Media Coverage
What Are the Top Supply Chain Issues of 2006?
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TradeBeam’s Duncan Jackson, vice president of business development
I would put realizing expectations from outsourcing and working with global suppliers at the top of the list of challenges for 2006. While many people have strong and divided opinions about globalization and outsourcing products and services, everyone will agree that these modes of business are here to stay. Nearly 30 percent of the world’s gross domestic product currently crosses borders, yet exporters and importers continue to struggle to coordinate old-fashioned, international freight, financial and regulatory processes.
Many may see the rationale for sourcing goods from far-flung locations with cheaper labor and costs, but few realize the intricacies and costs associated with such trading activities—a cost that often may negate the initial benefits of cheaper, nominal prices of imported items. Although many enterprises have made progress in improving aspects of their financial supply chains by implementing ERP or financial applications such as accounts receivable (AR), general ledger (GL), and accounts payable (AP), global trade requires a number of additional, crucial functions that are frequently absent from domestic trade, including Letters of Credit management, global trade financing, country and party risk assessment, and transaction reconciliation (settlement), to name a few.
A second challenge will be the convergence of two parallel and interrelated supply chains involved in global trade: the physical and the financial. The management of the physical supply chain has evolved from an emphasis on individual logistics functions like transportation and tracking shipments through delivery to a unified approach. In doing so, corporations have realized benefits such as shorter time to market, reduced production costs and lower inventory costs. Solutions for managing financial data and services across the supply chain have been missing from enterprise processes to date.
Finally, managing the compliance requirements placed on international supply chain practices will be a big issue this year. All of the nearly 200 countries in the world have individual governmental requirements for importing and exporting goods, where one has to account for factors like tariffs and duties, country-to-country preferences, and anti-dumping laws, with the danger of incurring hidden costs at every step. If that is not complex enough, the events of Sept. 11, 2001, have increased the scrutiny countries place on global trade, which also impacts costs adversely. Stringent new documentation and homeland security requirements are placing serious legal and financial consequences on importers and exporters for violating these constantly changing trade regulations. The burden is on the importer/exporter to know exactly what the regulations are and how to comply with them.
