Companies must factor global trade into supply chain designs

20 August 2015

Companies are giving up margin if they do not properly factor global trade into their supply chain design, according to a study.

SCM World’s Global Trade Management report has highlighted the opportunities for global trade but also suggested that some companies may need to “remap” their supply chains to benefit fully.

The study concluded that companies that effectively manage global trade are using free-trade agreements and other trade facilitation vehicles during supply chain network design. They also simplify customs and cross-border operational processes and invest in trade automation tools.

The report said: “The first word that comes to mind for most supply chain leaders when hearing the term global trade management (GTM) is probably ‘compliance’ – it helps companies to comply with arcane and ever changing trade regulations and cross-border customs procedures.”

It went on: “This is, however, a myopic and antiquated view of global trade, and it is partially responsible for the lack of mindshare GTM has with supply chain leaders.”

One sign that a problem exists is an inability to run a report that clearly and accurately states what a company pays in duty spend, according to the study.

“Moreover, if trade isn’t factored into the supply chain design analysis, then chances are your company is giving up margin,” it said.

SCM World highlighted new trade agreements such as the Trans-Pacific Partnership (TPP), which it said would create more variables for companies to consider, but also more opportunities.

“For instance, owing to the scope of this agreement, and how it interrelates with regional free-trade agreements already in place (ASEAN, for example), companies could potentially reap enormous benefits through a fundamental remapping of their supply chains, accompanied by investment in the customs and trade expertise needed to compliantly and legally abide by the rules.”

The report also contains recommendations for firms wanting to release some of the hidden value in global trade management. They include:

• Determine whether you have an opportunity with global trade or not.
• Map your current customs and cross-border operational processes.
• Develop your future state customs and cross-border operational processes.
• Factor trade into your total landed cost analysis at the beginning of sourcing activities.
• Develop or hire the right people for the job.
• Invest in trade automation tools.

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