Global Trade, Supply Risk, Compliance: Essentials Every Sourcing Practitioner Should Know (Part 1)

Some of the best content in trade rags -- and more esteemed publications -- these days are coming not from journalists, but from providers bylining articles, investing in the time to share their own thought leadership with a broader community. This is especially true of the "new" Supply Chain Management Review, which, under new ownership, appears to have an increased number of articles dominated by consultants, technology providers/experts and professors (nearly all of whom with their own consulting practices). But it's also true of more frequent publishing content factories, including Industry Week, which recently published an outstanding primer on global trade, supply chain risk and compliance.

Authored by CDC Software's Jason Childers, the above-linked story is an ideal example of the amazing depth of knowledge of experts on the vendor side to inform a story that goes many levels deeper than the typical superficial reporting on such topics had the publication opted for a Supply Management or CPO Agenda-style "interview the expert" rather than a byline expert essay.

Childers frames his discussion by suggesting for the typical procurement/supply chain executive engaged in global activity that "the proliferation of international regulatory trade requirements" and agreements, "between countries constantly under review and change due to fluid geopolitical and economic reasons," should be a key focus today -- even those not working in a customs or compliance role (one would assume that anyone with a customs broker license would already be up on many of the key points of the article already).

Specifically, "Due to growth in trade regulations and the fluidity of product classification and restricted party lists, managing risk is paramount to successfully managing global trade...If you're not screening against the most current, up-to-date lists, you might as well not be screening at all." In fact, Childers suggests, changes to goods classifications and restricted parties list happen daily. And "major new trade regulations [that] are scheduled to take effect early in 2012...will require companies to review and potentially reclassify as much as 40 percent of the components, materials and finished goods that they import or export globally. Other major tariff reviews will follow as a matter of routine."

These topics may seem like procurement and supply chain can delegate or hand them off to customs/compliance groups. But such thinking would be a huge mistake. Not only do changing trade rules, work practices, risk elements, classifications and tariffs impact total cost and have the ability to change whether or not global sourcing decisions make economic sense, they can also have even broader implications for new production introductions (and the speed with which products can be introduced to market), corporate CSR programs (and regulatory adherence on a local basis) and the like. Stay tuned as our analysis continues.

- Jason Busch

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