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