Global Trade, Supply Risk, Compliance: Essentials Every Sourcing Practitioner Should Know (Part 2)

Please click here for the first post in this series.

In evaluating supply chain risk and compliance, it's becoming increasingly important for procurement and supply chain practitioners to work closely with trade and compliance team members. While we'll get to the reasons for this around materials traceability, regulations and disclosures in a minute, we'll start with the logistics area, sharing some of CDC Software's Jason Childers views on how metrics for evaluating performance and key indicators are changing and can call attention to the overall performance of a global supply chain within a company -- not to mention which areas to probe for further analysis.

Consider, for example, how "tracking transit time has long been a measure worth watching, but [how today] the cause and reason for delays is become more important to monitor" and is where the real insight comes into place in pinpointing root causes and addressing specific issues. For example, are delays that might show of it a system the result of "licensing" issues, "loading for export due to missing documentation...or [the] failure to register for importing to the U.S. that held up [an] inspection?" As with combing spend data to evaluate opportunities that go beyond the "first savings wave" obvious, it's these next level queries on trade data that can be as important to ultimately avoiding stock-outs, maximizing working capital and providing better forecasts to suppliers that count far more than the basics.

Such problems can manifest during supply risk crises. Consider the case of the Eyjafjallajökull eruption that stopped airplanes (and all air freight) from flying the highly trafficked North America to Europe corridor. In this case, "Shipment time grew from less than 24 hours to days -- in some cases, weeks -- as supply managers worked to shift departures and arrivals southward, away from the volcanic plume that spread across Europe." As Childers further observes, such a move came with additional supply chain and trades compliance consequences and challenges.

To wit, "Shifting the movement of goods south, however, revealed additional problems. Goods had to be reclassified according to regulations covering new ports of departure and arrival. Some items that were permitted to be moved between the United States and Europe could not be moved through North Africa. Problems mounted; delays and costs increased." Now there's a story you probably haven't heard too much about if you're outside the customs/compliance world. But had procurement and supply chain teams been working in tandem with trade professionals from the start as the crisis unfolded, that could have had a material impact on the results of the mitigation steps (let alone up-front scenario planning that ideally have preceded a crisis such as this).

- Jason Busch

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