Globalization offers tremendous opportunities to companies of any size or industry that can successfully provide or source products and services in dynamic markets. Globalization creates staggering opportunities in growing markets like Southeast Asia, Mexico, India, and Brazil for companies around the world. It has also ushered in a more competitive business environment. Today, whether or not a company produces or sources outside its home country, it is often competing against global organizations.
As organizations develop efficient and effective global supply chains, they can ensure a smooth supply of goods anywhere in the world and survive and thrive. Many enterprises expect their own internal transportation and logistics executives to determine how to move products freely and successfully across oceans and borders.
While it is valuable to develop a knowledge resource regarding the population, infrastructure, languages, politics, economy, customs, currencies, tax laws, and tariffs for each country that shipping routes touch, it is not enough. The variables of global transportation change faster than the knowledge can be compiled.
Taking advantage of global opportunities requires a strategy that transcends continually changing markets. To succeed in global markets, enterprises and logistics professionals must be mindful of the factors that drive change in the international movement of goods:
While some countries currently have insufficient markets and transportation infrastructures to handle fast growth, government agencies in many countries are placing greater resources toward that development. From a logistics perspective, this can include the creation and/or expansion of intermodal terminals, roads, airports, railways, and ports. Monitoring private and government investment in these initiatives is critical to the development of an effective global transportation plan.
The Global Grid
Our world is highly connected by digital and physical networks. These networks transcend physical, social, cultural, and technological borders. They help streamline international logistics, but periodic instability and volatility can still cause hindrances. Global logistics plans should prepare alternate strategies to cope with these conditions.
Views regarding the balance of strong economic growth, environmental policy, community and social responsibility, product safety, and social services vary by country and culture. These considerations often dictate the development of tariffs, duties, taxes, Customs declaration processes, and general import/export compliance. What is important to one country may not be a high priority in a neighboring region. Knowing the difference can streamline border crossings around the world.
Logistics must be part of any global business strategy to source products and grow market share. Whether a company handles global logistics internally or outsources some or all of its transportation management, they must understand the crucial role logistics will play in their ultimate success. Today, global transportation operations require robust, internet-based management and reporting tools. A company’s technology must be able to track the potential hand-offs and interactions that can comprise a global move—without appropriate technology, they could sacrifice visibility, efficiency, and profits.
Transportation management systems (TMS) automate day-to-day processes, providing organizations with greater efficiencies in their supply chains, as well as new levels of optimization not previously possible. TMS solutions are offered through licensing agreements, cloud computing models, managed services, or some combination thereof. Many can integrate on some level with an enterprise resource planning (ERP) system.
A global TMS solution can provide shippers with global visibility into the details of every shipment. Such solutions help manage bids for any method of transportation, anywhere in the world, and coordinate contracts, procurement, rates, tenders, and schedules. Globalized versions of TMS solutions can also accommodate various language, currency, tax, and tariff considerations.
Organizations should select providers based on a combination of technology capabilities and knowledge because the consequences of missing or delaying information can prove disastrous. Third party providers around the world offer varying degrees of sophistication, reliability, and robustness when it comes to TMS solutions.
Reporting and Analytics
Organizations that use TMS solutions to optimize their worldwide supply chain can also compile data and create customized reports. Developing reports, from carrier and client scorecards to carbon emissions performance and calculation of total landed costs, gives enterprises and their executive leaders more strategic intelligence regarding sourcing, manufacturing, marketing, pricing, and distribution. With powerful business analytics, companies can define their differentiators in the market, positively impact and use their supply chains, and improve customer satisfaction.
Supply Chain Visibility
Global logistics will greatly magnify the inefficiencies of spending too much time on tactical or low-value tasks. It’s not uncommon for global shipments to touch many intermediaries, each of whom has a distinct set of regulations, cultural beliefs, and IT capabilities.
Technology alone is not the answer; too many shippers have deployed TMS software, only to have it fail and drive users back to their old, laborious duties. The most successful global companies use strategies that allow for “acceptable tolerances” in their transportation networks. They rely on event management features of technology to alert operators when out-of-the-ordinary situations require attention.
In addition, effective TMS solutions and services should allow users to generate a real-time view of their global networks, and to drill down into the specifics of each shipment, such as POs, freight bills, SKUs, etc.
The ability to communicate with offshore customers or providers is a critical part of supply chain visibility. Global supply chains demand access to current information, from advance ship notices and inventory planning to purchase orders and production status updates. While there are often significant hurdles to overcome in terms of language, customs processes, time zones, and currencies, an effective TMS platform—supported by a strong strategic plan—can greatly reduce delays and other costly problems posed by international borders.
Total Landed Costs Analysis
Supply chain visibility goes beyond tracking shipment locations. It also includes understanding the actual cost of transportation. Accurately calculating total landed cost—especially as it fluctuates from a variety of global forces—moves transportation to the center of the pricing and profitability discussion, since it is crucial to helping senior leaders avoid surprises. The reason total landed costs can be difficult to determine is because of the number of factors involved—from transportation and product classification to tariffs, taxes, and returns, along with quality assurance and IT infrastructure.
Global opportunities often bring logistics and transportation to the forefront of the discussion. To capitalize on sourcing and sales in global markets—and to price goods and services successfully—an enterprise needs a supply chain solution that can connect, report, give insight, and communicate across the globe.
Supply Chain Finance
Organizations can maintain the timely flow of goods across borders by understanding international trade agreements and requirements—letters of credit, tariffs, terms of sale, and other financial considerations. All financial documentation must be in order to avoid profit-killing delays in buying, selling, and sourcing.
An integrated workflow approach can help reach global profitability. While some TMS solutions offer software platforms to integrate global inbound and outbound transportation, strategic silos can still remain in many enterprises. The information and technology are available to bridge the gaps, but the strategic intent is missing. Logistics and transportation groups should lead this unification process to create a truly global infrastructure.
Border controls and Customs procedures pose significant and costly barriers for shipments of all kinds. Automation can overcome manual data entry errors that are often the cause of significant delays and fines. Organizations must also develop processes around security, safety, and compliance in various jurisdictions to prevent unnecessary difficulties and delays, and ensure that suppliers understand and follow those procedures.
Real-Time, Dynamic Routing
Global instability and rapidly changing infrastructures in countries around the world call for dynamic routing approaches. The most efficient route in August may not be in September, since any number of factors can influence that determination. To account for all the variables, effective global transportation strategies will likely employ TMS technology, processes, and expertise, which allow for real-time agility and risk mitigation.
Even the most perfectly planned global shipment can be ruined by theft, counterfeiting, hurricanes, floods, political unrest, labor disputes, documentation errors, or mechanical problems. Overcoming these hurdles requires a strategic view of supply chain risks.
The risk management role is essential for global supply chains because preventing and managing risk associated with disruptions is more difficult on a global level than it would be regionally or locally. Even in organizations with dedicated risk management staff, questions can arise about who is responsible—headquarters, regional offices, or third party transportation providers—for predicting, tracking, and resolving disruptions, and for understanding International Commercial Terms (Incoterms®) and associated risks around contracts, liability, and insurance.
Companies must decide how much time, money, and effort should be allocated to prevention vs. response. While strategic responsibility should reside at the top of the supply chain, it is critical to ensure that relationships are strong enough with suppliers, and that all parties understand the risk priorities, prevention strategies, and response plans.
A plan should include:
Many providers in the supply chain may have little or no risk management capabilities, so identifying the relative strength of core suppliers is important. Keep senior management aware of potential risks, since these vulnerabilities can have an impact on decisions regarding where to source, manufacture, and market products. Awareness and understanding of Incoterms® can help minimize confusion and misunderstanding of trade contract responsibilities and avoid the associated, costly risks.
Developing a risk management plan that clearly spells out the responsibilities of regional offices and third party providers establishes accountability. Developing and promoting a plan will contribute to vendor selection criteria—and help all parties understand the expectations for communication and response. Rather than wonder whether they need authorization from the home office, they can take responsibility for resolving issues and communicate updates accordingly.
Determining who has the decision-making authority for different parts of the supply chain is a critical component to success. All involved parties should understand their own responsibilities as well as those of others involved—especially when there is overlap.
Globalization moves transportation to a more prominent role in any organization. Growth-oriented enterprises and organizations that source from around the world will face a continuing challenge—the added cost, complexity, and risk that come with moving raw materials or finished products across multiple borders.
With integrated systems, strategies, and processes, organizations can coordinate the efforts of Customs brokers, freight forwarders, air and ocean carriers, logistics providers, and suppliers to create an effective transportation plan. At the same time, global transportation is not an in-house operation. It requires deep cooperation and integration of all these parties—in terms of both technology platforms and strategic intent—is essential for an effective global transportation plan.
By developing systems, strategies, processes, and insights that make efficient use of both time and space, organizations can streamline communications and increase competitiveness in the global marketplace. Not all supply chains—even global ones—require the same solutions. Tailoring the level of complexity involved can mean the difference between success and failure.
Single System Architecture.
Separate TMS systems on individual continents that send data to other discrete systems on other continents do not allow a true real-time, global view of a transportation network. A truly global TMS system spans all continents with no discrete data hand-offs and provides visibility within the same operating environment without exporting and importing data into standalone systems.
Supply Chain Visibility.
From a single platform, an organization should clearly see their entire supply chain, from procurement to drill-down details on every shipment worldwide. In a truly global system, leaders can capture relevant data, analyze it, and use the information to make more sustainable business decisions that achieve both cost and service goals.
Multiple Services and Modes.
Companies should be able to see details for air, ocean, rail, and road capabilities, and obtain utilization reports for each. Customs compliance rigor should also be part of the system to manage import and export Customs activities.
A global TMS accommodates specific currency, language, tax, and tariff requirements for each country or region.
By providing statistical business intelligence insights, truly global TMS systems can support more profitable management decisions and greater customer satisfaction.