Global trade has existed forever. Still, the processes many people rely on today to move goods domestically and internationally don't match the needs of the modern world's complex supply chains.
Along those lines, up to 87% of chief supply chain officers (CSCO) are investigating ways to reengineer and optimize the end-to-end flow of goods, according to Aberdeen Group's recent report, CSCO View on Optimization: A Prescriptive Model for Global Trade. These CSCO say global trade reengineering is necessary and will involve sourcing, trade and transport rate and lane analysis, optimization from point of origin of raw materials, synchronization of end-delivery activities globally, and closing the loop on planning and execution.
Some of the inherent problems with existing practices and processes are beginning to show. For instance, Aberdeen found that while 85 8% of companies polled handle international shipments, only about 35% of top performers were able to segment their trade and transport rates and cost. Companies that optimize this piece are better able to tie together global trade rates and events, and see how costs and related activities cut across various customer, product and logistics flows, the research firm said.
What many companies and CSCOs seem to strive for is what Aberdeen calls a Prescriptive Global Trade Roadmap. Logistics, supply chain and global trade flows are becoming more sophisticated and need to evolve from the descriptive or predictive models commonly used today in business.
In a descriptive global trade approach, the main question centers on what has happened. In a predictive model, the focus shifts to looking at what could happen. A prescriptive model for global trade moves the needle towards what should happen, and examines ways to increase trade and transport efficiencies; improve agility; optimally deploy and route products, and determine the best possible outcome, among other things.
Aberdeen identifies five key strategies to move in the direction of prescriptive global trade modeling and automating the transition from big data collection to supply chain intelligence. They are:
- Deploy a periodic strategic prescriptive sourcing planning process that includes all departments and stakeholders and involves occasionally, at least annual, reassessments. Developing key metrics and intelligence across the organization should be a primary goal.
- Use knowledge and analytics to re-engineer company-wide sourcing, purchasing, trade/transport and fulfillment. The idea here is to find a way to balance and optimize costs and supply chain services to better server multi-channel customer flows.
- Improve core processes. Companies need to fully understand the scope of their cross-border trade activity and leverage landed cost tracking across trade and transport events. Doing so, allows companies to take advantage of foreign trade zone (FTZ) programs and agreements.
- Synchronize collaborative execution by better utilizing dynamic optimization tools. Develop operational intelligence and readiness, address multi-level BOM and inventory tracking capabilities, and integrate systems of record and technology roadmaps.
- Establish or renew the corporate focus. Formalize a strategic inbound optimization program that includes all costs and ensures alignment with all applicable trade regulations. Identify opportunities by role and employee across purchasing, finance, compliance, supply chain, C-level officers, and other functions.
What challenges do you face in global trade management and how are your optimizing the supply chain practices around them?