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Globalization has been a trend for some time, but it only gained momentum
over the past two decades thanks to advancing technology, improving politi-
cal/economic environments, and the elimination of trade barriers.
These forces led to the creation of the virtual corporation, where a company
delegates a majority of its business functions, such as manufacturing and dis-
tribution, to partners are usually located in different parts of the world. For
example, semiconductor wafer fabrication is usually done
in the US, assembly is in Asia or Mexico, and final test 7KH UDSLG ULVH LQ JOREDO WUDGH LV
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poration essentially coordinates the activities of its
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partners to meet customer commitments, minimize costs,
and maximize profits.
Mergers and acquisitions are increasing as companies seek to gain market
share, expand their product footprint, and enter new markets. Often, the ac-
quired company is located in a different geographic region. The new entity,
therefore, becomes a global company instantaneously. The same is true for
companies that establish relationships with distribution partners overseas.
The World Trade Organization says the value of traded merchandise in-
creased from $124 billion in 1948 to $11.2 trillion in 1999 (or $13.8 trillion if
commercial services are included). The US was the leading exporter and im-
porter of merchandise with over 12 percent of total exports and 18 percent of
total imports. From 1998 to 2000, the total value of US imports and exports
increased from $2.03 trillion to $2.5 trillion (source: US Census Bureau).
The emergence of e-commerce, particularly business-to-business (B2B) activi-
ties, has spotlighted globalization. The Internet and related technologies
have enabled the creation of new business models such as marketplaces, ex-
changes, and application service providers (ASPs). These technologies are
facilitating collaboration between business partners, particularly small- and
mid-sized enterprises (SMEs) who have historically been left on the sidelines
due to the prohibitive cost of such technologies as EDI.
In March 2001, the US Census Bureau said manufacturing was the leading
industry sector for e-commerce in 1999, accounting for 12 percent ($485 bil-
lion out of over $4.0 trillion in total shipments. Unfortunately, the bureau
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did not distinguish between domestic and international shipments. But it is
very clear that in order for B2B e-commerce to reach the forecast of trillions
of dollars by 2005, a majority of the transactions will have to be international.
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7. Success on a global scale requires strong collaboration between business
partners, real-time visibility of information, tightly integrated business appli-
cations, and import/export tools and expertise. Moreover, companies now
buy and sell products worldwide via marketplaces, exchanges, portals, and
other channels that didn’t exist a few years ago. These new channels, along
with the need to collaborate with more partners, makes it harder to deliver
the right product, on time, in the right quantities, and billed correctly.
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Global Logistics is the transfer of information, documents, goods, and money
between various parties (such as suppliers, customers, freight forwarders,
carriers, and customs) to fulfill an order from one country to another.
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While fulfilling domestic orders can be challenging, as evidenced by the poor
performance of e-commerce providers during the holiday season, it is ele-
mentary compared to the challenges associated with global fulfillment.
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First, Global fulfillment involves multiple modes of transportation, each with
unique contracting process, rating systems, schedules, semantics, packing
requirements, and documents. It’s difficult to manage these contracts, de-
termine the appropriate carrier for each segment, coordinate the transfer of
goods between carriers and modes, generate the necessary paperwork for
each carrier/mode, and manage the financial settlement process.
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Secondly, moving goods between countries involves many more parties than
shipping goods between states. Shippers must work with more carriers, col-
laborate with freight forwarders, export and import customs agents,
inspectors, insurance agencies, and banks. All these parties increase the
probability for delays, damaged shipments, and missed customer commit-
ments. No wonder many companies hold excess inventory (i.e. safety stock)
to account for the uncertainties associated with global shipments.
Third, shippers must follow government regulations, not only for their home
country, but also for every country they trade with. These regulations
change frequently, are difficult to interpret, and in some cases are poorly
documented. Taxes, duties, quotas, and restrictions all depend on the prod-
uct’s value, country of origin (for the finished product and all components),
and Harmonized Tariff Schedule (HTS) code.
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It is against US trade laws to ship certain goods, such as chemicals and high-
tech electronics, to specific countries or entities, such as known terrorist or-
ganizations. Other countries have their own set of restrictions. For example,
some Middle East countries do not allow any products to be imported that
contain components manufactured or assembled in Israel.
In July 2000, the exporter and importer of record rules
were issued. They dictate that the exporter of record
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Since non-compliance can mean loss of export li-
censes, stiff penalties (up to 50 percent of invoice value), or jail, many com-
panies are looking to bring GLS capability in-house, particularly the ability to
perform restricted party screenings and the ability to generate/file all appro-
priate trade documents.
According to the US Department of Transportation, ocean shipments ac-
counted for 41 percent of international shipments in 1997 based on value
(almost 63 percent based on tonnage), the largest share among all modes.
Over the past 15 years, ocean trade has almost doubled to 1.13 billion metric
tons, and it is expected to double again over the next twenty years.
While air cargo accounts for less than 1 percent of international tonnage, it is
28 percent of these shipments’ value, due to the fact that nearly 20 percent of
air shipments are electronics and computers. In addition, international ton-
miles have increased fivefold over the past twenty years. Air transportation
will undoubtedly play a more important role in the near future as companies
adopt make-to-order models and inventory reduction policies.
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Global Logistics also involves the transfer of documents between different
parties. The amount of paperwork required to ship goods across borders is
simply astounding (see table below). Many of these documents are produced
in multiple copies, and if there are changes to the original itinerary or details,
they have to be regenerated. Considering that freight forwarders can charge
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as much as $75 per trade document, many companies are looking to bring the
document-creation process in-house.
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11. Fortunately, there is a move towards electronic filing of these documents.
For example, as of November 1, 2000, the US Census Bureau and US Cus-
toms stopped accepting Shipper’s Export Declarations (SEDs) via fax. The
preferred method is via an Internet system called AES Direct (Automated
Export System). A similar system exists for importers called ABI (Automated
Broker Interface). The benefits of automating document creation are primar-
ily threefold: cheaper, faster, and fewer errors. The latter has ancillary
benefits, including fewer delays at customs and faster payment cycles.
In summary, many documents are required to import or export a single
shipment. These documents flow between the shipper, its carriers, freight
forwarders, government agencies, banks, and other parties. A single clerical
error can result in delays, fines, or withheld payments. Therefore, automa-
tion of this laborious process is a necessity.
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It has been said that information is the most valuable thing to possess. The
more accurate and current the information, the greater its value. This dictum
certainly holds true in global logistics.
Traditionally, once an international shipment left the dock, it entered a black
hole where information about its status was virtually impossible to obtain.
Today, thanks to the Internet, satellite technology, messaging tools, bar-
coding, and improved software, the black hole is quickly disappearing.
Shippers and other parties can now access real-time or
6LQFH JOREDO ORJLVWLFV LV D FROODERUDWLYH near real-time information about shipments. Depending
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on the sophistication of the systems involved, they can
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identify the exact location of a vessel, along with very spe-
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cific details about its cargo, down to the stock-keeping-
unit (SKU) level.
Having this information reduces the uncertainty of global shipments, thereby
eliminating the need for high-levels of safety stock. It also enables inventory
to be dynamically routed to areas of high demand, thereby maximizing sales,
minimizing inventory carrying costs, and avoiding unnecessary manufactur-
ing costs. Third, information enables faster response to problems via event
management tools that proactively alert authorized parties to exceptions.
Fourth, information translates into higher customer satisfaction by having
the answer to their most common questions, namely: Where is my ship-
ment? and Do you have the product available?
There is another dictum, however, that has been used to describe informa-
tion: garbage in equals garbage out. Gathering information is definitely not a
trivial task. Since global logistics is a collaborative process, involving many
different parties, integration of disparate business systems is a big challenge,
along with rationalizing different standards and nomenclature. Therefore,
monitoring the quality of incoming and outgoing messages is critical. Oth-
erwise, there will be constant false alarms due to missing data, lost messages,
poor message mappings, or other correctable factors.
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While information may indeed be valuable, money still makes the world go
round. The complexity of the financial settlement process depends on the
trust level between the buyer and seller. If the two parties have a long his-
tory of working together without any issues, the process is relatively simple.
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However, if there is no prior relationship (as is common in public on-line
marketplaces), the transaction size is relatively large, and there is a desire for
higher levels of payment guarantee, then the process becomes complicated.
There are numerous payment terms used for transactions, but the most
common method of settling large international trade transactions is by ob-
taining a Letter of Credit (L/C).
Simply stated, the process of issuing a Letter of Credit and finalizing pay-
ment generally takes a long time (sometimes months), requires many
documents, is easily delayed by any clerical errors, is relatively expensive,
and involves many parties. Banks play the role of neutral third-party in the
transaction. Due to the labor-intensive nature of the process, they charge
both the buyer and the seller between 0.5% and 3.0% of the payment amount,
plus as much as $100 each time the L/C is amended. For a $5 million dollar
transaction, an L/C can cost over $150,000.
To summarize, global logistics involves more than just the physical move-
ment of goods across borders, which in itself is a complicated process. It also
involves the movement of documents, information, and (of course) money
between the numerous parties in the logistics ecosystem. All four compo-
nents are interrelated and critical for success.
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Global Logistics information, particularly trade content, obviously impacts
fulfillment. Its value, however, extends to other business processes, such as
product development, network design, vendor selection, and customer rela-
tionship management.
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As highlighted earlier, many trade regulations are based on the characteris-
tics of the product, which form the basis of its HTS code. The code
determines the duty rate applied, the trade documents required, and the ap-
propriate government agency to oversee the import. Since a product’s HTS
classification is essentially defined during its development, it is critical for
developers to understand the impact of their design choices as they relate to
trade regulations in each target market.
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For example, an adhesive is comprised of several chemical components. The
choice of components and their overall amount plays a role in how the fin-
ished product is classified. Too much of Component A and the adhesive
becomes flammable or unstable, thereby resulting in a
more regulated classification and perhaps illegal to im-
port into certain countries. If Component Z is chosen
Ir‡‚…xÃ9r†vt instead, the adhesive becomes biodegradable, thereby
resulting in a more favorable classification in terms of
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The bottom line: the decisions product developers make
when designing a product impacts the cost and viability
of importing/exporting.
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As with product development, the decisions made during network design
have a large and somewhat lasting impact on global fulfillment. Companies
evaluate their network design every one to two years, or more frequently if
they acquire another entity or significant changes occur within their supply
chains. The process entails determining the location, size, and number of
plants, distribution centers, suppliers, and third-party partners.
Obviously, local tax rates, labor costs, and currency valuations play an im-
portant role in the decision-making process. But as indicated earlier, country
of origin is also factor, along with preferential trade agreements such as
NAFTA and MERCOSUR (a trade alliance between Argentina, Brazil, Para-
guay and Uruguay, with Chile and Bolivia as associate members). Free
Trade Zones (FTZ) are also important. These are ports designated by a
government for duty-free entry of non-prohibited goods. Merchandise may
be stored and used for manufacturing within the zone and re-exported
without duties being paid. Duties are imposed only when the original goods
or items manufactured from those goods pass from the FTZ into an area of
the country subject to customs authority.
Therefore, companies should take into account global trade information
when evaluating their network design. In particular, they should consider
the following questions:
• Which is the better option: exporting merchandise directly to its des-
tination or exporting it to a nearby country that has more favorable
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import regulations (perhaps due to a trade alliance) and then re-
exporting the merchandise to its final destination?
• Can I establish/utilize FTZs to eliminate duties?
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• If I establish a manufacturing site in country A, are
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there import restrictions into the country that will
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impact my manufacturing costs or limit my ability PDWHULDOV
to use certain raw materials?
• Which countries do I plan to serve from a new manufacturing plant
or distribution center? How does my choice of locating the plant or
DC in country A affect my ability to export to these other countries,
in terms of costs, quotas, and other trade restrictions?
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Many factors are involved in selecting a vendor, including ability to produce
the desired product, quality metrics and certifications (such as ISO 9000),
credit rating, capacity constraints, and geographic location. The latter obvi-
ously presents global logistics considerations, especially with regards to
determining the total landed cost (TLC) of the goods.
TLC is the true cost of procuring an item. It entails not only the cost of the
item, but also freight charges, duties, taxes, insurance, inspection fees, broker
fees, banking charges, and many other cost components. Some GLS software
vendors claim that their applications can consider over 100 components to
determine a landed cost.
Therefore, basing a procurement decision simply on unit price is a highly-
flawed policy. For example, a supplier in China may quote a lower per unit
price than a supplier in Mexico. However, when all other factors are consid-
ered (such as duty rates, freight charges, and NAFTA privileges), the final
cost of procuring the goods from China may be significantly higher than ob-
taining them from Mexico (assuming labor charges and other factors being
equal).
Procurement managers can also benefit by understanding Incoterms, which
are standard sales terms developed by the International Chamber of Com-
merce. The Incoterm specifies where along the supply chain the title for the
goods is exchanged between the buyer and seller. Unfortunately, due to the
complexity of global logistics, many procurement managers ask vendors to
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quote “landed cost” prices, thereby forfeiting control of many cost compo-
nents such as freight charges and insurance. In short, better collaboration
between logistics and procurement with an enterprise can result in cost
avoidance.
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As highlighted earlier, global logistics solutions enhance customer satisfac-
tion by providing visibility to shipments and inventory, enabling more
accurate quotes by determining total landed costs, and minimizing delays by
expediting the document creation process and eliminating clerical errors that
typically result in shipments being detained at customs.
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In early March 2001, ARC conducted a GLS survey via its Website. Close to
50 people responded to the survey, about half from the manufacturing sector
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and the rest from 3PL, distribution, retailing, and other.
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The main insights gathered from the survey are: ’‚ˆ…Ãv€ ‚…‡vt Ãr‘ƒ‚…‡vtÃ…‚pr††r†4
ƒ ÃÉ
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ing/exporting processes.
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2. A majority of users will increase international trade †‚s‡h…rÇuv†Ã’rh…
this year. I ÇurÃ…‚
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3. The primary driving factors behind implementing
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GLS are to facilitate document creation, reduce in-
ventory, and have the ability to fulfill international
orders from their e-commerce site.
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4. Inventory and shipment visibility was considered uh‡ h†Ã‡urÃ…v€h…’Ãq…v‰vtÃshp‡‚…4
highly valuable by a majority of the respondents, P‡ur… $ÃÈ
along with the ability to automatically create and Ahpvyv‡h‡r qˆ‡’Ãq…hihpxÃ…‚pr†† $ÃÈ
electronically file trade documents, and the ability to Aˆysvyy v‡·y ‚…qr…†Ãs…‚€Ãrp‚€€r…prÆv‡r $ÃÈ
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receive alerts when exceptions occur.
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In January 2001, ARC published the GLS Worldwide
Outlook Study, whose results were derived from exten-
Sh‡rÇurÉhyˆrÂsÃuh‰vtÃir‡‡r…Év†vivyv‡’
sive interviews with GLS vendors and users. The Global ‚sÃv‡r…h‡v‚hyÆuvƒ€r‡†
Logistics Systems market, which had total software and
$ $$ÃÈ
service revenues of $165 million in 2000, will explode to
more than six times that size or $1 billion by the end of r
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2005, representing a Compound Annual Growth Rate W
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t
(CAGR) of over 43 percent. v
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There is no single supplier that offers a complete GLS !%ÃÈ
suite. Some specialize in optimization, while others fo-
cus on providing the infrastructure necessary for
collaboration. In some cases, suppliers view themselves as complimentary to
each other and establish partnerships. For example, Global Logistics Tech-
nologies (G-Log), which specializes in multi-mode, multi-leg optimization,
has partnered with Nextlinx, which provides landed cost and regulatory
compliance capabilities.
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Two significant trends were highlighted in the report.
First, the relatively strong acceptance of the ASP model
and recurring pricing schemes among customers. Re-
curring revenue streams, which include transaction,
subscription, and hosting fees, accounted for over 28
percent of GLS total revenues in 2000.
In particular, the hosted model appeals to customers
such as 3PLs and marketplaces that want to incorporate
GLS functionality into their offerings, but do not want to
incur large upfront costs (i.e. they prefer to pay on a
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33. transaction basis or over a long period of time). Hosting
also makes sense from a collaboration standpoint. The
traditional approach is to establish a direct link with each trading partner,
but there are several disadvantages to this strategy. First, it forces companies
to open up their firewalls to numerous outside parties. Network security is a
major concern for companies, and minimizing the number of outside connec-
tions reduces the risk of illegal activity. Second, large channel masters have
hundreds or even thousands of business partners. Direct links with each
would be a logistics nightmare, not to mention the cost associated with add-
ing and removing partners.
The alternate approach is to have the software supplier (an an ASP) become
the information hub where everyone connects. Each trading partner is essen-
tially a spoke that sends and receives information from the hosted service
provider. In this approach, the channel master provides firewall access to
only one party, the service provider. Also, the user doesn’t have to worry
about establishing and managing the different links. The service provider
assumes those responsibilities, along with maintaining a secure environment.
In addition to the security and logistical benefits, collaborating via a hosted
service centralizes information from various sources, thereby providing users
with a complete history of any order. It also makes data mining and report-
ing much easier. For example, users can analyze the on-time delivery
performance of suppliers or transportation carriers over time to drive deci-
sions. Descartes Systems Group has been particularly successful in
providing a hosted collaborative logistics solution via its Global Logistics
Network.
The second trend revealed was the merging of GLS software technology with
Business Process Outsourcing (BPO). In an effort to maximize their value
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proposition and differentiate themselves from the competition, several GLS
vendors have begun to offer basic consulting and support services, such as
product classification, workflow design, and international trade education.
For more complex consulting projects, such as designing a global supply
chain network, GLS suppliers have established partnerships with Big Five
consulting firms such as KPMG that specialize in this type of work.
Other value-added services may include helping clients select an appropriate
fulfillment partner (e.g. 3PL, freight forwarder, carrier), facilitating the finan-
cial settlement process, or actually managing the customer’s GLS operations.
An example of the latter is Vastera’s contract with Ford Motor Company.
Briefly stated, Vastera will manage Ford’s import and export trade processes,
first in the US and eventually around the world, in additional to provide the
software to power the operation. The 10-year agreement also includes the
transfer of intellectual property and human capital from Ford to Vastera.
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ARC interviewed two Vastera customers and one ClearCross customer to
understand their experience with the software applications and hear their
thoughts on global logistics. The common trait between all three customers
was that none of them had an integrated importing/exporting system.
One Vastera customer does very little importing, therefore, she did not see
the need to purchase an import solution. The other customer, however,
could not find an integrated import/export solution seven years ago when
she implemented Vastera. The ClearCross customer, which does very little
exporting, only implemented the import solution (originally from Questa
which was later acquired by ClearCross).
Vastera’s Customer X has several groups in the US, two locations in Canada,
and one each in Denmark and the UK. Exports, which currently account for
25 percent of revenues, are expected to grow significantly over the next few
years. As the company has grown, it became almost impossible to manually
manage the export compliance process, thereby driving the decision to invest
in software. Customer X evaluated several vendors, but chose Vastera be-
cause it felt they had the best compliance content and people.
The compliance manager at Customer X could not remember how long the
initial implementation lasted, but an upgrade (along with other Y2K projects)
took three 3 months, although further tweaking was required. Regarding
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ROI, the company estimated at the time of the initial purchase that it would
take 1.5 years, but nobody has verified the actual results.
Regarding complaints, Customer X recently implemented the regulatory
modules for Britain and Canada, but had difficulty getting them updated. It
was also difficult to schedule Vastera’s implementation specialists. The
company implemented the product itself, but it recommends that customers
involve Vastera’s technical resources due to the challenges it faced.
Novell was the second Vastera customer. Most of its software exports origi-
nate from two locations, the US and Ireland. Unlike Customer X, Novell was
already using an automated compliance system, but it was proprietary and
had to be replaced when the company decided to change its database system.
Novell did a thorough evaluation, including calling existing customers, be-
fore making its decision. Most contacted providers were able to meet its
needs. It picked Vastera was partly based on knowing people within the
company. The implementation process was very difficult and long (it took 9
months), primarily because the company was undergoing an Oracle installa-
tion at the same time. Vastera’s implementation team compounded the
situation by lacking a sense of urgency. While Oracle’s consultants would
work virtually around the clock, Vastera’s people would refuse to work long
hours and on weekends.
Novell advises that educate your entire workforce about trade compliance,
especially if you’re in a regulated industry. The compliance manager’s big-
gest challenge is making sure that employees don’t inadvertently violate
trade regulation due to ignorance. Therefore, besides education, you must
put controls in place. Regarding implementation, Novell says don’t assume
the software supplier understands how to integrate with your legacy sys-
tems. Therefore, spend the time to really know your existing applications.
ClearCross’ customer is the musical products division of Yamaha, which im-
ports finished goods from China, Indonesia, and Japan. Yamaha
implemented the client/server Questa system to ensure regulatory compli-
ance and better enable activity-based costing (in order to charge back costs to
sister divisions). It hopes to use the system to commit orders to inventory in
transit, as well as provide inland carriers forward visibility to capacity needs.
Yamaha evaluated three suppliers, but chose Questa because it specialized in
imports, it came as a stand-alone module, and the supplier had favorable
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customer references. Today, five power users work with the application,
along with about sixty people that simply have viewing privileges.
Implementation took about eight months, including integration with an Ora-
cle ERP system. It was delayed by Questa changing the product’s
architecture. Although ROI wasn’t specifically measured, but the depart-
ment was able to cut its staff from 6 six people to about 3.5 (i.e. an almost 50
percent reduction).
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Global Logistics Solutions (GLS) are software applications that manage the
transfer of goods and information from one country to another. These appli-
cations generally provide one or more of the following capabilities:
• Global visibility of inventory (moving and stationary), in real-time or
near real-time, along with exception management capabilities
• Optimize the movement of goods across multiple transportation modes
(including air and ocean)
• Facilitate the routing, tendering, and booking of cross-border shipments
(including air and ocean), as well as invoicing, auditing, and payment
• Provide an integration/workflow infrastructure facilitating collaboration
between all parties in the international trade ecosystem
• Import/export functions, including landed cost calculators, restricted
party and embargo screenings, and product classification tools
• Manage the creation and flow of international shipping documents, in-
cluding customs documents and letters of credit
Product offerings vary by supplier. At the low end of the spectrum, there are
suppliers that simply focus on automating the document generation/filing
process for either the importing or exporting of goods. High-end suppliers
provide integrated import and export solutions, manage databases of global
trade information, and offer management consulting services.
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The Achilles Heel of virtually all GLS software vendors is their ability to
manage reverse logistics. It is a complex problem that involves tight integra-
tion between exporting and importing systems, as well as sophisticated logic
to determine the best course of action (i.e. ship the product back to the ex-
porting country, liquidate the product, destroy the product, or re-export to a
different country). Of course, you also have to create and file trade docu-
ments, perform a cost/benefit analysis that takes into consideration freight
charges, insurance, handling fees and other charges, and you have to adjust
accounting records.
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Considering all of this effort, it is not surprising that most B2C retailers de-
cide to destroy the product instead of having it shipped back to them. The
cost of returning a music CD or book is considerably greater than its retail
value.
Duty Drawback is another weak area for GLS vendors, as it requires tight
integration with many other business systems. Briefly stated, duty drawback
allows an importer to reclaim duties paid if the imported material is later ex-
ported in a finished product. For example, a plastics manufacturer that
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imports resins to produce bottles can reclaim the duties paid on the resins if
he exports the bottles overseas. The challenge, however, is maintaining an
audit trail from the time the resins are first ordered, through importation,
manufacturing, warehousing, and finally exportation. In addition, the neces-
sary information is dispersed across different business systems, such as order
management systems (OMS) and enterprise production management (EPM)
applications, as well as across different trading partners, such as freight for-
warders, customs brokers, and contract manufacturers.
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Logistics has historically been viewed as a cost center. However, while
minimizing costs remains important, the emphasis today should be on
maximizing customer satisfaction. In today’s competitive environment,
where many products are becoming commodities, companies can no longer
compete solely on price or features. The key to survival is customer reten-
tion, which is based primarily on quality of service.
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How is this accomplished? By delivering the right product, at
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the right time, in the right quantities, and billing them cor-
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40. rectly. By being able to provide them with immediate
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SURFHVV DQG FDQ SURYLGH SHUVSHFWLYH answers to “Where is my order?” and “Do you have the
RQ EXVLQHVV LVVXHV product in stock?” And by keeping their production lines
running, reducing stock outs at their retail locations, and ef-
fectively meeting their demand spikes. In short, by doing all
of the things enabled by global logistics solutions.
When it comes to funding projects, companies tend to place strategic initia-
tives at the top of the list. Unfortunately, logistics rarely ranks high enough
to garner much attention. The time has come to make it a priority and make
the necessary investments. Also, while the importance of the Internet and
information technology has elevated the role of the CIO within the enter-
prise, the same has not occurred with logistics professionals. The time has
come for every company to have a Chief Logistics Officer (CLO) that is in-
volved in the decision-making process and can provide his/her perspective
on business issues.
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Companies have historically treated inbound and outbound logistics sepa-
rately. While each operation certainly presents unique challenges and
requirements, keeping them separate eliminates collaborative opportunities.
For example, a truck delivering an in-bound shipment can be used to deliver
an outbound order, thereby creating a continuous move opportunity for the
carrier that translates into lower transportation rates. Today, most of those
inbound trucks leave empty.
Also, as highlighted in the report, tight integration is required to effectively
manage reverse logistics operations and facilitate the duty-drawback process.
Depending on the nature of the company, the cost of integration may pale in
comparison to the money reclaimed from customs if duty drawback was im-
plemented.
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Most of the focus around global logistics has been around fulfillment. How-
ever, global logistics favorably impacts many other parts of the enterprise.
For example, product development teams must understand how design deci-
sions affect product classifications (i.e. HTS codes) that ultimately dictate
duty rates, document requirements, and trade restrictions. Similarly, net-
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work designers must take into account global logistics in-
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formation when determining where to open a new
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manufacturing plant or DC. Poor decisions during prod-
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The bottom line: educate all employees about global trade
regulations as it relates to their role in the organization. Also, implement
controls to ensure 100 percent compliance. This point is especially important
in regulated industries such as high tech, chemicals, and pharmaceuticals.
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Hosted solutions make sense in highly collaborative business environments
due to the challenges associated with performing and maintaining thousands
of one-to-one integrations. Therefore, considering the number of different
parties involved in fulfilling an international order, GLS applications are ide-
ally suited for the hosted model.
Also, trade regulations are dynamic in nature. Depending on the number of
countries you trade with, changes can occur almost daily. Therefore, having
access to the most up-to-date information is critical. The hosted model en-
ables the service provider (i.e. software vendor) to update all customers
simultaneously by updating a single instance of the trade compliance data-
base. In most cases, the upgrade requires little or no effort by the customer.
However, if a customer is not hosted, the vendor has to send the customer a
CD with the changes or instruct the customer how to download the modifica-
tions from an online site. In other words, the update is neither automatic nor
transparent. Since the task is likely one of hundreds on the IT department’s
list, there is a good chance the update will be delayed, thereby potentially
resulting in non-compliance issues.
In summary, deploying GLS as a hosted solution enables more efficient col-
laboration between business partners and enables automatic and near-
transparent updates of trade compliance information.
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Despite their claims, it is nearly impossible for software vendors to offer
“everything to everyone.” This is especially true for vendors that provide
solutions such as GLS that help manage supply chains. Why? Not all supply
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chains are created equal. For example, some industries are heavily regulated
and face a lot of trade restrictions, while others are less restrictive. Some
conduct a majority of their international shipments via
containerized ocean vessels, while others may use bulk
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ocean carriers or airfreight carriers.
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In short, look for software vendors that understand
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H[SHUWV WR PDQDJH FOLHQW UHODWLRQVKLSV your supply chain. They typically incorporate industry-
specific best practices into their solutions, as well as hire
industry experts to manage client relationships.
For example, Vastera is particularly strong in Automotive, while ClearCross
is strong in Chemicals/ Pharmaceutical, Descartes in 3PL, G-Log in Chemi-
cals, and Celarix in Retail. Although these vendors have clients in many
different industries, these verticals represent their strengths.
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