargo in roughly half the time it would have taken to arrive in the northern German port city by sea.
The sea journey takes about 30 days.
"The test train was a success. We have demonstrated that we can transport goods by rail between China and Germany safely, reliably and yet twice as fast as compared with ships," Bensel said.
"At the same time, we are considerably cheaper than air freight for many types of cargo."
The "Container Express" made its way from China to Germany through Mongolia, Russia, Belarus and Poland.
It is the brainchild of Deutsche Bahn chief Harmut Mehdorn who wants to improve and increase rail transport between Europe and China as the Asian giant establishes itself as a vital trade partner for the continent.
Mehdorn said administrative cooperation with the transfer countries needed to be finetuned and infrastructure improved, but he believed that "by the end of the decade we can aim at launching regular freight transport services along this axis."

Monday, 14 January 2008

Seeking Sustainability on new fronts – Environmentally and Economically

Another new market driver is rapidly taking the main seat. The U.N.’s latest report this year on climate change declared with 90% certainty that mankind is cooking the planet. Acting now would cost 0.12% of the annual global GDP – while in contrast, the damage of not acting now could cost as much as 20% of annual global GDP. National regulations and environmental awareness has become a market driver, powered by customers and shareholders asking for change. They are now demanding sustainable, environmentally sound, fair trade practices, while expecting no less financial gains than before, for their trade and investment.

Product safety & quality, fair trade strategies and environmental protection have merged to create a synergistic demand for ‘Green’ business practices adding complexity to global trade. Global warming, food and product recalls, energy costs and consumer demand for fair trade practices are driving global importers to actively manage the sourcing of their products, requiring closer scrutiny and control. For example, Daimler (Chrysler) maintains a database on more than 800,000 products and components it uses, containing information on multiple environmental attributes of the products. Importers and brand owners are responding, pressuring suppliers, exporters and logistics service providers to develop eco-friendly ‘Green’ business processes that ensure product traceability, monitor in-transit custody, reduce carbon emissions and are regulatory compliant. Exporters, suppliers and logistics services providers are faced with developing and deploying fulfilment practices that enable importers to verify trade fulfilment transactions, quickly respond to product alerts, meet market demand for ‘Green” practices, and assure compliance. Researchers and studies have found that price and quality being equal, consumers prefer products and companies that are ecological, ethical and socially responsible. In response, many of the top brand owners embrace the green initiative actively as a mean to protect and enhance their brand images. Dow's supply chain staff worked with the manufacturing side of the company to identify ways to reduce the inventory of one highly toxic material, improving the overall safety of the operation and also cutting inventory by $160,000. Tesco has introduced a dedicated train to move stock between the distribution centers in Daventry and Livingston. One train can carry the same amount of stock as 28 lorries, which saves over 14,560 lorry journeys every year. That is over five million fewer lorry miles and 180,000 freight tones off the road each year. Timberland has already started including a “nutrition label” with its footwear, detailing the footprint of the shoes production including the type of energy used, the renewable portion, and the factory's labor record.
The market leaders have chosen to respond to the call of green awakening by seeking a new balance between profitability and sustainability.