GTM Best Practices

More and more companies are becoming aware of the need for detailed metrics to track supply chain performance, according to a recent study done by the Georgia Southern University and the University of Tennessee on issues in transportation and logistics.

“What we’re starting to see,” says [Karl Manrodt, Associate Professor at Georgia Southern], “is senior management … trying to understand what those metrics are and should be.” The desire to monitor one’s own performance, so prevalent in school, never really goes away. At the same time, “it’s important for us to communicate what’s critical … to customers and suppliers. Let’s manage to that.”

Unfortunately many supply chain teams struggle to access data in multiple sources and formats and do not have access to the latest business intelligence tools. Implementing a Performance Management solution that integrates with your supply chain visibility and trade compliance processes can give companies the insight to make better-informed strategic decisions and improve supply chain performance.

Look for a Performance Management solution that offers several important capabilities:

• A portal to schedule reports, alert users when new reports are available and to distribute polished deliverable documents.
• A dashboard to provide a consolidated view of key performance indicators and reports along with extensive personalization options.
• A complete set of  standard reports to manage key metrics such as cycle time, trading partner performance, landed cost, and data quality.
• An ability for users also have the ability to create their own customized reports.
• A web-based reporting tool to perform ad-hoc queries and multi-dimensional analyses with the ability to drill to operational details.
• Easily customize reports by dragging and dropping data, inserting calculations, and adding graphs.

For more details on the study, please read this article on SupplyChainBrain (includes a link to a video interview).

Last in my “outlook for 09″: a new priority to automate imports.  Many companies have imported for years through distributors or aligned closely with a logistics service provider that facilitated the process.  With the recent legislation around supply chain securty like Customs 10+2, many importers are realizing that they are fully accountable, but don’t feel like they have enough visibility and control over their destiny. 

Another key trend affecting importers is the degree to which they rely on logistics providers.  I have heard from many companies (especially after higher than expected rate increases) that the reliance on an LSP provided information system often limits their ability to foster competition and manage costs.   Not a surprise.  

What is needed is a system that centralizes compliance for an importer globally, then integrates the trading partner community to execute the process.  And along the way, comply with just about any trade regulation that world governments can dream up.  

Leading import automation solutions can do just that by:

• Establishing a compliant PO with respect to classification, other government agency controls, etc
• Supporting direct procurement strategies to “cut out” the middleman
• Coordinating orders with suppliers to manage ship windows and product compliance
• Gaining control over origin logistics to optimize inbound freight
• Complying with new security initiatives such as ISF
• Monitoring global fulfillment and diverting inventory as needed
• Preclearing customs and reducing brokerage fees by automating the entry process
• Controlling landed cost to pay the legally minimum amount of duty

In the last two posts, I summarized some key trends that formed in the GTM space in 2008.  With the new year, I think it is appropriate to make a few predictions.  The first is the rise of the SME.  The Small Medium Enterprise? Not quite.  Actually we see the larger market of exporters (and there are over 230,000 in the United States alone), the Small to Medium Sized Exporter start to invest in managing export compliance.  

A few trends are driving the SME and it starts with some good compelling events:

• Enforcement is up 
• Fines are up (including imprisonment)
• Regulations are not getting simpler (no 1040-EZ here)

Another interesting trend in 2008 is the maturing of the global trade compliance market (also known as Global Trade Management).  Born in the mid-90s as ITC (international trade compliance), the category has grown up with demonstrable success from early adopters and a recent surge in interest from the “early majority”.  And, the analyst community has started to ramp up coverage with various reports that attempt to dimension the category and identify the leaders.

Gartner: Developing an End-to-End Global Trade Management Functional Map

Forrester: Modern Global Trade in Tough Economic Times Requires Next-Generation Software Solutions

ARC: Global Trade Management Software Market to Grow 10.1% Annually

AMR Survey Data: The Quiet Revolution

AMR Survey Data: The Revolution becomes Evolution

Marsh: Unlocking Hidden Value in Global Trade Management

Aberdeen: Global Trade Compliance Priorities in 2008

As the Global 2000 supply chains are becoming more centralized, they are also revamping information systems to address the complexities and manage risk.  Trade compliance decisions are shifting from more tactical “how do I screen for restricted parties?”, to more strategic notions of automation across all compliance domains.  Characteristics of strategic trade compliance solution include:

• An automated export process that manages product compliance, sanctioned party screening, license management, document generation, and filing
• An automated import process that classifies products and manages admissability, establishes compliance purchase orders, manages supplier and logistics decisions at origin, visibilty to in-transit shipments, complies with new security regulations, pre-validates import entries, files entries and manages post entry reconcilliation and amendments 
• An automated trade agreement process that manages all supplier parts, establishes campaigns to solicit suppliers to certify the origin of products, and qualifies duty savings across any number of preferential trade agreements.
• Trade content that deeply integrates with the trade execution system to support a higher level of automation across a number of content categories including denied party lists, classification, regulatory controls, documents, embargoes, rules of origin, and land cost.

Having been involved in the supply chain visibility market for over ten years, 2008 was one of the most impressive years in terms of number of projects.  It seems that the generalization that SCV is simply “a feature of every application” is being tempered with the realization that a specialized information system is needed to manage complex global supply chains.  Not visibility in your TMS.  Not visibility in your WMS.  And, not that visibility that comes packaged with your ERP but doesn’t connect to any data sources outside the four walls of your enterprise.  What is to deliver true global supply chain visibility  are purpose-built solutions that exhibit the following characteristics:

• Highly configurable to map your business processes
• Bolts on to all your four wall systems like ERP, TMS, WMS
• Leverages an existing supply chain network for pre-integrated connections to carriers, forwarders, brokers, and suppliers
• Employs an expert on-boarding process to efficiently certify and manage new connections
• Applies advanced data quality management methods to cleanse and synchronize the flow of information

So it is a combination of software, network and services that allows this dog to hunt.

Now why is the SCV space taking off?  McKinsey has some interesting insights from their recent survey on managing global supply chains:

• Supply chain risk is rising rapidly
• Companies are not meeting their cost reduction and customer satisfaction objectives
• Supply chain processes are still very inefficient
• Companies are centralizing operations to get control

The most common responses to the trends influencing supply chain strategies are increasing the efficiency of supply chain processes (71 percent of executives), actively managing risks along the supply chain (56 percent), and sourcing more inputs from low-cost countries (47 percent). The degree of attention paid to supply chain processes seems prudent, as process improvements are an effective way to manage increasing complexity.

Global supply chains faced their fair share of new and existing challenges in 2007. While improving both cost efficiencies and customer-service levels remained top of mind for supply chain executives, they are now chartered with enabling new business priorities, such as support for growth through more rapid innovation, increased flexibility to respond to demand variations, and sustainability and environmental needs.

Furthermore, in 2007, global supply chain risk took center stage with stories like Mattel’s major issue with lead paint on toys and Dell’s portable battery recall, amplifying the need for mitigating the potential for supply chain disruptions. What does 2008 hold for supply chain management (SCM) and logistics? AMR Research believes that a confluence of economic, technology, and political factors will further emphasize that SCM and logistics are keys to the future success of global businesses. Specifically, here are the top ten supply chain management and logistics trends that AMR anticipates in 2008.

1. SCM and logistics technology markets enjoy healthy growth: In our supply chain spending study, twice as many companies said they will increase spending on supply chain technologies, projecting to grow their budgets by nearly 12% for 2008). The 12% growth in supply chain technology spending will target controlling costs, raising productivity, and improving customer service. Companies can no longer make do with their 10 to 15 year old SCM systems. The research shows that an application replacement cycle is in progress as competition and globalization are driving the move to newer technologies.

2. Near-shoring presents a viable alternative to low-cost country offshoring: AMR Research believes that the trend of near-shoring will continue to gather steam in 2008 for multiple reasons. Companies are discovering some hidden costs of low-cost country outsourcing ranging from the loss in their ability to be demand driven or to manage product quality and protect their brand image. Additionally, focus will remain on the goal of protecting domestic producers against unfair trade practices of countries like China and encouraging U.S. manufacturing through tax incentives, especially in this presidential election year. Expect near-shore sourcing, manufacturing, and design in the United States and in the western hemisphere to be closely analyzed as a more cost-effective–not just faster–alternative to low-cost country sourcing.

3. Best-of-breed vendors regain some lost ground from ERP competitors: In the same AMR Research Report on SCM spending, respondents were evenly divided on which category of vendors they will rely on for new technologies and replacement of existing applications. ERP vendors have gained a strong foothold in areas like demand planning and inventory management. However, users still prefer best-of-breed applications, either packaged or custom-built, in areas like transportation management, warehouse management, and network design as well as for collaborative processes such as vendor-managed inventory (VMI) that extend outside of the four walls of the enterprise.

4. SCM outsourcing alleviates the SCM talent shortage in increasingly complex global supply chains: When combined, several current industry factors are propelling the growth of logistics and greater supply chain outsourcing. A decade of staff downsizing, the globalization of supply chains, the complexity of operating today’s demand-driven networks, and the rise of the offshore, low-cost back-office outsourcing firms have naturally produced an awareness and a new level of acceptance of outsourcing. 2008 will prove to be a fertile year for outsourcing. Look for a slow expansion of additional supply chain services beyond the traditional transportation and warehousing offerings.

5. Companies manage risk for business continuity and competitive advantage: Whereas cost efficiencies, customer service improvement, inventory reductions and other fundamental goals will remain top priorities for supply chain organization, emphasis on supply chain risk mitigation will grow in 2008. Realizing that risk in global supply chains is unavoidable, companies will build a risk-conscious culture, to ensure business continuity. Leading companies will take risk mitigation a step further, building competitive advantage by continuously balancing risk and reward to expand their market presence, improve their profitability or capture bigger market share from their competitors.

6. Impressive returns on investment from current projects nudge RFID back into the spotlight: From arm’s length, the RFID application market looks somewhat listless. Closer examination shows a very different picture. Early adopters now have hands-on experience implementing RFID and a better understanding of its potential value as well as limitations. Ongoing standards development eases the concerns of those companies that fear technological obsolescence. Technology providers have been working hard to keep pace with end-user expectations. Along with tag and reader development, enterprise software applications are focused on easing management and distribution of the RFID data collected.

Look for big advances in item-level tracking that will demonstrate the unmistakable value in the technology in industries as varied as pharmaceutical, publishing, healthcare, and apparel and footwear. Already shown to be a major growth area, the use of RFID in asset tracking and management will continue to expand. We will also see exciting and innovative applications of the technology in emerging markets such as India and Brazil, where companies are defining their supply chain processes from the ground up with RFID as a foundational technology enabler.

7. Software vendors expand their managed-services offerings to deliver results: Software implementations often fail to deliver the benefits expected because oftentimes skills within the organization are insufficient to maximize the value that sophisticated technology can potentially provide. To help companies reach their goals, many software vendors and service providers are coupling domain expertise with deep application knowledge to not only conceptualize, but also actualize the benefits their software and services can bring to an organization. The menu of managed services runs the gamut from business-to-business (B2B) electronic connectivity to demand planning, forecasting, and transportation management. In fact, some of the software-as-a-service (SaaS) transportation networks and managed-services offerings are being adopted by the more mature users, suggesting that increasingly, it does not matter who presses the keys as long as process performance is being achieved.

8. S&OP technologies–not just processes–take center stage: Viewed as the make-or-break process for profitably matching demand with supply, designing sales and operations planning (S&OP) processes and building a supporting organization were high on business priority lists in 2007. But now, more companies are realizing that building S&OP excellence is constrained by their existing S&OP technologies. Look for better definition of the S&OP technology market space and wider adoption of S&OP functionality that enables fast what-if analysis, profitable demand and supply shaping, and structured internal and external user collaboration and consensus building.

9. Connectivity grows in importance as companies extend their value networks: Companies are increasingly realizing that electronic connectivity is necessary to sustain and scale up collaborative relationships with trading partners. But the cost and complexity of building this connectivity had traditionally limited the scope of integration to just a small segment of a company’s trading community. In 2008 we expect to see a growing acceptance of third-party networks, created by integration hubs and SaaS providers that enable companies to more rapidly and easily connect to a broader segment of their customer, supplier, and service provider bases. We will also see some game-changing strategies in the B2B connectivity market that will alter pricing structures and deployment options.

10. What-if analysis and simulation-based tools see growing adoption: Gone are the days when users expected a black-box optimization engine to churn their data, model their problem, and generate a definitive optimal solution. User companies are now more interested in decision-support tools that, while still using optimization techniques, can allow them to conduct scenario planning, perform what-if analysis, and compare the trade-offs among multiple options. Similarly, simulation techniques will see wider adoption as the emphasis continues to shift from the ever-elusive “single optimal solution” to a better understanding of the effect of different supply chain decisions on the top line, customer-service levels, and other business priorities.

In 2008, global companies will continue to focus on supply chains as a necessary enabler for business growth. To do that, companies will search for better strategies to manage their extended supply chains profitably. These strategies will span the deployment of technologies like RFID and S&OP and the analysis of alternative business models like both near-shoring and expanded SCM and logistics managed services. Companies will also focus on alleviating supply chain challenges that could negatively affect their long-term growth potential, including the shortage in SCM talent, limited connectivity, and increased supply chain risk in global value networks.

Source: http://www.amrresearch.com