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A Well-designed Supply Chain is No Accident

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

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To get adequate insurance coverage, importers must provide instructions to their freight forwarder. As we’ve written previously, this is possible by using free on board (FOB) incoterms, in which the importer takes control of the goods as they go onboard at the overseas port of shipment—control that includes shipping terms and insurance coverage. Choosing your own freight forwarder to handle the importing details makes FOB easy. Global forwarders have the IT systems, standardized operations and relationships with key international shippers to smooth the logistics process. Their services can be customized for use by both the smallest and largest businesses and corporations. Freight forwarders can often find creative solutions where traditional supply chain handlers see obstacles. When it comes to challenges—such as refrigeration, throughput, theft, customs and other regulations, and product tracking—freight forwarders consistently solve problems in a nontraditional way that adds value.

The Customs Conundrum

Customs duties represent another concern that unwary companies fail to include in their global sourcing. For example, the U.S. Customs and Border Protection agency (CBP) is squarely in the middle of a new regulatory requirement that stands to increase costs for importers. The SAFE Ports Act of 2006 directed the CBP to gather data about shipments imported to the U.S. that will allow the agency to better evaluate terrorism and security risks. The CBP is now finalizing rules for an Importer Security Filing (ISF) that requires importers to submit additional security-related information on their shipments at least 24 hours before the goods are loaded on board an ocean vessel. This ISF is in addition to the current 24-hour Rule requirement to provide the CBP with shipping manifest data in advance of cargo arrival.

The ISF will fundamentally alter both the timeline and manner in which import related information is provided to the CBP. As plans currently stand, the required filing must be made electronically and include 10 categories of detailed identification regarding the manufacturer, shipper, consolidator and importer, as well as information on the shipping container stuffing location and various shipment identification numbers. This information must be provided as individual line items, so that shipments that contain merchandise subject to multiple classifications will require multiple ISF submissions. In addition, the carrier must provide the CBP with two other items: a cargo stowage plan for the vessel and container status messages. The ISF requirement is being referred to as the “10+2” rule.

The party who makes the ISF will be responsible for the timeliness and correctness of the transmission, and must make every effort to update the filing if there is any change in the data while the merchandise is in transit to the United States. Although some of the required data elements can be obtained from existing purchase order systems, most companies will be required to coordinate information from several different sources to satisfy the ISF requirements. It is not certain when the ISF requirements will be final, but it is clear that they will require importers to make major changes in how they gather and report information about their shipments. Such considerations will make partnership with a technologically sophisticated freight forwarding specialist even more necessary.

Flexibility and Foresight

This discussion certainly doesn’t encompass all the key considerations that cosmetics companies should consider in designing their supply chains, but it does indicate that flexibility and foresight are essential to keep logistics problems from occurring in today’s rapidly changing logistics landscape. Problems are inevitable for the unprepared or unsophisticated company that hasn’t made supply chain design a priority. A well constructed supply chain is no accident. It requires planning and analysis that encompasses all customer interactions (from order entry through paid invoice), all product transactions, all regulatory requirements and all market interactions for the final fulfillment of each order.

Simon Kaye is founder and CEO of Jaguar Freight Services, with operations and fully integrated door-to-door freight solution networks in Europe, North America, South America, Australasia, Asia, the Middle East and Africa. E-mail: simon@jaguarfreight.com; www.jaguarfreight.com; 1-516-239-1900