Supply Chain
Trade Compliance

Reduce Supply Chain Friction by Optimizing Trade Compliance

Trade compliance has the opportunity to play a pervasive role in reducing global supply chain friction and helping make the global supply chain great.

Ned Blinick

June 13, 2019

Great global supply chains move product from source to destination with minimal friction. Friction in the global supply chain occurs at those points where disruption to the supply chain plan can manifest itself and impede the smooth flow of product in its international journey. In this case, we are not talking about unforeseen dramatic disruptions, such as earthquakes, tsunamis, political turmoil, we are referencing those areas where expected normal operations go "off plan" and disrupt the expected flow of product and impact inventory optimization, order fulfillment or manufacturing execution.Great global supply chain execution eliminates, wherever possible, those controllable points of friction so that the shipment moves with minimized impediments from the time a purchase order is executed until the goods arrive at the final destination. Great global supply chain organizations have a much higher level of perfect order execution than their peers, better inventory optimization, higher levels of customer satisfaction, and lower costs.

The Importance of Trade Compliance

Trade compliance is an integral part of ensuring that product moves without friction at the border for both import and export. However, its importance is often overlooked and therefore it translates into sub-optimized global supply chain performance. Friction caused by improper trade compliance has a direct impact on the speed of the global supply chain and can negatively impact its performance by upwards of 5%.To get to great global supply chain performance the first step is to understand how the global supply chain is configured. The global supply chain is highly complex and requires the management of multiple moving parts outside the direct control of the importer. While this is not to minimize the complexity of the domestic supply chain, the fact is that global supply chains often cover multiple diverse supply jurisdictions, complex modes of transportation, extreme time zone differences, different mother languages, and export and import customs and regulatory jurisdictions.

Areas of Friction

The second step is to understand where the points of friction may take place in the global supply chain. If one looks at a relatively simple global supply chain there are 4 critical areas where friction can take place:

  1. Purchase Order execution
  2. Account and Product compliance for international trade
  3. Delays in production planning and execution - poor visibility into the suppliers manufacturing processes
  4. Delays in shipment PO preparation for shipment - lack of visibility into shipment planning, freight booking, shipment staging, and loading
  5. Tracking of supporting documentation - missing documents or errors on documentation
  6. Logistics execution
  7. Carrier delays in spotting equipment for shipment - poor or no visibility into carrier execution at supplier or consolidator
  8. Carrier performance on loading shipment as booked - poor or no visibility into shipment loading at the port of departure
  9. Unforeseen delays in shipment schedule - lack of tracking visibility
  10. Trade Compliance execution
  11. Delays in entry filing - poor visibility into entry preparation and filing
  12. Account control - screening, regulatory registration control, relationship control
  13. Product control - classification, regulatory profiles, UoM management, country of origin (COO) determinationEntry management - customs and government agency entry preparation (pre-post entry audits), filing management (customs brokers or self-filing), post summary correction management, FTZ control
  14. Entry management - customs and government agency entry preparation (pre-post entry audits), filing management (customs brokers or self-filing), post summary correction management, FTZ control, License and Quota management
  15. Holds at the pier - poor visibility into hold execution and release management
  16. Pier and Delivery execution
  17. Carrier and Customs Release visibility - poor visibility into customs status of entry execution
  18. Pickup delays - poor visibility into drayage company performance
  19. Pier Priority management - poor visibility into free-time status at the pier for imports and exports
  20. Detention management - poor visibility into equipment delivery and return execution

Trade compliance has the opportunity to play a pervasive role in reducing global supply chain friction and helping make the global supply chain great.