Risk, uncertainty, complexity, dynamic — these are all terms we use to describe global supply chain management. How can companies successfully navigate through this environment? What actions can they take to streamline and automate global trade processes? How can technology help? Those are some of the questions I discussed with Ty Bordner, SVP of Marketing & Business Development at Amber Road, in a recent episode of Talking Logistics.
Global Trade in Flux
As we record this episode, there is still much uncertainty over if or when Brexit will happen and whether it will be a “soft” or “hard” exit. There are also many unknowns concerning U.S. trade negotiations with China. And these are just two of many other challenges facing global trade managers. Thus, I asked Ty for his comments on current key trade issues.
In addition to the two I mentioned, Ty highlighted USMCA (the “New NAFTA”) and all of the work that still needs to be done there. But Ty pointed out, “One of the things not mentioned much yet is that China is completely revamping their trade policies, adding export regulations to put them on par with the rest of the developed world. With all of these unknowns and changes, people realize they have to be agile and have the ability to react to whatever changes occur. The only way to handle this is with technology, to create a digital twin of the supply chain.”
The Three Phases of Efficiency
Another unknown for those not on the frontlines of import/export is the depth of data required to manage global trade transactions. I asked Ty to share his thoughts on this and what separates the leaders from the laggards in managing the process.
Ty provided a long list of things that must occur to move products across great distances and borders, starting with the purchase order (PO) and progressing to final delivery potentially halfway around the globe in a country with a different language. This includes both the lengthy paper trail and the physical movement through export and import regulations and processes. And Ty points out that these processes are often handled manually by multiple, siloed groups within an organization.
Ty classifies leaders and laggards by three phases. He says most companies are still in phase one where they hire customs exports and brokers to handle export processes for them. Phase two is digitizing the data required for cross-border movements for all of the countries you trade with and sharing that data with your brokers and forwarders. This creates efficiencies by reducing redundant work.
Ty says phase three, which everyone aspires to, is automation of the full order build-out. “It’s taking the digitized master data from phase two and using an intelligent system to integrate it with all of the numerous digital transactions coming into the company to create the completed cross-border transaction. That’s where the real value lies.”
Duty Deferral Zones
One way companies can help navigate new tariffs and trade regulations is through the use of Duty Deferral regimes such as Foreign Trade Zones and Customs Warehousing. I asked Ty what is required to take advantage of these options.
Ty explains that, “Countries around the world allow you to bring goods into the country in a ‘temporary zone’ without collecting duties on those goods initially. You may choose not to pull the goods out of that zone until you sell them, thus better aligning cashflow with revenue. There are many such regulations or regimes. For example, China allows raw materials to be brought into the country to be used in manufacturing and the finished goods are then shipped back out without ever paying duties on the raw materials.
“To take advantage of these duty deferrals,” continues Ty, “you have to prove to Customs that you have accurately accounted for everything. Essentially, duty deferral is an accounting system. And it’s very complex because each country has their own rules for how to account for various situations. The only way to handle this if you have any kind of volume is electronically. Then the next step is to build that into your customs filing. With the recent increases in tariffs, the potential savings are big enough that people are really starting to look into using these duty deferrals.”
(For a related commentary, see Why Duty Drawback Is Making A Comeback)
The Customs Last Mile
People in transportation are familiar with the difficulties in last mile delivery. Ty talks about another last mile — the last customs mile, and how difficult it is to file the final customs paperwork. He says automation of this step can be “a real game-changer.” To learn more about the last customs mile and other aspects of automating the global supply chain, I encourage you to watch the full video to hear all of Ty’s insights and advice. Then post a comment and share your own thoughts and experiences on the topic!