Going Global? Logistical Factors to Consider Before Establishing Global Supply Chain Operations

Going Global?

Logistical Factors to Consider Before Establishing Global Supply Chain Operations

May 2008

Going Global?Logistical Factors to Consider

Before Establishing Global Supply Chain Operations

SUMMARYIn today’s global economy, many US-centric manufacturers and distributors are increasingly feeling the pressure to become niche, competitive play-ers overseas as well as domestically. American-based companies seeking to expand their product lines internationally for the first time or attempting to enlarge their existing global footprints will need to keep up with global trade growth and increased competitive demands. To succeed in the global marketplace, companies wanting to capitalize on the compelling interna-tional market’s opportunities must prepare their supply chain operations for the onslaught of logistical challenges of foreign markets.

OVERVIEWBefore his 1492 voyage to the “New World,” Christopher Columbus spent several years trying to explain his belief that the world was round. He exerted all his passions, efforts and energies in convincing any and all who would listen that the world was a sphere and not a flat landmass.

Ironically today — over 500 years after Columbus’s insistence that the world was round — advances in transportation, technology and telecom-munications have seemingly “flattened” the Earth once again, making com-munications and global interaction with foreign markets highly accessible and instantly viable.

While there may be many advantages to having a flatter world, we should not assume that flat equals simple. In many cases, flatness does not diminish complexities. This is especially true in the arena of international transporta-tion logistics, where a flatter world does not simplify the daunting logistical challenges of managing global supply chains.

If your company has been contemplating broadening its supply chains inter-nationally, it would not be alone. Today’s highly competitive global market-place demands, at the very minimum, some level of active involvement or participation in foreign markets due to rapidly changing market conditions, aggressive competition and dramatic growth in foreign exchange. Diagram

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WHITE PAPER

www.cmsglobalsoft.comCMS GlobalSoft White Paper — Going Global?

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1-1 showcases an arresting statistic which underscores just how much foreign exchange transactions have increased between 1970 and 2004. The dramatic night-and-day difference within this 34 year timeframe strongly validates just how much world commerce has expanded by leaps and bounds. Such statistics command attention and reinforce an undisputable fact: if your strategy is to stay wholly domestic, your competition is com-ing (or will soon come) from every area of the globe.

“Even if a company only has domestic suppliers and domestic customers, it must always be analyzing whether it would be better to go overseas. And companies are always subject to global competition, they must be conduct-ing constant analysis of their global competitors,” says Yossi Sheffi, Direc-tor, Center for Transportation and Logistics, MIT.

“With the emergence of the free-trade movement, low-cost country sourcing, and the rising affluence of large segments of the world’s population, companies now aim to gain market penetration in foreign markets as deeply as the penetration they enjoy at home.” John FontanellaAMR Research, 2008

Foreign Exchange Transactions

Diagram 1-1From a March 2006 “Meeting the Challenges of the Global Supply Chain” presentation by ORACLE

$10 Billiona day

1970

$10 Billiona second

2004


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SOURCING GLOBALLYAs domestically focused companies stand by in the sidelines, aggressive and fierce competitors are going global, seeking ways to improve their competitive edge by streamlining manufacturing production and distribution channels worldwide.

Forrester Research’s study entitled “The State of Global Supply Chain Man-agement,” reinforces the now ubiquitous act of sourcing globally. The study asked 168 respondents from North American retail, manufacturing, and other industries if they have business units based outside of North America. Not surprisingly, an overwhelming majority do globally source to the fol-lowing international markets:

Perhaps your company would like to increase its competitive advantage by outsourcing its production beyond US borders. Or maybe your business has been presented with compelling opportunities abroad. Whatever the case may be, if your organization is in the process of extending its supply chain beyond domestic US borders, you can’t just dive in. Nor can you simply try to “extend” your domestic systems and assume that what works for you locally will work for you globally. While surely some aspects of your do-mestic logistics can be applied to your supply chain abroad, there are many more intricate details and logistical variables you should consider before you steer towards the global economy.

Where US Companies Most Source To

Diagram 1-2— 2006 Forrester Research study, “The State of Global Supply Chain Management”

China

Asia Pacific countries

South

Eastern

CentralAmerica

Turkey

North Africa

67%

57%

47%

43%

32%

20%

18%


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This white paper will provide a high-level overview of key logistical chal-lenges organizations can face as they launch their global supply chain voyage as well as offer viable, real-world solutions to help you align and facilitate your corporate supply chain strategies abroad.

GLOBAL SUPPLY CHAIN COMPLEXITIES

Global supply chains are overwrought with complexities. While this is not to say that domestic supply chains are not without their own unique set of challenges, international trade inherently tends to be more complicated.

In other words...“Sourcing and selling internationally is an alarmingly inefficient process today,” according to Beth Enslow, Aberdeen Group’s Vice President of Enterprise Research. “Today’s cross-border supply chains are strapped together with disconnected, manual processes. They are buffeted by high supply chain unpredictability and continually evolving regulatory demands. Making matters worse, we found that more than half of the companies Aberdeen surveyed do not even measure their global trade performance. Most also lack the technology to help them do so.”

— Findings from Aberdeen Group’s

“New Strategies for Global Trade Management” Report, 2005

The Aberdeen study findings as cited above were collected from a survey of over 170 companies which were examined and surveyed about their proc-esses for sourcing goods with overseas suppliers, selling goods internation-ally, financing global trade, managing cross-border logistics, and complying with increasingly stringent trade and cargo security regulations.

As the Aberdeen findings indicate, amongst the biggest problems in global supply chains include:

� Long and uncertain lead times which inhibit the ability to respond to market demands and adequately fill orders on a timely basis

� Projected product cost savings are absorbed by unanticipated, higher costs from operating longer and more complex global supply chains

To achieve higher service levels, better asset utilization, and lower logistics costs in the modern supply chain, a new breed of transportation management solution is required—one that supports multiple modes and many languages at a reasonable cost. — Transportation Management Solutions Forrester Research Report, January 2008Patrick M. Connaughton


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Let’s briefly examine some of the broader aspects of global logistics that should be on your “Going Global 101” framework:

Extended Distances and Multiple VariablesGoods are typically traveling a far greater geographical distance, possibly requiring different modes of transportation and multiple hand-offs that must be managed. As a result, extending a supply chain beyond borders obvi-ously lengthens the chain and results in exposure to greater variables. These variables can include border crossings, multiple modes of transportation and multiple hand-offs, different government systems, technology issues and security concerns. Every one of these variables presents opportunities for errors that can stall the entire supply chain. “There is far more uncertainty and risk in global trade and you have to plan for and be aware of that,” says John Langley, Professor of Supply Chain Management, the Logistics Insti-tute at Georgia Tech University.

Challenged VisibilityVisibility in global logistics becomes very complex and difficult to achieve in an international supply chain. “You need to know where the goods are,” says Mike Peters, First V.P., ProLogis Solutions Group. This is particularly critical in order to allow companies to manage their supply chain strategi-cally, identifying various points throughout the supply chain where goods can be held to reduce the risk of delays. And, with capacity issues still a concern in North America, a delay-reduction strategy applies across the board, resulting in the need for specific skills and expertise to manage a global supply chain.

Inconsistent TechnologyTechnology and infrastructure tend to not be as sophisticated as in North America, meaning the pace of information flow and management of cross-border logistics in developing countries is quite challenged. Missing and unreliable information adds risk and decreases flexibility in the international supply chain. Often supply chain managers and the ultimate customer can’t be sure what they’ll be receiving until the shipment actually arrives.

Unfamiliarity with Cross-Border Trade Regulations & IssuesCompanies want to access the foreign markets such as Canada or Mexico, but “are afraid to deal with issues at the border,” says Larry Fyke, President, Fyke Trading & Logistics. Undoubtedly, many domestic companies are in the same shoes, wanting very much to capitalize on the opportunities of the


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international market and neighboring economies but uncertain as to how to proceed or venture forward. And who could blame these organizations for their trepidation? Most companies are not sure how to get their goods from origin to port in-country, how to ship from port to port over the ocean, and then shipping from port to destination in North America. Joining the ranks of global economy players is not easy and requires a lot of forethought, planning and consideration.

Undeniably, designing and implementing global supply chains can be dif-ficult and taxing. But while unique variables facing global transportation logistics do exist, this is not to say that these challenges cannot be overcome or, at best if unsolvable (e.g. foreign regulation challenges), then managed to mitigate risk and inefficiencies that inevitably lead to cost overruns and poor customer service.

BEST PRACTICES:KEY FACTORS STEER YOUR SUPPLY CHAIN IN THE RIGHT DIRECTION

While there may be different ways to address the numerous challenges involved with global transportation logistics, it is important to note that this white paper only touches on a few of the most critical factors required for improved global supply chain performance:

“Holistic” Management ApproachOne of the most common culprits found in poor global transportation lo-gistics is senior management’s inability to establish and follow a unified approach towards a strong logistics execution. Approaching global logistics management as an “afterthought” has a tremendously negative impact on more than the supply chain. The ability to establish a robust network of sales becomes strained and bottlenecks in transport affect distribution and cus-toms clearance, further resulting in the interruption of scheduled marketing strategies and production timelines.

To achieve operational excellence in global supply chain logistics, senior managers must focus on crux management and operational issues beyond the supply chain. Each department must work in concert with other internal departments — from marketing and sales to accounting and IT -- to identify challenges and opportunities for improved efficiency to improve overall business functions.

The acceleration of global sourcing and selling activ-ity and the increasing need to monitor multiple tiers of the supply chain to remain agile and cost competitive is challenging companies to rethink their business models and automation strategies.


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GLOBAL TRADE MANAGEMENT TIP- - - - - - - - - - - - - - Institute a global trade center of excellence that advises the corporation on total landed cost and risk reduction actions from the point of product design and sourcing through final delivery decisions.

Dismantling Old-Style Organizational StructuresFor years, managers have complained of the “silos” within their organiza-tions, an arrangement that results in fragmented internal communications amongst various departments and poor cooperation in the interest of forging a truly unified supply chain. This type of organizational environment has been shown to create significant lag times in the sharing of critical infor-mation to the parties who need it most. In the end, customer service levels plummet to lows so low that an organization’s ability to maintain a contin-ued, long-term competitive position in the marketplace suffers tremendously.

Consistency in ExecutionBy virtue of the “e” in ERP, many organizations have already learned the value of managing data and processes at the enterprise level. Typically, best practices are defined, refined, and made part of the ERP solution prior to implementing or during the implementation process. Values recognized from this approach can and should be carried over to transportation management solutions as well. With global instances of the ERP, one should follow suit for all subsystems or complimentary applications to maintain consistency in execution for all the same reasons as those taken into consideration when exposing the ERP on a global basis.

Centralized Technology and DataToo often with geographic diversity, whether it is domestic or global, cor-porations have a tendency to create islands of technology. This phenomena is often seen at a high degree when growth is obtained through acquisition, where systems were in place prior to the acquisition taking place, and in an attempt to allow the flow of information to occur between the two disparate systems and organizations short term communications interfaces are devel-oped as a quick fix, and often times not transitioned for many years. Islands of technology also create data silos which result in disparate knowledge across global supply chain operations.

Centralized Business Rules Once an application becomes an enterprise application, and only when it becomes an enterprise application, can the business rules which define and drive best practices be put in place and managed centrally. This does not lim-it diversity among the various factions of the entire organization, but rather allows flexibility for the facility to meet demands and expectations of both the customer and the carrier, while maintaining the integrity of the corporate governances and best practices.


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Global VisibilityAs the likes of manufacturing, distribution, technical and customer support move to regions of the world where they can prove to be more cost effective, one must also provide the information to support these activities. This infor-mation needs to be available at the fingertips of those in these support roles. With this requirement, global visibility can only be provided by interoper-ability among the execution systems. And the interoperability must be real time to be effective at accomplishing visibility of any value. Old information is only valuable to historians, analysts and auditors. To support the customer or trading partner, information must be current. In addition to being timely; information needs to be presented to the person requiring this visibility through one common interface.

COLLABORATION:WORKING WITH TRUSTED, OUTSOURCED LOGISTICS PARTNERS

The opportunities and challenges created by globalization are requiring companies to establish relationships with new types of reliable and specific-country-savvy suppliers. Why? Very simply: companies can’t possibly know all the ins and outs of doing business in every single foreign market their global supply chain touches.

While an organization may develop a certain level of knowledge about man-ufacturing product lines into China, for example, what may work in China may not work in Denmark or Ghana. While some knowledge acquired in doing business in China may be applicable to Denmark or Ghana, Denmark and Ghana are essentially not China. Each country has its own unique set of trade compliance regulations and certainly each pose its own set of logistical challenges.

As a result, companies are turning to outsource providers who can offer the expertise needed to keep the supply chain moving.

“Your supplier [3PL] should have a global footprint. They need to un-derstand the region, and should have the knowledge and facilities to fix problems,” says Jack Gross, VP & GM International, Schneider Logistics. “Companies are now looking for help inland [on the ground in the foreign country]. The world has never been more open to international trade; the time is right for testing the waters once you have the right guides on board.”


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Technology is crucial.It speeds the supply chain and creates visibility.

An enterprise solution that is incorporated into a company’s transportation strategy introduces the additional benefit of being able to leverage buying power across the enterprise to help achieve maximum volume discountsfor shipping..

TECHNOLOGY:ENTERPRISE-WIDE SOLUTIONS HEIGHTEN SHIPPING EFFICIENCIES

Once solid management practices and trusted outsourced partners are in place, companies expanding their global footprints can further heighten their shipping efficiencies by the deployment of technology to help streamline logistical processes.

Today’s most powerful, best-in-breed enterprise solutions for administering all aspects of global transportation logistics are Web-based systems that per-mits close collaboration among suppliers, producers and logistics providers.

Web-based Enterprise Shipping SystemAssuming your senior management has already adopted sound global trade best practices and you have the right partners in place, it is important to note that no amount of managerial integration and partnership collaboration can replace the critical role played by information technology in the enablement of operational, logistical excellence.

While most research in the subject matter of technology-enabling global trade points to the importance of integrating an enterprise-wide web-based system into your supply chain design and strategy, you would be wise to first do your research. A recent September 2007 SAP study found that many of today’s Global Logistics Service Providers (GLSPs) are at the same point manufacturers were a decade ago: burdened with proprietary, outdated and non-scalable systems. As a result, organizations seeking to work with a GLSP must be selective and ensure a provider’s technology solution is an efficient web-based, enterprise-wide shipping system that streamlines opera-tions, achieves financial and strategic objectives and meets customer expec-tations.

What to Look for in a Global Logistics Web-Based SolutionWhen seeking a company to provide enterprise-wide global logistics solu-tions, make certain the web-based solution or services available will be in-tegrated into senior management’s overall global supply chain design. Such tools, when effectively included into your global logistics strategy, can play a mission-critical role in improving many of your operations and business processes, including but not limited to:


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LEARNING FROM OTHERS — Part I APPLIED BIOSYSTEMS GLOBAL SUPPLY CHAIN WOES

Who Applied Biosystems, a business unit of Applera Corporation, serves the life science industry and research community by developing and marketing instrument-based systems, consumables, software, and services. WhereFoster City, California

The ProblemThe company, with an installed base of approximately 180,000 instrument systems in nearly 100 countries, was unable to effectively keep up with the increased, global demand of its products due to the company’s dependence on sorely dated, un-centralized and disparate transportation management systems. The reliance of such systems hindered everything from the ability to access accurate and timely data, the shipment of dangerous goods and overall customer service and fulfillment levels.

Key ChallengesApplied Biosystems’ primary challenges included the need to:

� implement global visibility for shipping operations

� centralize systems administration

� leverage automation processes originally designed for a legacy solution

� administer dangerous goods shipping effectively

� develop systems for package tracking

Analysis FindingsOUTDATED SHIPPING SYSTEMS CAUSED YEARS OF INEFFICIENCY-RELATED EXPENDITURES & OPPORTUNITY COSTS

Applied Biosystems had endured years of inefficiency in its shipping management. These inefficiencies resulted in millions of dollars of lost opportunities for the company. Motivated by the promise of enhanced productivity and multi-million dollar cost savings, Applied Biosystems set out to overhaul their company-wide shipping processes from the ground up.

The Need for StandardizationIn addition to accessing centralized data with ease, Applied Biosystems also needed to eliminate inconsistencies in its worldwide transportation management processes. Because staff were attempting to access data and important logistical information from disparate systems, processes and shipping management services were fraught with inefficiencies that routinely cost the company thousands of wasted dollars. Standardizing and simplifying both processes and technology became a priority to improve global distribution of Applied Biosystems human health, research technologies and diagnostic products to the international marketplace.

Addressing the ProblemsThe company’s vast transportation logistics makeover began by addressing numerous business processes and technology needs in an effort to do away with obsolete systems and dated infrastructure. In their extensive effort to accurately define their requirements, Applied Biosystems determined one of the many mission-critical goals of any newly implemented shipping system would require the centralization of consistent, accurate and timely data that could be accessed from any location, 24 x 7.


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� reducing time to market for new initiatives� handling new areas of business including Internet sales� managing the distribution of outsourced manufacturing� service international markets� improving customer service levels

Collectively, when deployed in concert with global supply chain best prac-tices, enterprise solutions are designed to dramatically improve your com-petitive advantage in bottom lines in today’s global economic stage.

As your company begins the process of identifying which enterprise solution will be the best fit for your global trade initiatives, be sure to also examine the following critical requirements:

FlexibilityYou are looking for an easily customizable GUI and/or the ability to run the solution in the background, using your system’s front end to process transac-tions.

Productivity and Customer Service EnhancementsFeatures that give you the ability to dramatically reduce your shipping costs, decrease your shipping turnaround time and enhance your customer service offerings.

Global VisibilityAllows all your worldwide shipping processes and data to be accessible by authorized personnel from anywhere in the world.

Rating Engine IndependenceProvides your company flexibility in choosing the already built in, third party or carrier-supplied compliance engines that best suit your needs and preferences.

Variable Business RulesEnables you to have various business rules assigned to different stations, us-ers and sites. Database FlexibilityAbility to support both Oracle® and/or Microsoft SQL Server® databases.

SUPPORTEDCMS WORLDLINK CARRIERS - - - - - - - - - - - - - - FedEx®UPS™USPS®DHL Express®Expeditors®LTL & GenericBAX GlobalPurolator Courier®TNT ExpressExel

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LEARNING FROM OTHERS — Part 2 APPLIED BIOSYSTEMS GLOBAL SUPPLY CHAIN SOLUTION

Determination to Remedy Supply Chain InefficienciesApplied Biosystems exited its obsolete transportation management technologies and deployed CMS WorldLink as the company’s enterprise-wide global transportation logistics tool, allowing the company to standardize its shipping processes and systems configurations across numerous warehouses based on its own needs and criteria. While the tool allows for customization for site-specific needs, the standardization has allowed Applied Biosystems to do away with the inconsistencies and resource-consuming customizations of its past.

In addition to standardization, CMS WorldLink is a web-accessible live system, allowing Applied Biosystems logistics managers and team members alike to access vital shipping data when needed, no matter their location.

Deployment of CMS WorldLink Benefits� Simplified transportation management processes� Allows for site-customization without losing company-wide standardization� Reduced wasted costs; enjoyed multi-million dollar savings� Easy to use, scalable and flexible 24 x 7 solution

Applied Biosystems’ Global Supply Chain TodayTo date, Applied Biosystems has enjoyed million-dollar cost savings year after year since its implementation of CMS WorldLink. As the company continues to grow, it continues to manage its expanded global shipping operations via CMS WorldLink. Significant savings in time, money and resources have made CMS WorldLink an invaluable shipping management tool, allowing the company to better administer the worldwide distribution of its human health and biotechnology products throughout Europe, Asia and beyond.

Designed with Today’s Most Advanced TechnologiesCompatible with various MS Windows technologies including Microsoft SQL Server & Oracle Database, OLE Automation, C++, COM+, .NET, OLEDB, XML and IIS.

CMS WorldLink can easily operate with virtually any host application by using standardized templates and communication methods hosted within your environment including SAP®, Oracle Financials®, JD Edwards® or any custom ERP system, allowing you to view shipping in the context of your other functions.

CMS WorldLink provides you with the power to manage and maintain all of


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your shipping points via a single application. You will benefit by centralizing shipping history reports, location cost reporting and carrier rules, thereby significantly improving efficiency, cost savings and a standardized global shipping process regardless of location(s).

To find out how CMS WorldLink can streamline your domestic and cross-border transportation logistics, we welcome you to please download our CMS WorldLink brochure.

For additional information about CMS WorldLink or how CMS GlobalSoft can be play a key role in your organization’s global logistics success, please contact Wil Fekeci at [email protected] or go to www.cmsglobalsoft.com.


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Going Global? Logistical Factors to Consider Before Establishing Global Supply Chain Operations