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Supply Chain: Don’t Lose Your Company’s Future En Route

By: Simon Kaye
Posted: June 9, 2008, from the June 2008 issue of GCI Magazine.

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A supplier must always know the status of mission critical factors in its supply chain, even as it leaves the nuts and bolts of freight management to outside interests. That means knowing what has been shipped, what is in transit, what is due to be shipped, where freight is in the cycle and how the shipment is performing against the stated timetable. For this reason, electronic tracking protocols are essential to avoid losing shipments and a company’s future along with them. When a company knows where its goods are and why they are there, it adds much needed transparency to a process that can quickly become opaque and convoluted as materials and packaging shuttle back and forth between multitiered markets. This is particularly the case where the temptation toward misconduct and fraud, created by the rising prices of luxury goods at the consumer end, too often produces delayed or “missing” shipments.

Online electronic tracking reflects best practices in transportation, stocking and compliance. An effective computerized tracking system will offer a common language for businesses along the supply chain to capture essential product information and shipment status. The ideal program will show what has been shipped, what is in transit, what is due to be shipped, where goods are in the cycle and how the shipment is performing against the customer’s timetable. Via links to the freight shipper’s own information, customers should be able to cross-check and validate the progress and timings of shipments. The entire system should be password-protected and encrypted for added security. Finally, the system should be interactive, allowing the customer to authorize and initiate both the original transaction and any subsequent amendments, with the system providing written confirmation of such authorization.

The system will also:

  • Automatically alert manufacturers and suppliers that certain key milestones have occurred—such as loading, sailing, arrival and delivery—and, more importantly, warn about exceptions that are causing delays;
  • Transmit specific customized reports via e-mail at certain convenient times and intervals according to a producer’s request;
  • Provide online and real time updates on where a shipment is and what it consists of—right down to individual item descriptions, quantities and SKU codes;
  • Enable users to employ “real world” search criteria such as vendor or consignee identities, country of origin and destination;
  • Work with and display both estimated and actual departure and arrival dates.

What’s the Extra Edge?

Use of electronic tracking also gives cosmetics suppliers an extra edge when using Incoterms 2000, the internationally accepted definitions of trade terms. Structuring contracts of sale to use Incoterms under Group F (under which they pay for import shipping) allows importers to control, manage and track their shipments themselves—while separately allowing them to delay the point at which they record the goods into their inventory. In contrast to newer and smaller importers that generally specify Group C Incoterms (seller arranges and pays for shipping without assuming its risk), sophisticated importers prefer to use Group F terms (such as FOB, “Free on Board”).