The explosion of global trade over the past decade or more, and the expansion of sourcing, transportation and distribution networks that enabled it, has stretched the resources of all but the largest multinational corporations. Demanding service levels and high costs (for everything from fuel to regulatory compliance) make supply chain management even more of a top priority in tough competitive conditions. Producers that have made cutbacks in their own organizations to reduce costs may even more than ever lack adequate logistics infrastructure, capable decision support tools, necessary capital and operating scale as a result of recession.
Neglect and Cost
The challenge in strategic planning is getting globally sourced materials and components to the production line, and subsequently getting the final product in the hands of the distributor and ultimately the customer. The process of product and process design is typically a seamless one, as companies conduct testing simultaneously with planning the equipment and facility space needed for production. Similarly, the packaging, marketing, distribution and sales, public relations and advertising for getting the finished product to market are well thought out.
Transportation and the logistics of the supply chain — the vital links that stretch to the production line and the consumer — are taken into account late in the game, if they are ever considered at all.
Yet transportation has the potential to generate such substantial hidden costs and delays that it should be part of the initial planning phase for every product and production operation. Failing to investigate and consider the details in vital logistics factors can dramatically increase supply difficulties and overall costs for any product, no matter how great its potential demand. When logistics and delivery service providers are neglected as part of production planning, not only is production jeopardized, but critical deadlines are missed.
Speed and Sourcing
A poorly constructed or outdated supply system with inadequate organization can create unnecessary storage and demurrage charges at airports and other freight centers. Information snags, missing or ill prepared shipping documents, and inappropriate cargo routing are the culprits. Inadequate packaging, poor or incomplete documentation, and other such lapses in vendor responsibilities can bring rejection of goods during border crossings, customs delays, cargo loss, and theft — all of which create huge and unexpected cost penalties that the importing producer must absorb.
Advance planning can put shipments on the fast track, even while complying with the strictest customs and security rules.
A good example is the Customs-Trade Partnership Against Terrorism (C-TPAT), a cooperative cargo security effort between U.S. Customs and Border Protection (CBP) and supply chain participants. In it, CBP asks businesses to ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain. C-TPAT applications for validation involve meetings with and inspections by CBP agents to verify supply chain security measures.
Motor truck shipment between Canada or Mexico and the United States demonstrates how it works. Trailer and container integrity must be maintained by using a high security seal which meets or exceeds government security standards. Written procedures stipulate how seals are controlled, to include procedures for recognizing and reporting compromised seals and/or trailers to CBP or the appropriate foreign authority. Only designated employees distribute container seals.
The advantages of being C-TPAT certified mean that cross-border shipments move through customs and security faster and more efficiently. Pre-certification means fewer CBP inspections, reducing border delay times, and ensuring priority processing for CBP inspections, including front-of-the-line processing for inspections when possible. Being C-TPAT certified takes planning, but it means that cross-border shipments move through customs and security faster and more efficiently while maintaining full security.
For companies that source globally, inefficient supply chain documentation means delay, cost and inefficiency. The fundamental problem is typically lack of information, which can involve incomplete or missing data about the status of shipments, an inability to retrieve data when needed, or an inability to adequately document shipment status. Substantial time and energy is wasted chasing information which ought to be readily available, and creates delays at ports, air cargo terminals, customs inspection points — anyplace that shipments should freely pass.
Comprehensive electronic tracking eliminates this inefficiency by reducing both the fuel consumption and carbon footprint of shippers.
Electronic tracking also eliminates physical keying or writing of routing numbers and freight identification. Every manual keying of a product code is an opportunity for a mistake, and then the products will cease to exist along the rest of the supply chain, forcing a company to stop everything and search — typically wasting fuel in the process.
Electronic tracking also eliminates the sheer volume of paper. The International Air Transport Association (IATA) has estimated that each air cargo shipment carries with it as many as 30 paper documents — equivalent to 7,800 tons of paper a year, enough to fill 80 Boeing 747 freighters. As of 2010 IATA has launched an E-Freight initiative for participating freight forwarders that will replace 20 of these documents with electronic documentation. The result will be faster supply chain transit times, given that the ability to send shipment documentation electronically before the cargo itself arrives can reduce the industry cycle time by an average of 24 hours.
Quickly and Cleanly
When producers, shippers and freight-forwarders work together in an integrated process founded on initial logistics planning, it facilitates the movement of products around the globe, quickly, cleanly and without loss, creating a supply chain with minimal inefficiency and maximum flexibility. Strategic planning that makes logistics a key element is the only way to make sure mission critical factors in a supply chain don't get lost through poor communication.
Simon Kaye is founder and CEO of Jaguar Freight Services (www.jaguarfreight.com) with offices in London, New York, Philadelphia, Paris and Hong Kong and an operations network in Europe, North America, South America, Australasia, Asia, Middle East and Africa.