Global Supply Chain: 2007 Risks and Rewards

According to Bernie Hart, global product head, JPMorgan Chase Vastera, when considering the global trade environment in 2007, there are a number potential issues looming that can disrupt global supply chains, sourcing strategies, and the flow of working capital. But the news for 2007 isn't all bad. A number of promising opportunities exist as well.

In the area of risks, Hart says, “approximately every five years, the World Customs Organization updates the Harmonized Tariff System (HTS) nomenclature at the international (6-digit sub-heading) level to reflect changes in trade patterns and technology.”

Accurate HTS code assignment is critical as it determines the manner in which a product is taxed when shipped across borders. The problem: Very few international governments have published their country-specific changes, leaving businesses in the lurch and at risk of facing unknown duty increases, possible sanctions and delays in processing transactions as the industry scrambles to comply. The solution: Assign dedicated personnel or outside trade experts to monitor international government publications for timing and detail changes, and be prepared to make adjustments to your product classifications as soon as changes become available.

RFID is gaining ground in supply chain systems around the world, and adoption is just going to increase. Retail is one of the primary sectors, with the oft-quoted Wal-Mart mandate to its suppliers to adopt this technology, but other retailers around the world are also finding benefits from implementing RFID.

Industries adopting RFID run the gamut, from labeling cheese in Italy to livestock in Australia and just about everything in between. However, it is the increased adoption of RFID by logistics and service providers that provides benefits to all other verticals. A distribution center or cross-dock facility that has tested and proven efficiencies from this technology shares this improvement with any client's products received with compatible RFID tags - be they fine wines, auto parts, or razor blades.

Increased automation of pallet and container tracking results in efficiencies and cost savings, regardless of the product they transport. Two major obstacles to widespread immediate adoption are cost and security. Calculating the hard cost of equipment and tags is much easier than calculating the economic benefits and assigning costs across the supply chain.

Second is security. Concern about proprietary information, be it product related or personal, being intercepted cannot be discounted. The benefit of dialogue with opponents who resist RFID adoption out of privacy concerns is an increased level of awareness and improved solutions to address these concerns. Any conversation about RFID needs to include a plan to address security.

Source: JPMorgan Chase

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