Electronics companies provide products to hundreds of countries, and they acquire companies in many different countries. However, in an era of heightened security and trade risk, individual countries are developing their own customs and compliance standards, which can be expensive and difficult to navigate if you have a global presence. Fortunately, new cloud-based automation can reduce the cost and complexity of international customs management. It offers the potential to pre-clear shipments to speed them to market, shorten transit times, and minimize inventory carrying costs.
For example, Fairchild Semiconductor has completed 11 global acquisitions over a seven-year period. This placed immediate pressure on the company to enact a global trade management strategy for its supply chain that would ensure it maintained efficient and compliant transactions; it moves 17 billion units across 45 different country boundaries on an annual basis.
Fairchild worked with Amber Road, a provider of on-demand global trade management (GTM) solutions. The partnership "has enabled Fairchild to achieve global logistics processes that are 100 percent standardized worldwide, establishing a process that is easily repeatable and scalable to meet any new business need," said Bob Scribner, senior manager of global logistics for Fairchild, said in a Amber Road testimonial. "More importantly, this process supports our initiative to provide exceptional customer service and maintain outstanding customer satisfaction worldwide."
What kinds of risks do customs problems present to enterprises, and in particular, electronics companies?
Superior Essex designs, manufactures, and supplies wire and cable products. "As a manufacturer with a worldwide distribution of customers who depend on us for their supply chain needs, customs is very important to us," Shafiq Judallah, corporate logistics manager at Superior Essex, told me last year for an article in World Trade WT100 magazine (registration required).
If a border shuts down, we immediately lose part of our production capacity, since we have manufacturing facilities in the US, Mexico and Canada. This can impact the volume of goods we are able to ship to our customers -- and it makes our capital assets, such as factories from which we can't ship goods across borders, useless. Consequently, it is very essential that we efficiently process our goods through customs and that we comply with all regulations and documentation needs.
Ultimately, successfully getting through customs depends on a free flow of accurate and pertinent information, along with the ability to track it. Not having an automated system and the right people and processes in place to address an information flow that must also handle the needs of e-commerce and e-tailing makes it even more challenging to provide all the necessary customs information in a timely manner.
The rapid movement of goods from producers to consumers that especially characterizes the electronics industry requires fundamental customs elements like classifying products, generating documentation, and knowing the correct customs duties, taxes, and fees. It is also important to have a product master across all product lines, divisions, and countries that is stored in a single data repository. This averts the classic problem of "bad data in, bad data out," when people at different locations process data in ways that might fit the customs needs of their particular country but don't necessarily apply elsewhere.
Equally challenging for many companies that lack internal compliance departments is staying on top of the constant changes to customs regulations that occur in each trade country. Electronics companies can't afford these kinds of problems, because customs-delayed shipments can generate extensive product delays and lose customers.
"In today's electronics industry, fast time-to-market (TTM) and time-to-profit (TTP) is key to customer satisfaction and firm competitiveness," Elena Jean Folgo wrote in a 2008 master's thesis for the MIT Sloan School of Management. "Optimizing the product development and new product introduction (NPI) process is particularly critical for products in dynamic market segments such as consumer electronics and telecommunications." Nothing over the past six years has changed this. To the degree that cloud-based and other technology solutions can address customs issues, companies in rapidly paced industries like electronics will find their supply chain optimization easier.