Tag / Supply chain

by Mike Poverello

SAD Story – Part 2

What is clear in regard to modern day business is the fact that ‘harmonisation’ in the international supply chain is essentially built around ‘data’. E-commerce has been around for decades, plagued by incompatibilities in messaging standards, and computer software, network and hardware architecture. However, one of the key inhibitors has been organisations and administrations having to adhere to domestic ‘dated’ legislation and so-called standard operating procedures – seemingly difficult to change, and worst of all suggesting that law has to adapt!

A lot has had to do with the means of information presentation (format) and conveyance (physical versus electronic) rather than the actual information itself. Standards such as the UN Layout key sought to standardise or align international trade and customs documentation with the view to simplifying cross-border trade and regulatory requirements. In other words, each international trade document being a logical ‘copy and augmentation’ of a preceding document.  This argument is still indeed valid. The generally accepted principle of Customs Administrations is to maximise its leverage of latent information in the supply chain and augment this with national (domestic) regulatory requirements – within a structured format.

The Single Administrative Document (SAD) was itself borne out of this need. The layout found acceptance with UNCTAD’s ASYCUDA which used it as a marketing tool (in the 1990’s) in promoting ‘What-You-See-Is-What-You-Get’ (WYSIWYG). It certainly provided a compelling argument for under-developed countries seeking first-time customs automation. Yet, the promise of compatibility with other systems and neighbouring customs administrations has not lived up to this promise.

Simultaneous to document harmonisation, we find development of the Customs data model, initially the work of the Group of 7 (G7) nations at the United Nations. Its mandate was to simplify and standardize Customs procedures Customs procedures. In 2002, the WCO took over this responsibility and after further refinement the G7 version became version 1 of the WCO Customs Data Model. Once more a logical progression lead to the inclusion of security and other government regulatory requirements. This has culminated in the recent release of WCO Data Model 3. Take note the word “Customs” is missing from the title, indicating that Version 3 gives effect to its culminating EDI message standard – Government Cross Border Regulatory (GOVCBR) message – an all inclusive message standard which proposes to accommodate ALL government regulatory reporting requirements.

Big deal! So what does this mean? The WCO’s intent behind GOVCBR is as follows –

  • Promoting safe and secure borders by establishing a common platform for regulatory data exchange enabling early sharing of information.
  • Helping co-operating export and import Customs to offer authorized traders end end-to to- end premium procedures and simple integrated treatment of the total transaction.
  • Contributing to rapid release.
  • Elimination redundant and repetitive data submitted by the carrier and the importer.
  • Reducing the amount of data required to be presented at time of release.
  • Reducing compliance costs.
  • Promoting greater Customs Co-operation.

Undertaking such development is no simple matter, although a decision in this direction is a no brainer! Over a decade’s work in the EDI space in South Africa is certainly not lost. Most of the trade’s electronic goods declaration and cargo reporting requirements remain intact, all be they require re-alignment to meet Data Model 3 standard. Over and above this, the matter of government regulatory requirements (permits, certificates, prohibitions and restrictions, letters of authority, etc.) will require more ‘political will’ to ensure that all authorities administering regulations over the importation and exportation of goods are brought into the ‘electronic space’. Some traction is already evident here largely thanks to ITAC and SA Reserve Bank willingness and capability to collaborate. In time all remaining authorities will be brought on board to ensure a true ‘paperless’ clearance process.

So, I digress somewhat from the discussion on the SAD. However, the bottom line for all customs and border authorities, traders and intermediaries is that ‘harmonisation’ of the supply chain operation follows the principal and secondary data required to administer ALL controls via a process of risk assessment, to facilitate release including any intervention required to ensure the compliance of import and export goods. As such even legislative requirements need to enable ‘harmonisation’ to occur otherwise we end up with a non-tariff barrier, uncertainty in decision-making, and a business community unable to capitalise on regional and international market opportunities. Positively, the draft SA Customs Control Bill makes abundant reference to reporting – of the electronic kind.

In Part 3, I will discuss regional ‘integration’ and the desire for end-to-end transit clearance harmonisation.

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by Mike Poverello

New Models for addressing supply chain and transport risk

Trends such as globalization, lean processes, mass travel and the geographical concentration of production have made supply chain and transport networks more efficient, but have also changed their risk profile. This World Economic Forum report, produced in collaboration with Accenture, calls for new models to address supply chain and transport risks. It highlights the urgent need to review risk management practices to keep pace with rapidly changing contingencies facing the supply chain, transport, aviation and travel sectors. Download the full report here! Source: Creamer Media

by Mike Poverello

US launches National Strategy for Global Supply Chain Security

U.S. Secretary of Homeland Security Janet Napolitano unveiled  the Obama administration’s National Strategy for Global Supply Chain Security at the World Economic Forum in Davos, Switzerland yesterday (25 January). The Department of Homeland Security (DHS) is committed to facilitating legitimate trade and travel, while preventing terrorists from exploiting supply chains, protecting transportation systems from attacks and disruptions, and increasing the resilience of global supply chains.

The National Strategy for Global Supply Chain Security outlines clear goals to promote the efficient and secure movement of goods and foster a resilient supply chain system. It also provides guidance for the U.S. government and crucial domestic, international, public and private stakeholders who share a common interest in the security and resiliency of the global supply chain. (Why call it a “National” strategy when it impacts the international community?)

DHS works with leaders from global shipping companies and the International Air Transport Association (IATA) on developing preventative measures, including terrorism awareness training for employees and vetting personnel with access to cargo. Fulfilling a requirement of the 9/11 Act, 100 percent of high risk cargo on international flights bound for the United States is screened.

In addition, through the Container Security Initiative currently operational in over 50 foreign seaports in Europe, North, Central and South America, Africa, the Middle East, and throughout Asia, U.S. Customs and Border Protection helps our partner countries identify and screen U.S.-bound maritime containers before they reach the U.S..

Following the release of the National Strategy for Global Supply Chain Security, DHS and the Department of State will lead a six month engagement period with the international community and industry stakeholders to solicit feedback and specific recommendations on how to implement the Strategy in a cost-effective and collaborative manner. You can find the Strategy by clicking here! Also, for a summary of the strategy in presentation format, click here! We wait with bated breath to find out whats going to be new here, besides more onerous reporting requirements!

Source: US Press Secretary and The White House Blog.

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by Mike Poverello

Aircargoshop – a revelation for shippers

The following piece suggests that the realisation of AEO obligations on shippers is real and will be augmented by support systems that may marginalise the highly competitive freight forwarding industry.  While there is a suggestion of cost savings due to non-reliance of shippers on traditional forwarding agents, I believe this is a short-sited view as the ‘real challenge’ lies in whether or not shippers are up to the task in meeting these obligations given their unfamiliarity with customs and transport requirements. I see many shippers having to recruit experienced customs and forwarding experts to maximise their compliance given the burgeoning obligations materializing in international shipping!

In October 2011, Aircargoshop an online booking portal provided shippers the possibility to book their own airfreight without involvement of the traditional shipping agent via the online portal Aircargoshop. This is a development that might have important consequences for the closed airfreight industry. As a consequence the online booking portal offers a lower-priced, more efficient and more transparent process for aircargo booking.

Founder Paul Parramore of Rhenus Logistics suggests that this system will bring down the cost of airfreight by as much as 50%. The Dutch Shipping Council EVO, gave the system the thumbs up and said that it will revolutionise the manner in which the freight business is currently being conducted.

Joost van Doesburg, a consultant with EVO said that in the long run restructuring of the industry is necessary in order to meet the challenges of the 21st century. Many of the forwarders will lose out, but the system is geared towards cost effectiveness and being competitive. He also added that if the forwarder is to add value to the supply chain, then he has to comply to adapting to the system rather than working against it.

On the home front, a recent article featured on the website Freight into Africa reports that the South African Cross Border Transporters Association (SACBTA) will be introducing a similar system which is currently under development for the cross border road freight industry. It will be called “ROAFEonline” or shortened form of Road Freight online which will allow the customer to book directly his freight with accredited SACBTA members hence cutting out the middleman and brokers.

All payments can and will be done online and this system will integrate with SARS EDI (Would like to hear more on this!). The consignor will only have to ensure that his goods are loaded onto the truck, the rest will be done by the system. The cost per transaction to the customer will be a paltry R100.00 in relation to a few thousand Rands normally swallowed up by the middlemen.

Based on our estimations a regular consignor can save up to R3-5 million Rands per annum which hopefully will be passed onto the consumer. With the looming integration of the SADC countries towards one stop clearing, it makes sense to further integrate the system. So whether you are in Dar es Salaam or Lubumbashi, you can now book your freight from Cape Town without having to go through a string of brokers. You also have the assurance that your cargo will be loaded by an accredited SACBTA transporter who complies to the standards set out by SACBTA. It will facilitate consolidations as any accredited transporter will at any given time be able to see what cargo is available. If Transporter A has only 20 tons, he can check which other transporter on the system has another 8 tons to Dar es Salaam for example. The transporters can then consolidate a load on the system which will happen in a shorter period of time than say for instance waiting a month to fill a tri axle.

This system will have many other functionalities that have been incorporated like online tracking, bar coding, which will give the consignor and consignee piece of mind knowing at any given time where their cargo is. It will also be accessible to border agents and customs officials who will be in a position to extract vital information on any consignment long before it actually gets to a border.

The system will go into testing around March of this year and if all goes well should be ready for implementation by the latter part of 2012 or early 2013. We hope that this will go a long way towards restructuring the industry for the better. It has long been the desire of SACBTA to allow industry players to come on board to create a better industry. However, there has been very little interest shown in transforming the industry and we feel this system will by virtue of its nature, transform the industry whether industry players are willing participants or not. Source: Freight into Africa and various own sources.

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by Mike Poverello

X-Ray Security Screening -Technologies & Global Market 2011-2016

X-Ray Security Screening Market 2011-2016Despite years of cutting edge weapon and explosives screening technology Research, Development, Test & Evaluation (RDT&E), there is no competitive modality on the market, which challenges the cost-performance of X-ray screening technologies. This is a significant drawback for security agencies and funding bodies when considering the multi-year investments which need to be costed to operate a successful and effective scanner inspection solution. The capital cost of the equipment is but one facet, one also needs to consider the HR and facilities which need to be procured to make all this work. The Homeland Security Research Corporation (HSRC) have therefore made significant improvements over the years to the scope and content of their market analysis to make visible the scope, application and longevity of such equipment.

Over the next six years, HSRC analysts forecast that, led by the USA, China and India, the global X-ray security screening market (including systems sales, service, and upgrades) will grow from $1.0 billion in 2010 to $1.9 billion by 2016.

HSRC’s latest report, is the most comprehensive review of the multibillion global X-ray security screening market available today. It analyses and forecasts the market by application, by country and by business transaction.

The report, segmented into 50 sub-markets, offers for each sub-market 2010 data and 2011-2016 forecasts and analysis. In 210 pages, 87 tables and 118 figures, the report analyses and projects the 2011-2016 market and technologies from several perspectives, including:

  • Market forecast by application: Air cargo, Airport-cabin baggage, Secured facilities, Postal items, Supply chain cargo and People.
  • National and regional markets: e.g., US, UK, Germany, France, Saudi Arabia, China, India, Japan, Korea, Malaysia, Singapore, Brazil
  • X-Ray Technologies: conventional, back-scatter, multi-view, coherent, dual energy
  • Systems Sales, post warranty service and upgrade markets
  • Competitive environment:6 leading vendors and their products
  • Market analysis: e.g., market drivers & inhibitors, SWOT analysis
  • Business environment: e.g., competitive analysis
  • Current and pipeline technologies
  • Business opportunities and challenges

At a purchase cost just shy of US$ 4,500 for this market analysis, procurement officers would do well to familiarise themselves with the WCO’s Guidelines for the Purchase and Deployment of Scanning/Imaging Equipment. While it won’t provide all the answers, it certainly outlines the key areas for evaluation. Better still, secure the services of a non-intrusive inspection expert, typically with procurement and implementation experience who can guide and recommend the most cost-effective and practical solution. These experts can also offer significant help in the development of associated organisation planning and performance structures.

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by Mike Poverello

Ports back campaign to weigh all export containers

The International Association of Ports and Harbours (IAPH) has joined the World Shipping Council (WSC) and International Chamber of Shipping (ICS) in urging the International Maritime Organization (IMO) to establish an international legal requirement that all loaded containers be weighed at the marine port facility before they are stowed aboard a vessel for export. In what has been a much publicized issue since 2008 in the maritime industry, much the same view is taken by customs administrations. Like many other changes in the supply chain, it is a lot easier said than done. Modern ports are designed and developed taking into account requirements for weight bridges, radiation portal monitors, networks to monitor vehicle and container movements in and around port precincts, and inland transportation routes. While the expense and budget for these are usually borne by the relevant port authority, would it not indeed be good if those responsible for the packing/stuffing of containers took it upon themselves to ensure the correct weight, quantity and content are properly declared?

Refer to the joint WSC/ICS paper on “Solving the Problem of Overweight Containers” as well as the ICS’s “Safe Transport of Containers by Sea”. Both are self explanatory and short enough so as not to be considered laborious. In the South African context the question of who packed the box is often unanswered given that a variety of entities could be involved in this activity. In some instances it could be a container depot operator or a freight forwarding and consolidation agent; depending on how ‘safety and compliant conscious’ the shipper wants to be. While it will still take some time before the entire supply chain becomes properly regulated and monitored, now’s the time for ‘operators’ to take stock of what might in future be a new standard. New standards mean more capital outlay with pass-on costs for which the shipper ultimately carries the can.

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by Mike Poverello

Freight forwarders’ liability is being boosted by expanding supply chains

TT Club, the international transport liability insurer, is warning that freight forwarders and other transport intermediaries face increasingly significant liability risk, particularly in emerging markets, as they take on additional supply chain services for their customers. TT Club specialises in the insurance of liabilities and equipment for multi-modal operators.

Traditional freight forwarders, who have seen the opportunity to offer extended warehousing, packaging, delivery fulfilment and even purchasing functions for shippers are not always fully aware of the liabilities for cargo loss and third-party damages that these additional tasks are opening them up to, according to Andrew Kemp, European regional director of the TT Club.

He told the Cargo and Freight Insurance Annual Conference in Moscow that as supply chains continue to develop to supply emerging markets, where the cargo owners are not always willing to invest in distribution infrastructure, the out-sourcing of such tasks will proliferate.

This could bring significant new business opportunities to companies, which had previously limited their service offerings to freight forwarding and the organisation of international transport, but these additional procedures could be complex.

“A typical new type of activity would be the packaging, for the local retail market of an item with a sales promotion attached (price discount or two for one offer). This task is straightforward in itself but brings with it risks of errors and possible damage to the items. This would be something not experienced by transport operators in the past,” he said. Source: Logisticsmanager.com

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by Mike Poverello

Reminder: People Run the Supply Chain

doesn’t this just sound so familiar? What a fine article by Chris Kane, Chief Strategy Officer of a family owned third-party logistics provider (3PL).

As the U.S. economy continues to struggle and unemployment remains high, our industry has focused on cost cutting through automation. Technology has undoubtedly helped us move more products more quickly and less expensively than ever before, but have we focused so much on automation and technology that we’ve neglected to identify how they affect the people in our supply chain?

I’m a distribution guy, so I’m the first to admit that technology provides visibility into our operations that makes my life much easier. A single report can tell me exactly where a specific load for any one of our customers is located in real-time. What it doesn’t tell me is how our people in the distribution center hustled to get the trailer loaded, even after a forklift problem, so that the driver didn’t miss his delivery window. Or how the driver’s skills helped her avoid an accident that would have destroyed the customer’s product. If I just look at that report, I miss the most important aspect of our business: the dedication of our people. When things go wrong (as they inevitably do), technology will only get us so far.

Is our industry fast paced? Absolutely. Do we need to utilize the technology available to be more efficient, more cost-effective and more competitive? Of course. But if we pursue those options exclusively, with little regard for the people running our operations, we’ve failed. Because at the end of the day, it’s the efforts of the people in the supply chain that get the product to its destination.

by Mike Poverello

Zero Tolerance – the saga of 100% scanning continues

Various opinions on this subject have been voiced over the last 3 years – the threat of sea and airborne cargo being used as ‘a delivery mechanism’ for a nuclear or terrorist attack. Besides the US calling for 100% scanning of containerised cargoes at point of origin, the reality remains that less than 4% of seaborne containers are being scanned at port of departure.

Post 9/11, the US was quick to initiate a multi-layered approach to securing America against another terrorist attack. This entailed a number of domestic and extra-territorial programmes. At the bottom of each of these lies an authoritarian distrust or question mark against the integrity of entities involved in the international supply chain. In as much as these modern-day Customs’ initiatives aim to deal with tangible and intangible threats, one can begin to question the motives used by many governments and organisations in introducing such programs.

Last year, the US postponed it’s requirement for 100% scanning of inbound boxes by at least two years because of technical and funding issues. (Lets not forget the massive outcry from foreign countries of origin who envisaged their own ports coming to a standstill). The 2014 deadline, as it stands, would require any container heading to the US to be scanned for conventional as well as radioactive threats before being loaded at a foreign port.

However, in June 2011, US Homeland Security chief Janet Napolitano went on record saying that 100% scanning was “probably not the best way to go”. She said Congress was considering a “more layered approach” to container security, a combined system of scanning, data and risk analysis, physical checks and closer co-operation with ports and countries around the world.

Could it be that the promise of mega-deals for the ‘security industry’ is under serious threat given limited success and results from these ‘supply chain’ initiatives? One hears less and less about the awarding of multi-million dollar contracts for non-intrusive equipment. Funding is a big issue, and no less an issue is the question mark which countries of origin have regarding the direct intrusion these US-domestic policies have on their local economies and supply chains.

The WCO went a long way in accommodating and addressing the question of international terrorism which in the view of many helped curbed the ‘paranoia’ which prevailed post 9/11. Still the question of motive and opportunity spurred several organisations and governments to support the many bilateral developments that ensued. The EU Commission for one was infuriated by the bilateral overtures of the CBP and EU Custom’s administrations before diplomatic agreement prevailed.

The bottom line is that a nation’s domestic policy overrides that of the wants and whims of the more affluent states. Several donor programs nowadays offer ‘security equipment’ free of charge to countries packaged with ‘capacity building programmes’ to instil the desired mentality of the donor country or agency. Traditional forms of customs control and human initiative/intuition are being cast out on the trash heap as primitive everywhere, yet there is little to show for the billions of dollars spent on anti-terrorism measures year after year. However, reading the article – Zero Tolerance – you get the impression of a little desperation on the part of the engineers and manufacturers of nuclear based security equipment – almost wishing a further nuclear calamity to prove their point! Source of article: www.portstrategy.com