Global Trade, Supply Risk, Compliance: Essentials Every Sourcing Practitioner Should Know (Part 4)

Please click for the initial posts in this series: Part 1, Part 2, Part 3.

In his Industry Week column, Jason Childers (who works at vendor CDC Software), does a good (if not self-serving) job of calling out how ERP systems come up short in monitoring trade compliance. For example, "ERP systems typically provide few if any features for tracking source origin or destination attributes of items in their master data file to the degree required to ensure global trade compliance."

And at the conclusion of his otherwise outstanding column, Childers makes a shameless plug for a class of global trade management tools that can help accomplish a number of objectives, including the "shifting of compliance activities as far forward in the process as possible" and "viewing compliance as a collaborative managed service to multiple areas of the organization." He also suggests that the right toolset should enable the "constant monitoring of non-compliance match rates against industry best-practice indicators to drive improvements."

Childers then makes the case for the ability to leverage benchmarks in making global supply chain decisions based on trade compliance inputs plus exceptions and real-time events and handling that may occur. While much of his analysis is spot on, we'd argue it takes too much of a software-informed global trade compliance narcissism on the topic of addressing compliance and supply risk in a globally connected sourcing and logistics world. No doubt, global trade management automation is needed -- and many of the new and needed features and integration capabilities that Childers calls out hit the point -- but his ideas only scratch the surface of what solutions are needed today to proactively manage risk, compliance and cost when the shipment of direct materials (parts, components, chemicals, ingredients and raw materials) and finished goods are involved in buying, selling, compliance and trade.

To his list, we'd add that a thorough exploration, investment and integration in the following areas is essential (and this is after an organization gets the functional collaboration and process integration between customs/trade, procurement, R&D, supply chain/operations, manufacturing, finance and other groups optimized):

  • Multitier supplier management tools on the vendor level (for tracking and managing on-boarding, compliance, supplier performance, etc.)
  • Multitier supplier management tools on the materials/substance/ingredient level (to track information ranging from MSDS data to broader testing, compliance, audit, quality, performance, substitute, and related information)
  • Integrated spend analysis (with above)
  • Collaborating planning, forecasting and scheduling systems (that work on a multi-tier level)
  • Applications to actively model and manage total cost that cascade into sourcing, spend and related tools
  • Advanced sourcing technology/optimization to evaluate alternative supplier proposals

And with this list we're only scratching the surface! So despite the excellent -- and we do mean excellent -- primer that Childers provides, don't believe for a minute that global trade and compliance challenges are solved by a next generation of trade management tools alone.

- Jason Busch

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