Supply & Demand Chain Executive September 2014 by Supply+Demand Chain/Food Logistics

BONUS PULLOUT: Global Enabled Supply & Demand Chain Map, Version 28 September 2014 ®

Global Solutions for Supply Chain ROI

The Changing Pharma Landscape p.15

The Hospital Supply Chain p.10

Who’s Protecting Our Ports?

Opening the Door to Procurement Success

p.13

w w w.SDC E xec.co m ON THE WEB: Exclusive online features and solutions for successful supply chain operations. Content changes daily, so be sure to visit

Ideas as Good as Gold There’s more to saving money than cutting expenses. In fact, spending in the right areas of your supply chain—when done wisely—can positively impact your bottom line. Integrating innovative solutions, alternate freight options, and a broad array of services into your supply chain can help safeguard against unnecessary logistics costs.

accelerateyouradvantage.com

Global Solutions for Supply Chain ROI

2014 Educational Webinar Series WEDNESDAY, SEPTEMBER 10, 2014:

The Changing World of Procurement Over the next decade, the way procurement is executed has to change. Organizations must identify all of their business entities, buying habits, cost information, benchmarking and more to obtain more real-time data in a predictive form. Without it, there will be knowledge loss as experienced supply management professionals leave the business; customer loss; being viewed as a less favorable supplier; less financial investment from shareholders; reduced market share; and a non-sustainable business model.

https://event.webcasts.com/starthere.jsp?ei=1027421

Sponsored by:

WEDNESDAY, DECEMBER 10, 2014:

Risk Management in the Financial Supply Chain It’s true that all elements of the supply chain have inherent risk, but the financial supply chain has its own set of problems. It provides the cash flow needed to ensure the doors are kept open, the lights are kept on, the employees are being paid and products are being made and shipped. Managing cash and capital is just as important as managing relationships among supply chain partners. A breakdown in one can trigger a breakdown throughout the chain.

http://bit.ly/FinancialSupplyChain

If your company wants to be included as one of the panelists/sponsors for any of these seminars, please contact: Jolene Gulley Publisher & West Coast Sales 480-413-0354 jgulley@sdcexec.com

TO WATCH THE ARCHIVED WEBINARS, CLICK ON THE LINKS BELOW: RISK MANAGEMENT PART 1:

Global Risk Management and Supplier Visibility http://bit.ly/GlobalRiskManagement

RISK MANAGEMENT, PART II:

Are You Ready for Anything? https://event.webcasts.com/starthere.jsp?ei=1031711

The Changing World of Procurement https://event.webcasts.com/starthere.jsp?ei=1027421

Table of Contents September 2014

Volume 15

Issue 4

Elena Aliaga/Hemera/Thinkstock

INSIDE 6 Executive Memo

22 Global Focus

The Hot Button of Procurement

Why You Need Trade Compliance to Maximize Global Supply Chain Profits

Are you ready for the change? By Barry Hochfelder

8 COVER STORY

Without it, you risk fines, penalties, increased cycle times, lower revenues and poor customer service levels By Ty Bordner

10 Industry Focus The Hospital Supply Chain

The CPO’s Challenge

Adopting a holistic, procurement cycle management process

24 Case Study Getting Freight Costs and Logistics Under Control

By Gary Johnson

Making sure the right people, processes and technology are in place By Dave Bowen Unlocking indirect procurement savings—and actually making them stick—is a core challenge for every CPO. Building a roadmap to the right people, processes and technology is the answer to that challenge. More often than not, companies don’t even know overspending is happening, let alone how much. The first step is to establish a roadmap for getting indirect spend under control. This requires the right mix of people, processes and technology to manage, measure and track current spending.

13 Global Focus

Who’s Protecting Our Ports?

DSI Systems experienced a growth spurt and needed help By Carrie Mantey

There are no internationally agreed upon minimum supply chain security standards By Barry Hochfelder

26 Best Practices Rapid change is the trend in the world of 3PLs By Robert Nathan

15 Industry Focus The Changing Pharma Landscape Elimination of inefficiencies along with tighter regulatory issues make the pharmaceutical supply chain more effective By Barry Hochfelder

18 Best Practices What’s on Your Holiday Checklist? Getting your warehouse ready for shopping’s busiest season By Maria Haggerty

20 Best Practices Five Trends Driving the Movement Toward Smart Manufacturing Industry 4.0 means companies are responsible for their products throughout the supply chain By Diane Palmquist

4 Supply & Demand Chain Executive September 2014

Thriving in the Fast Lane

28 Case Study Procurement Intelligence: Should- Cost Modeling Drives Stronger Profitability

Tool provides clear understanding of the specific economics behind manufacturing a particular product or service By Omer Abdullah

34 Final Thoughts Avoiding the Guessing Game While uncertainty over conflict mineral reporting looms, companies deal with time-consuming, costly reporting By Sri Ramadas

years:

that’s 32,850 days of transportation

excellence. But at Saia, our team isn’t looking back — because we’re focused on one day in particular :

tomorrow.

That’s when, once again, complex technology will yield streamlined LTL solutions. And it’s when our forward-looking approach will still be keeping shippers ahead of the curve. That’s why we innovate every day — because that’s what we deliver tomorrow.

saia.com / 800.765.7242

September 2014 • Volume 15 • Issue 4

executive memo

The Hot Button of Procurement Are you ready for the change?

here always are issues with supply chain. The hot ones that we hear a lot about are risk management (and that will be eternal), talent management and offshoring/near-shoring/reshoring. But there’s a fourth that’s evolving so rapidly that today’s version might be unrecognizable in a decade or less: Procurement. Earlier this month, we presented a webinar called “The Changing World of Procurement.” If you haven’t heard it yet, do yourself a favor and visit our website to give it a listen. It’ll be worth an hour of your time. As I said in my introduction to the webinar, organizations must identify all of their business entities, buying habits, cost information, benchmarking and more to obtain more real-time data in a predictive form. If not, they face knowledge loss as experienced procurement officers leave the business (talent management), customer loss, being viewed as a less favorable supplier, less financial investment from shareholders, reduced market share and a non-sustainable business model. This issue of Supply & Demand Chain Executive features a couple of stories that deal with procurement. The first, our cover story, “The CPO’s Challenge: Making Sure the Right People, Processes and Technology are in Place,” begins on Page 8. In it, Dave Bowen, CEO of MarketMaker4, says more often than not companies don’t even know overspending is happening, let alone how much. He advises putting a roadmap into place that will enable you to invest in the right talent, tap specialized tools to achieve maximum results and take an integrated approach so

Barry Hochfelder

Editor Supply & Demand Chain Executive bhochfelder@sdcexec.com

procurement can achieve its goals and prove its value within the wider business. On Page 12, we narrow the procurement focus to one of the most complex verticals: healthcare. Hospital systems have the same general issues as most businesses, but they have unique regulatory and compliance requirements that add a higher level of complexity to their supply chains. Beyond traditional buyer-seller transactions, hospitals require solutions that help manage relationships, respond to regulatory obligations, and thrive in the marketplace. Gary Johnson, CMO of Vendormate recommends adopting a holistic, procurement cycle management process and tells how to go about it. We’re not done with healthcare. Pharmaceutical companies have begun to realize that having a true end-to-end supply chain is of vital importance. “Start at the doctor’s office, the hospital, Walgreen’s and CVS to understand consumption,” says Robert Martichenko, CEO of LeanCor, in our story that begins on Page 15. “What are their needs and what does pharma need to do to meet them? You need the proper lead time to have the freshest product in the hands of your customers.” Later in that same story, Brian Daleiden, VP marketing of TraceLink, tells us about the Drug Supply Chain Security Act (DSCSA), new legislation that will establish, for the first time, the foundation of a national requirement for tracking and tracing of drug products across the supply chain from pharmaceutical manufacturer to pharmacy dispenser. The end-to-end supply chain. Finally, I’m pleased to announce the latest member of our Editorial Advisory Board— Lora Cecere. I’m sure Lora, the founder and CEO of research firm Supply Chain Insights, is familiar to all of you. I’m looking forward to her advice, guidance and experience as we strive to provide solutions for all of your supply chain pain. ■

Global Solutions for Supply Chain ROI

www.SDCExec.com Published by AC Business Media Inc.

PO Box 803, 1233 Janesville Ave., Fort Atkinson, WI 53538-0803 (800) 547-7377 • www.ACBusinessMedia.com

Print and Digital Staff Publisher Jolene Gulley Editor Barry Hochfelder Associate Editor Carrie Mantey Assistant Editor Eric Sacharski Art Director Tracy Hegg Ad Production Manager Cindy Rusch Sr. Audience Development Manager Wendy Chady Audience Development Manager Tammy Steller Advertising Sales (800) 547-7377 Jolene Gulley, jgulley@ACBusinessMedia.com Stephanie Papp, spapp@ACBusinessMedia.com Editorial Advisory Board Lora Cecere, Founder and CEO, Supply Chain Insights Tim Feemster, President, Foremost Quality Logistics John M. Hill, Board of Governors, Material Handing Industry of America William L. Michels, President, ADR North America Julie Murphree, Founding Editor, Supply & Demand Chain Executive Andrew K. Reese, Former Editor, Supply & Demand Chain Executive Bob Rudzki, President, Greybeard Advisors Raj Sharma, CEO, Censeo Consulting Group Kate Vitasek, Founder, Supply Chain Visions Circulation & Subscriptions PO Box 3257, Northbrook, IL 60065-3257 (847) 559-7598, Fax: (800) 543-5055 Email: circ.sdcexec@omeda.com List Rental Elizabeth Jackson, Merit Direct LLC (847) 492-1350, ext. 18, Fax: (847) 492-0085 Email: ejackson@meritdirect.com Reprint Services Nick Iademarco, Wright’s Media (877) 652-5295, ext. 102 niademarco@wrightsmedia.com AC Business Media Inc. Chairman Anil Narang President and CEO Carl Wistreich Executive Vice President Kris Flitcroft VP Content Greg Udelhofen VP Marketing Debbie George Digital Operations Manager Nick Raether Published and copyrighted 2014 by AC Business Media Inc. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage or retrieval system, without written permission from the publisher. Supply & Demand Chain Executive [USPS #024-012 and ISSN 15483142 (print) and ISSN 1948-5654 (online)] is published five times a year: March, May, September, September and December by AC Business Media Inc., 1233 Janesville Avenue, Fort Atkinson, WI 53538. Periodicals postage paid at Fort Atkinson, Wisconsin and additional entry offices. POSTMASTER: Please send all changes of address to Supply & Demand Chain Executive, PO Box 3257, Northbrook, IL 60065-3257. Printed in the USA. SUBSCRIPTION POLICY: Individual subscriptions are available without charge in the United States, Canada and Mexico to qualified individuals. Publisher reserves right to reject nonqualified subscribers. Oneyear subscription to nonqualified individuals: U.S., $30; Canada and Mexico, $50; and $75 for all other countries (payable in U.S. funds, drawn from U.S. bank). Single copies available (prepaid only) for $10 each. Return undeliverable Canadian addresses to: Supply & Demand Chain Executive, PO Box 25542, London, ON N6C 6B2. The information presented in this edition of Supply & Demand Chain Executive is believed to be accurate. The publisher cannot assume responsibility for the validity of claims or p erformances of items appearing in editorial presentations or advertisements in the publication.

6 Supply & Demand Chain Executive September 2014

Conference | Port Tour | Networking | Exhibition | Free Seminars

Host Sponsor

14 â&#x20AC;&#x201C; 16 October 2014 CCCI, Cartagena, Colombia

Featuring

TOC Americas Conference: A New World Order Preparing for the Future of Container Shipping across Latin America & The Caribbean Expert speakers include

Robbert van Trooijen CEO Latin America & Caribbean, Maersk Line

Who attends?

Howard Finkel EVP Trade Division, COSCO Container Lines Americas

Poul Hestbaek SVP - Latin America West Coast & Caribbean, Hamburg SĂźd

Boris Leyton VP Operations & Logistics WCSA, CSAV

Richard Jordan SVP & Regional Head of Logistics Americas, Panalpina

Mario Aguilera Logistics Director, Cartulinas CMPC

Juan Carlos Hernandez Global Equipment and M&R Manager, Chiquita

Host Sponsor

Delegate Sponsors

Camila Camacho Rocha Area Manager Latin America, FloraHolland

Associate Sponsors

Conference Sponsors

Ports

Terminals

Carriers

3PLs

Shippers

Sponsorships & booths still available

TECH TOC Sponsors

Port Partner

Media Partner

Latin American Partner

www.tocevents-americas.com

Industry Partners

cover story procurement

The CPO’s Challenge Make sure the right people, processes and technology are in place By Dave Bowen

■■Budget appropriately and allow for bonuses. ■■Allow partial or full assignments, and business line experience. ■■Find other means to help grow talent within. ■■Look for cultural fits and general procurement knowledge.

nlocking indirect procurement savings—and actually making them stick—is a core challenge for every chief procurement officer (CPO). Building a roadmap to the right people, processes and technology is the answer to that challenge. The truth is, CPOs are leaving millions of dollars on the table, and therefore, it’s commonly asked how those savings can be recouped. More often than not, companies don’t even know overspending is happening, let alone how much. Indirect spend typically represents 20 to 30 percent of revenues, but refined procurement practices can save 10 to 30 percent on spend. The first step is to establish a roadmap for getting indirect spend under control. This requires the right mix of people, processes and technology to not only manage, measure and track current spend, but also to generate and tightly manage cost reduction to ensure it hits the bottom line.

Growing Talent At most organizations, the majority of attention is paid to direct procurement rather than indirect. And when indirect procurement is addressed, it’s frequently done so by generalists, not specialists, which limits efficiency and impact. A company can be led by a visionary CPO with a clear strategy, but if they are not supported by the right team of experts with deep sourcing 8 Supply & Demand Chain Executive September 2014

Put the Right Processes in Place

Medioimages/ Photodisc/Thinkstock

experience, that vision can’t be executed properly. A team without this expertise doesn’t necessarily mean that it’s not talented. Rather, this talent was channeled the wrong way, resulting in experience that may not be applicable to strategic sourcing. For example, a person may operate reactively, negotiating contract extensions with incumbent suppliers, fire-fighting as supplier performance issues crop up and catering to ad hoc spot buy requests. Consequently, the CPO does not have the adequate team skill level to elevate the sourcing and procurement function to the next level of maturity. Here are a few tips to consider when seeking the right team and how to retain them: ■■Invest in talent development and coaching subject matter experts. ■■Create a succession plan.

As the business of business accelerates, so does the process of processing. Time is money. Speed in delivering results is power. From initial supplier contracts to final accounts payable, effective procurement processes can accelerate the entire buying transaction—across markets, companies and borders. The faster and more efficiently a business can process supply chain intelligence and transactions, the more competitive it can become. If it can connect the transaction to the finance department, competitive advantage can only increase. Here are some pointers to consider when looking to establish and implement the best processes to get maximum indirect spend under management: ■■Target 85 percent spend under management. ■■Tightly integrate your sourcing and procurement organizations. ■■Analyze and benchmark indirect spend. ■■Increase the frequency of sourcing events. ■■Assign dedicated teams to run sourcing events. ■■Identify key internal stakeholders

cover story procurement Today, it is the buyer, not the seller, who determines long-term business success. Knowing where, when, and how to buy effectively and efficiently provides competitive advantage.

and develop good working relationships. ■■Assign dedicated contract and supplier management teams.

Find Technology to Pinpoint and Drive Savings Today, it is the buyer, not the seller, who determines long-term business success. Knowing where, when, and how to buy effectively and efficiently provides competitive advantage. Procurement professionals need to respond immediately to market conditions in order to protect company interests. Technology can have a big impact on efficiency, visibility and improving processes; sourcing and procurement methodologies can be greatly enhanced by developments in this area. Consider these thought starters around putting impactful technology to work: ■■Create a team and process to explore available technology.

■■Explore promising technologies, such as spend analytics, e-sourcing and tail-end spend management. ■■Integrate between technologies and sourcing and procurement teams end to end. ■■Support integration with dashboard technology. The priority is the bottom line: Be able to identify savings and impacts.

The Path to Procurement Success Procurement can, and should, make a significant difference within an organization, but it can’t be done so blindly. A roadmap must be put in place for getting indirect spend under

management under control, and core to that is having the right people, processes and technology in place. By investing in the right talent, tapping specialized tools to achieve maximum results and taking an integrated approach when it comes to processes, procurement can achieve its goals and prove its value within the wider business. ■ Dave Bowen co-founded MarketMaker4 (MM4) in 2010 and held the role of CEO. In 2013, MM4 was acquired by Xchanging and now is an operating unit of Xchanging Procurement Services, where Bowen serves as managing director for procurement services, Americas.

One break in your quality supply chain could cost you millions.

Prevent losses in productivity, efficiency and your bottom line. Take a quality leap forward.

Scan For Complimentary Supply Chain eBook

Sparta Systems provides a proven platform that manages quality-related risk across the enterprise and supplier networks to reduce the costs associated with quality events. Now is the time to gain control of every aspect of your quality management processes. Visit us at www.spartasystems.com

September 2014 Supply & Demand Chain Executive 9

best practices healthcare procurement

The Hospital

Supply Chain

Fuse/Thinkstock

Adopt a holistic procurement cycle management process

By Gary Johnson

ospitals face the same challenges most companies face on a day-to-day basis, from reducing costs to managing vendor relationships to elevating customer service. Yet regulatory and compliance requirements add a level of complexity to the healthcare supply chain. Beyond buyer-seller transactions, hospitals require solutions that help manage relationships, respond to regulations and thrive in the marketplace. In most hospitals, the supply chain remains highly manual and fragmented. Limited access to timely vendor data means that managers typically identify vendors on a one-off basis as needs arise, rather than using a readily available pre-qualified and vetted pool of potential vendors. The full procurement cycle, which is a key part of supply chain 10 Supply & Demand Chain Executive September 2014

management, includes sourcing, onboarding, contracting and daily vendor management. A new generation of vendor management processes and tools is helping unite hospital purchasing and supply chain activities under one procurement cycle umbrella, which also takes into account vendor compliance.

A Holistic Management Approach Hospitals must do more than just provide excellent patient care. They also must be well-run businesses. Adopting a holistic procurement cycle management process helps healthcare organizations achieve that goal in three ways: improved regulatory compliance, reduced costs and streamlined workflows.

Improved Regulatory Compliance Hospitals that receive Medicare reimbursement are required to confirm that their suppliers are not

on an Office of the Inspector General (OIG) excluded list, which indicates they were previously scrutinized for fraud or abuse. Failing to thoroughly vet vendors before commencing a business relationship may place hospitals at risk of steep fines. Furthermore, new Health Insurance Portability and Accountability Act (HIPAA) Omnibus rules governing electronic-protected health information (ePHI) expand the definition of business associate (BA) and increase penalties for any data breach that comes at the hands of a BA. A pilot audit by the Office of Civil Rights (OCR) determined that an average hospital can expect to have at least five data breaches per yearâ&#x20AC;&#x201D;many of which involve a BA. As a result, OCR plans to audit covered entities and BAs with a risk of fines. The hard cost of a data breach and the required clean-up actions is estimated at $233/lost patient record/ patient breach, according to the Ponemon Instituteâ&#x20AC;&#x2122;s 2013 Cost of a Data Breach study. While insurance coverage can mitigate some of the hard costs, organizations still face potential financial penalties, and the soft costs associated with damaged patient relations, community reputation, and time and resources necessary to manage a breach event caused by a BA. Finally, significant Meaningful Use payments could be at risk if effective oversight of BAs is not in place as required in Stage 1 attestation to patient data security by the covered entity.1 Still, many hospitals only identified a fraction of their BA vendors.

Healthcare organizations must ensure that oversight policies and tasks required for BA vendors are a scalable process, which begins with the credentialing of 100 percent of potential, new and current vendors. Credentialing should include: ■■Capturing tax identifications. ■■Responding to BA risk questions. ■■Disclosing vendor-physician financial relationships. ■■Providing other company-level information as part of initial registration. Then, the required checks can be performed for OIG sanctions, credit score, ownership, parent-child company relationships and more. This information can be used to support downstream processes and existing information technology (IT) assets, such as accounts payable and medical management. Emerging best practices often include policies that require all vendors—for example, consultants— to be registered and authenticated. In addition, it is recommended that monthly OIG sanction checks be performed prior to paying invoices for all current vendors.

Reduced Supply Chain Costs With reimbursements on the decline, healthcare organizations that wish to ensure future financial viability must take a closer look at their product and service expenses. Supply chain executives are in the awkward position of driving cost reductions, even though up to 30 percent of total non-labor spending may not be handled by or visible to their department. Increased visibility into all vendors and spending categories throughout an organization is the key to trimming supply costs. With spend and vendors defined, a value analysis process can be applied to select the

your supply chain to:

• Grow your Business • Improve Margins • Outperform the Competition Logility Voyager Solutions™ can help you leave the competition behind. With Logility’s proven three-pronged strategy, OUTPLAN, OUTPACE, OUTPERFORM, companies can more proﬁtably satisfy customer demand—and stay in the winner’s circle—by getting the right products at the right cost to the right place at the right time.

WWW. LOGILITY.COM September 2014 Supply & Demand Chain Executive 11

best practices healthcare procurement best products, services and vendors to meet requirements. Primary and secondary supplier agreements then can be established to gain financial and operational benefits. Once processes are in place to manage potential vendor considerations and selection, supply chain leaders can protect vendor formularies, and the associated standardization and financial goals. They can also effectively capture previously overlooked vendors through the allvendor registration process, offering the opportunity to more successfully address sourcing policy goals relative to vendor diversity. Intelligence turned into action has the potential to drive savings of 10 to 20 percent for hospitals that apply creative tactics such as: standardizing products and services, attacking shadow-spending, ensuring vendors deliver on contractual commitments, finding innovative suppliers whose solutions can improve patient outcomes and lower costs, and using diverse vendors to meet policy goals.

Streamlined Vendor-Related Workflows Few hospitals have contracting tools that enable them to easily create contracts using already gathered and vetted vendor data. Even fewer can route vendor data for authorizations and host it in a central archive where it is easily accessible by appropriate staff throughout the hospital. Most healthcare organizations also lack ways to proactively manage vendor performance against defined performance terms as part of the relationship lifecycle. With so many vendor-specific documents housed in unlinked systems throughout a healthcare organization, the need for a vendorcentric solution that eliminates manual, redundant activities is clear. 12 Supply & Demand Chain Executive September 2014

The process of registering 100 percent of vendors provides a prevetted list of diverse vendors with all certifications checked. Hospitals can then select from this pool, assured that it supports the organization’s sourcing and vendor policies. It also offers a means to identify products and services that can improve cost, quality, and patient safety, as well as identify secondary suppliers of high-priority items. Once a vendor is selected, procurement cycle management technologies can facilitate efficient onboarding by

Centrally archiving electronic contracts, along with related vendor documents, in one system enables staff to easily access the information needed to do their respective tasks. providing all the relevant company data for accounts payable, legal, compliance and other departments. By instituting an electronic contracting approval process, supply chain managers gain a workflow resource capable of routing, tracking and storing all contracts and their related data. Centrally archiving electronic contracts, along with related vendor documents, in one system enables staff to easily access the information needed to do their respective tasks.

Greater Compliance, Stronger Relationships Through a combination of process improvements and procurement cycle management technologies, hospitals can streamline vendor management. Required tasks

can be performed with scale and speed by injecting efficiencies and eliminating redundancies. Formerly siloed departments can begin to work together to strip unnecessary administrative costs from the entire procurement cycle. By capturing complete and accurate vendor information up front to feed downstream, healthcare organizations are better positioned to accomplish more with fewer resources. Even more importantly, however, a holistic approach to procurement cycle management is likely to enhance regulatory compliance by helping credential vendors, and identify and monitor all BAs, limiting an organization’s exposure to data breaches and safety risks. This approach to procurement cycle performance improvement not only facilitates sourcing and contracting, but also vendor engagement and oversight, representative credentialing and onsite access, and cost visibility. With the appropriate tools and processes, healthcare organizations can approach procurement cycle management as an end-to-end process—from initial selection to performance evaluation and renewal decisions. The end result is improved regulatory compliance, reduced costs and streamlined workflows, which ultimately lead to stronger vendor relationships and improved patient safety. ■ Gary Johnson, CMO of Vendormate, has more than 20 years of industry experience growing business-to-business (B2B) healthcare companies focused on software and devices.

1 Core Objective & Measure 15: Protect electronic health information created or maintained by the certified EHR technology through the implementation of appropriate technical capabilities – ONC’s Guide to Privacy and Security of Health Information.

alexh/iStock/Thinkstock

global focus port security

Who's Protecting our Ports? There are no internationally agreedupon minimum supply chain security standards

By Barry Hochfelder

t’s no secret that the world’s ports play a key role in the movement of goods around the globe. According to the United Nations Conference on Trade and Development (UNCTAD), about 80 percent of global trade by volume and more than 70 percent of global trade by value are carried by sea and handled by ports. In the United States alone, hundreds of billions of dollars flow through the ports. In June testimony before the Committee on Homeland Security and Governmental Affairs in the U.S. Senate, Henry H. Willis of the Rand Corp. said, “Each year, approximately $500 billion in containerized imports and $200 billion in containerized exports transit our ports as more than 12 million containers are loaded onto ships. “This productivity is the result of complex cooperation among sectors,” Willis continued. “Transportation

firms physically bring freight to and from ports via water, road and rail. Local law enforcement, the U.S. Coast Guard, and U.S. Customs ensure trade occurs safely and in accordance with U.S. laws. Banks, brokers, and freight consolidators make sure that shippers needing goods can contract with manufacturers or suppliers who have them and carriers who can transit them. These interactions make the freight supply chain of the U.S. one of the most efficient and rapid in the world.” Clearly, there is a lot to protect, and it’s a function of government, port authorities and private industry. Think of the security issues: nuclear and radiological materials, explosives, terrorism, theft, smuggling and cyber security to name just a few. Matt Frowert is director of marketing for finance and government services at Tyco Integrated Security (TycoIS). His group covers security solutions for federal government and contractors,

as well as aviation and port security. He said that access control systems are a good place to start. “You have to make sure all the people in the supply chain at the ports are properly credentialed. The Transportation Worker Identification Credential (TWIC) is a Transportation Security Administration (TSA) and Coast Guard initiative in the United States.” The TWIC program provides a tamper-resistant biometric credential to maritime workers requiring unescorted access to secure areas of port facilities, outer continental shelf facilities, and vessels regulated under the Maritime Transportation Security Act of 2002 (MTSA), in addition to all U.S. Coast Guard-credentialed merchant mariners. Those seeking unescorted access to secure areas aboard affected vessels, and all Coast Guard-credentialed merchant mariners, must obtain a TWIC. To obtain a TWIC, an individual must provide biographic and biometric information, such as fingerprints, September 2014 Supply & Demand Chain Executive 13

global focus port security sit for a digital photograph and successfully pass a security threat assessment conducted by the TSA. As of May 2014, there were 2.99 million people enrolled in the program. The MTSA was enacted by Congress as part of the U.S. implementation of the International Ship and Port Facility Security Code (ISPS). It requires vessels and port facilities to conduct vulnerability assessments, and develop security plans that may include passenger, vehicle and baggage screening procedures; security patrols; the establishment of restricted areas; personnel identification procedures; access control; and/or installation of surveillance equipment. To help organizations secure their perimeters, Frowert said, TycoIS uses what it calls a “four As” framework:

14 Supply & Demand Chain Executive September 2014

Without this global baseline, and a method of either enforcement or rewards, supply chain security is largely voluntary with little chance of truly enhancing security. assessment, access, alert and audit. “Assessment is a security review of the system, processes and people; we match them up to threats. Access is electronic locking systems for doors and other entry places, including vehicles, lobbies and turnstiles. Alert is basically a video surveillance system. Analytics triggers alerts that the operator views in real time and decides how to respond. Audit is the electronic trail of evidence: video, [misuse of a] key card to get to a restricted part of the premises or someone trying to take [the system] down. It helps law enforcement.” Unfortunately, there are no real

standards for supply chain security. The American Association of Port Authorities (AAPA), an alliance of the ports of Canada, the Caribbean, Latin America and the United States, strongly recommends a framework of minimum standards that can be adopted worldwide. The AAPA stated, “While the [Department of Homeland Security] has attempted to address supply chain security under various [U.S. Customs and Border Protection] programs, the reality is that no internationally agreed-upon minimum supply chain security standards have been established. Without this global baseline, and a method of either enforcement or rewards, supply chain security is largely voluntary with little chance of truly enhancing security.” In fact, government funding for port security programs declined from $389 million in 2008 to $100 million in 2014, Willis said during his Congressional testimony. “There is general consensus that priorities for the port security grant programs should be based on risk. Unfortunately, reliable methods for measuring risk at ports—especially terrorism—remain elusive. Yet, greater reliance on local risk assessments in the award process could make ports more secure.” AAPA stresses that more, not less, funding is necessary. “AAPA is concerned that drastic cuts in recent years to the Federal Emergency Management Agency’s (FEMA) preparedness grant programs, and in particular to the Port Security Grant Program, threaten the ability of our nation to maintain or expand our current level of security.” ■

industry focus healthcare

The Changing Pharma The elimination of inefficiencies along with tighter regulatory issues make the pharmaceutical supply chain more effective

idal/iStock/Thinkstock

Landscape By Barry Hochfelder

ike the world in which it plays a central role, the healthcare and pharmaceutical industries are evolving rapidly. In the case of pharma, the big players are really changing the way they do business. According to Robert Martichenko, CEO of LeanCor Supply Chain Group, “The big pharma companies were extremely high margin on products that were under patent. Now, with [many pharmaceuticals] coming off patent and going generic, a lot of pharma companies don’t [go generic] with them. Some even stop manufacturing them. “The new-product pipeline for big pharma companies is not robust; they’re not replacing off-patent products with another high-profit item. The industry never focused on operating costs because the margins were so high. The money went into research and new products. Now companies are saying, ‘Wow, we better focus on operating costs. It’s the only way to maintain margins that shareholders are accustomed to. What do we do?’ They did a deep dive for the first time. They were finding an incredible amount of inefficiencies, especially in inventory. It was so cash rich, inventory was never [viewed as] an evil.” But now, big pharma executives

look at all the inventory in the supply chain, along with the cash tied up with it and the waste. Obsolescence is added to transportation and warehousing costs. Martichenko suggests that having an end-toend supply chain is important in solving the issue. Pharma, like many industries, must concentrate on operational excellence. It is one of the last industries, he says, to do so. “The work we did and organizations are doing is end-toend work,” he explains. “Start at the doctor’s office, the hospital, Walgreens and CVS to understand consumption. What are their needs and what does pharma need to do to meet them? Pharma must question all the nodes [distribution points], inventory and batch sizes to connect with consumption so large inventory lasts. You need the proper lead time to have the freshest product in the hands of your customers. “Pharma companies have really

smart people working there—smart supply chain people, too. But the focus was product introductions and new product development. Now the focus is end-to-end operational excellence, a strong fill rate, on-time delivery, and inventory fulfillment with the most nodes and the least inventory. It’s the entire timeline from the customer back to the manufacturer.” Before the industry began to change, there was little emphasis on maintenance, repair and operations (MRO) or the reverse supply chain, which often led to increased waste. One of the most common areas of waste is excess inventory. What if the product was in the warehouse for 30 days and additional product comes in? Until the original is shipped, it all sits. “You could actually have 120 days of product on hand,” Martichenko says. “You have four nodes between factory and customer: factory to distribution center (DC), then DC to the wholesaler, then September 2014 Supply & Demand Chain Executive 15

industry focus healthcare wholesaler to the distributor, and then finally to the hospital, doctor or pharmacy [customer].”

Track & Trace As pharmaceuticals move along the supply chain, security is an issue. The U.S. pharma supply chain is the safest in the world, but because it’s also the largest, it’s a target for counterfeiters, drug diverters and others of that ilk, says Brian Daleiden, vice president of marketing, TraceLink, Inc. “Incidents over the last decade, such as the diversion of the cancer drug Avastin from other countries into the U.S., created a sense of urgency by the industry and lawmakers to further improve the protections in the supply chain.” The answer was the creation and passage of the Drug Supply Chain Security Act (DSCSA) in 2013. It established, for the first time, the foundation of a national requirement for tracking and tracing of drug products across the supply chain from pharmaceutical manufacturer to pharmacy dispenser. The regulation phases in starting on Jan. 1, 2015

and culminates in November 2023 with the requirement for unit-level tracing of all drug products across all changes of ownership using an interoperable electronic system. The result is enhanced patient safety as industry stakeholders, the Food & Drug Administration (FDA), and other federal and state officials work together to protect the U.S. drug supply against counterfeits, diversion,

The U.S. pharma supply chain is the safest in the world, but because it’s also the largest, it’s a target for counterfeiters, drug diverters and others. quality issues and other threats to product integrity. The act also helps unify track-and-trace regulations, says Daleiden. “There was a desire in the pharmaceutical industry to clean up what was known as a patchwork of state-level track-and-trace regulations.

Results Through Applied Intelligence® JVKellyGroup, Inc. provides cost reduction and risk mitigation solutions for some of the world’s largest organizations. By offering an integrated set of analytics, sourcing services and technology, JVKellyGroup helps ensure that a company’s spend is effectively analyzed, sourced, managed, and monitored. Why JVKellyGroup, Inc.? Clients benefit from the expertise of years of experience our consultants have in actual sourcing roles including former CPOs, VPs of Procurement and Sourcing, Buyers, Analysts and Sourcing Technology Developers. Our services will help decrease sourcing cycle time, increase potential savings capture due to expertise in commodity areas as well as improve supplier relationships and mitigate supplier risk. Experience With a team of professionals, averaging more than 15 years of hands-on, industry experience, our projects provide practical solutions and quantifiable benefits. JVKellyGroup has led engagements across a diverse range of industry verticals and worked with virtually every category of indirect spend.

email: info@jvkg.com

web: www.jvkg.com

16 Supply & Demand Chain Executive September 2014

Industries

JVKellyGroup has worked with some of the world’s largest organizations across multiple industries including: » Financial Services » Pharmaceuticals » Manufacturing » Automotive » Business Information » Government/Public Sector » Retail

Prior to DSCSA, there were a couple of dozen state-level pedigree requirements that followed varying rules, increasing costs for the industry, and creating loopholes in the U.S. supply chain that counterfeiters and diverters could exploit. So the pharma industry got together with the FDA and lawmakers to devise a single national track-and-trace standard.” DSCSA focuses on two key elements: the ability to uniquely identify the drug product, and the ability to trace or identify where a drug product is throughout the supply chain—when changes in ownership occur. There are different threats in the medicine supply chain, and if you can interrogate product integrity and the chain of custody of a drug, you can use those two elements to improve product security in the supply chain, Daleiden adds.

At the Core There are three core regulatory requirements to the DSCSA: tracing, verification and serialization. Tracing requires the traceability of drugs across all changes of ownership back to the pharmaceutical manufacturer through the generation, provision, and receipt of transaction history (TH), transaction information (TI) and transaction statement (TS) compliance documentation for each product. Verification requires that supply chain participants have systems and processes in place that allow FDA, or federal or state officials to question or interrogate stored compliance documentation about the products and their related sales transaction histories to support investigations on suspect products or recalled products. Serialization is a requirement to uniquely identify, or serialize, drug products at the unique package and sealed homogeneous case level

industry focus healthcare for originally manufactured and repackaged product. “DSCSA is being implemented in a phased approach,” explains Daleiden. “Lawmakers were aware that DSCSA would impact tens of thousands of manufacturers, wholesale distributors, pharmacies, and other pharmaceutical supply chain participants with diverse business processes and technical infrastructures. So, DSCSA regulatory requirements are incrementally rolled out, with different timelines for various features of the law and different segments of the supply chain (manufacturer, repackager, wholesale distributor, pharmacy dispenser).” Here’s a brief summary of the three-phase implementation: Phase 1 begins on Jan. 1, 2015 for tracing and verification regulation. Those affected must trace drug product changes

of ownership from manufacturer to dispenser at the unique lot or batch level; respond to requests for information or verification queries about drug products and their related supply chain transactions to support suspect product investigations, illegitimate product incident management, and recalled product issues; and archive TH, TI and TS compliance documentation for six years past the transaction date. Phase 2 extends from 2017 to 2020 for serialization and enhanced verification. Those affected must place barcodes and unique serial numbers on all drug products produced by a manufacturer or repackager at the saleable package and sealed homogeneous case level. Supply chain participants may only buy or sell drug products that were

serialized according to a phasedin date. Verification regulations are also enhanced to require the verification of the Standardized Numerical Identifier, or the National Drug Code (NDC) and serial number, by participants across the supply chain. Phase 3 starts in 2023 for unitlevel drug product traceability. Those affected must combine supply chain traceability and serialized product capabilities to establish unit-level pharmaceutical traceability across the supply chain using an interoperable electronic system. LeanCor’s Martichenko concludes, “Pharma is going at it the right way. It’s taking that smartness and passion for doing things the right way and taking it to the supply chain. I think it’s very promising.” ■

September 2014 Supply & Demand Chain Executive 17

best practice warehouses

What’s on Your

HolidayChecklist? It’s time to get your warehouse ready for shopping’s busiest season

By Maria Haggerty

hile retailers are in the midst of a busy back-to-school season, now is the time for warehouse, fulfillment and logistics providers to ready their operations for another hectic holiday shopping season. In November and December 2013, online sales increased at a rate more than double that of brick-and-mortar stores, according to ShopperTrak data. According to a recent IBM study, we can expect this holiday season to be marked by even more deliveries and online orders. While this is great for business, ill-equipped warehouses may find themselves at risk of damaging 18 Supply & Demand Chain Executive September 2014

customer loyalty and profits if orders are not shipped on time. As an added complexity, the 2014 shopping season is a historically short one. With only 26 days between Black Friday and Christmas, it’s more important than ever for warehouses to start preparing for holiday orders before the end of summer.

Creating a Warehouse Holiday Checklist As warehouses gear up for the busy holiday season, there are several must-haves to incorporate into your checklist, including: ■■Accurate Forecasting: Accurate forecasting should be a top priority for warehouses ahead of the holiday season. Without accurate predictions

for anticipated order volume, warehouses could be going into the holiday delivery season blind—a dangerous scenario for operations and retailers. To reduce risk, warehouses should build effective forecasting models for expected order volume on a daily, weekly and monthly basis during the holidays. Be sure to consider the average number of units per order, inventory arrival dates at your warehouse and types of products (e.g. electronics, toys, apparel). These calculations can determine everything from inventory stock levels and warehouse layout to the amount of storage capacity needed and how many seasonal employees to hire. ■■An Optimized Warehouse Layout: A strong warehouse layout and organization can make the holiday delivery season much less chaotic. The first step in optimizing your warehouse layout is to incorporate best practices and lessons learned from the previous holiday season. Consider whether you needed to order extra items or resources, such as trailers and storage space. If you needed extra space and resources last year, it’s very likely that you may need them again this year. Prepare additional space ahead of time and ensure that your equipment is up to date.

best practice warehouses This includes material-handling equipment, lift equipment, backup power supplies, order printers and delivery fleets. It’s better to address any issues now while you still have time to make repairs or purchase new equipment. ■■An Open Dialog with Carriers: Begin conversations with carriers well before the holiday shopping season begins. Communicate anticipated order volume and other projections to make sure carriers are prepared for the uptick in deliveries. When selecting a carrier, be sure your partner of choice has the capacity to accommodate any unexpected increases in delivery volume. It’s also advantageous to negotiate pricing in advance, while you still have time to enlist the support of another carrier at a better rate. ■■A Plan for Staffing and Resource Ramp-Ups:

Staffing skilled seasonal workers in your warehouse environment is a top challenge for most companies. Begin the hiring process in advance of the holidays. There is less competition from other employers, and it gives you adequate time to train and onboard new staff. Additionally, ask your current staff to provide recommendations for seasonal new hires. Often, the best seasonal candidates are referred by existing team members. If hiring seasonal workers is particularly challenging for your warehouse, consider offering an incentive for existing employees when a candidate they referred is hired. ■■New-Hire Training Programs: Hiring seasonal staff is just one component of

building a winning warehouse team. You also need to train new staff members so they can work efficiently and independently throughout the holiday season. An effective onboarding process can simplify the training process, and equip new staff members with the tools and knowledge necessary to succeed on their own. During the first week of employment, pair new hires with experienced staff members for at least half avday before assigning them to their own workstations. This allows them to learn the ropes in a relatively low-risk environment and provides them with a mentor when they have additional questions. ■■Organized Pick-and-Pack Stations: It’s important to prepare warehouse pick-and-pack lines well ahead of the holidays to help you handle an influx of orders. Leverage your forecasting predictions to ensure you have enough materials on hand at each pick-and-pack station. While items like tape, scanners, carts, totes and other pack station necessities may seem like a no-brainer, a lack of adequate supplies can significantly damage pick-and-pack line productivity and ultimately delay deliveries. Sort stations by type of packaging and any premium services required. Separate boxing, wrapping paper and personalized message stations so each work area is dedicated to one activity. You can also consider creating alternative pick-and-packing lines to further increase efficiency. This includes creating mini assembly lines or quick-pick lines that handle only best-selling orders. ■■A Plan B: Whether it’s a destructive winter storm, frigid

temperatures or an unexpected surge in demand, even the bestlaid plans encounter hiccups. That’s why warehouse, logistics and fulfillment providers must have a back-up plan in place to deal with unforeseen circumstances or changes in expected order volume. Consider what you may do if technical difficulties arise with equipment or employees. And if you are located in an area with cold weather and heavy snow, select a snow removal service well in advance of the winter shopping season. As we saw last holiday season, when FedEx and UPS failed to deliver packages as promised to customers on or before Christmas Day, customers are unforgiving and very vocal about their unhappy experiences, especially on social media. Don’t let your warehouse repeat past mistakes from last holiday season—have a Plan B. By developing a checklist early, warehouses can improve productivity and workflow during the holiday rush. It’s a busy time of year, but with adequate preparation and foresight, warehouses can make sure they are running efficiently, and satisfying customer and retailer expectations. Warehouses that get it right this holiday season gain market share and set themselves up for success for next year. ■ Maria Haggerty, CEO and co-founder of Dotcom Distribution, plays an integral role in developing and defining the operation, including sales and marketing, operations, finance and IT. Previously, she was an auditor at Arthur Andersen and CFO of GoodTimes Home Video.

September 2014 Supply & Demand Chain Executive 19

industry focus manufacturing

Trends Driving the Movement Toward Smart Manufacturing

Industry 4.0 means that companies are responsible for their products throughout the supply chain By Diane Palmquist

upply chain used to be about transportation. Responsibility was looked at from a regional perspective. You were responsible for goods within your slice of the cycle. Once the goods left your hands, they were out of your control. Today, supply chain is expanded and broadened—and companies must know how they are moving things end to end. They are responsible for the full trip. Sometimes you’re responsible for goods that you didn’t ship or hold in your hands. There’s more responsibility and supply chains are a high priority, often reporting to the CEO. Smart manufacturing, or industry 4.0, is changing the way companies manage the supply chain, and maintain responsibility for goods and deliveries. Here’s a look at some of the major factors behind the surge in interest in smart manufacturing.

➊ Distributed Manufacturing More companies are outsourcing their critical manufacturing processes—and their intellectual property—to third parties. Doing so 20 Supply & Demand Chain Executive September 2014

means manufacturers lose control of production schedules. This results in inventory scattered throughout the supply chain that needs to be tracked down and validated. Depending on the industry, this poses various challenges and risks, ranging from quality to safety to counterfeiting and materials specifications. A smart environment, with machines or factories plugged into a central hub

to verify production, location and ingredients can deliver new levels of transparency that timestamps the manufacturing lifecycle.

➋ Virtual Manufacturing Expansion into new markets and expanded growth overseas in places like Asia are driving manufacturers toward agile and virtual production, often closer to customers, to meet

industry focus manufacturing demand. In a smart supply chain, demand fluctuations in Asia can trigger demand signals to devices and parties all the way up to n-tier (multiple tiers in the supply chain) suppliers. In a true pull system, a signal of low inventory at a store in Beijing can ultimately trigger component production at a factory in Vietnam that was identified by predefined data analytics as the bestsuited party and location to deliver the right component at the right time and cost.

➌ Thirst for Data and Visibility A manufacturing executive recently shared a story of how his daughter could order a $20 product online and track it until it arrives at the front door. Yet the executive, who manufacturers multi-million dollar construction machinery, was unable to learn when an order for one of his company’s massive vehicles was due to arrive. We’re accustomed to real-time information in all aspects of our lives. In manufacturing, the days of manually piecing things together to know the status of an order are going away fast. No one needs an archaeological project, piecing together old news to figure out where things went wrong. They need information on how things are running in real time. Picture a network of machines, factories, and parties sending signals and data back and forth at every step within a production lifecycle. The ability to store and use that data gets us closer to real-time business.

➍ Managing by Exception It’s more important than ever to automate processes, flag issues and escalate as necessary. Straightthrough processing, auto-compliance engines and analytics tools that trigger decisions are a few of the

Picture a network of machines, factories, and parties sending signals and data back and forth at every step within a production lifecycle. The ability to store and use that data gets us closer to real-time business. ways the managing by exception concept was broadened. Machines and interconnectivity are leading the way. Smart manufacturing has a huge impact. But keep in mind, when there are problems, humans still need to intervene. With so many moving parts, it’s impossible for anyone to look at the whole picture. Technology can be used to monitor and find the problems, so supply chain experts can focus on problem-solving.

➎ 3D Printing There’s an immense amount of hype surrounding 3D printing and the technology can (eventually) completely change the industry. The entire design and development process for new products can be shortened. For example, the ability to create and print specific metal parts can reduce barriers. One of the biggest challenges in building traditional aerospace or auto parts out of metal is that it can only be cut into certain shapes. Digitally printed metal, however, can be molded into an infinite number of shapes. This is a game changer. An interesting shift already occurring today is around rapid prototyping. The ability to test new stuff and make it happen is sped up and enhanced. Digitally printing a prototype of a part or component, and testing it right away can change cycle times around designs. Looking at the big picture, 3D printing moves manufacturing further in the direction of a capitalintensive industry vs. labor. This

means more automation, more data to feed the process, and more interconnectivity between facilities, machines, computer-aided design (CAD) systems and inventory sensors throughout the network. Everything we do today gets back to two things: customer service and profitability. Companies that can harness smart manufacturing, or industry 4.0, to better hit those targets can be exponentially ahead of their peers. Machines talking to machines, and networks of ships, factories, shippers and suppliers—and all of their machines and sensors and gadgets talking to each other—opens the door to having a better handle on the end-to-end supply chain. The challenge is harnessing all of that data, making sense of it and acting on it. Global end-to-end supply chain visibility is more important than ever. It’s no longer OK to have data missing or late, and to try to piece things together like a jigsaw puzzle. Smart manufacturing brings us closer to this. But it’s not just the connections and signals: You must have the network behind it to make use of the data. ■ Diane Palmquist is vice president of manufacturing industry solutions at GT Nexus, which provides a cloud-based collaboration platform that nearly every sector relies on to automate supply chain processes on a global scale. Palmquist’s area of interest is creating supply chain technology solutions for global manufacturers. September 2014 Supply & Demand Chain Executive 21

global focus compliance

Why You Need Trade Compliance to

Maximize Global Supply Chain Profits By Ty Bordner

ithout trade compliance, a global supply chain can’t achieve operational excellence. Unexpected delays, fines and penalties associated with noncompliance can erase expected revenue gains from offshoring. Compliance is needed to deliver goods in a timely manner; maximize supply chain efficiencies; lower costs and increase revenues; and decrease cycle times and lower inventory levels. Global supply chains are more costly and complex than domestic, with more parties involved, longer lead times and higher transportation costs. According to the U.S. Department of Commerce, the average travel time for a container vessel from Asia to the U.S. is between two weeks and a month. Proper documentation, customs clearance, handling and inland shipping can add 17 to 33 days to the shipping time from most emerging market regions, and another six days once goods reach the United States. Compliance can both positively and negatively affect supply chain management efficiency, time and cost. 22 Supply & Demand Chain Executive September 2014

donskarpoCollection/iStock/Thinkstock

Without it, you risk fines, penalties, increased cycle times, lower revenues and poor customer service levels

Postponed Shipments Countries around the globe now require companies to provide shipment information before goods are shipped. Without it, shipments are delayed. In the U.S., on the import side, there is the Importer Security Filing (ISF) or 10+2, which requires containerized cargo information to be transmitted to the Customs and Border Patrol (CBP) at least 24 hours before goods are loaded onto an ocean vessel. On the export side, many governments require that the export declaration be filed before the shipment can be made. The faster a company files the record, the quicker the product ships, increasing supply chain speed. On the flip side, if a company can’t provide the required paperwork for a shipment, the cargo can’t be loaded, resulting in supply chain delays.

Furthermore, while CBP does not normally charge for cargo examinations, there still may be costs involved for the importer. For example, if your cargo is selected for examination, it is generally moved to a privately operated central examination station (CES) and unloaded for the exam. As the importer, you may be billed for the storage, movement and loading/ unloading of your freight. The cost of unloading and reloading your freight could cost several hundred dollars. U.S. Customs does not disclose its examination selection process as it would be a national security risk. However, most exams and delays are linked to missing, incomplete or misleading information.

Customs Delays Customs agencies around the world are the gates that shipments—both export and import—need to get through. These gates are potential stopping points for the goods. If the information required to clear these gates is not available at the appropriate time, then the supply chain stops.

Fines and Penalties The consequences of not complying with customs regulations can be catastrophic. In the U.S., failure to meet a customs requirement can result in monetary fines of up to $100,000 per violation, loss of trade privileges, seized merchandise and jail time. Ignorance of customs law is

global focus compliance not a valid legal defense. The specific fines and penalties vary in cost and severity depending upon whether the importer is found to be negligent, grossly negligent, or perpetuating actual fraud. Once you are found noncompliant, you are targeted for examinations of future shipments, causing further monetary costs and delivery delays.

Becoming a Trusted Trader Many countries have programs whereby the importer is rated for compliance performance. If a company has a high rating, its goods are inspected much less frequently than if it has a low rating. The U.S. has a self-certification program, the Importer Self-Assessment (ISA). If you are new to importing/ exporting, you should plan for your first few shipments to be examined until you establish a track record with customs. Beyond compliance documentation and processes, being able to demonstrate to a customs agency that a company has a secure supply chain lowers the chance of it having its goods inspected, thereby speeding up delivery times. Two examples are the Customs and Trade Partnership Against Terrorism (C-TPAT) in the United States and the Authorized Economic Operator (AEO) in the European Union. Automation If a company generates consistent and informative import and export documentation (such as the commercial invoice, packing list and shipper’s letter of instructions), it reduces the likelihood of its goods being delayed at customs. A centralized global trade management (GTM) solution automates the creation of import and export documents, minimizing rekeying errors, and enabling consistent, complete and auditable records and documentation, reducing the potential for inspections. The benefits of an automated system include the ability to leverage a single view of product information throughout the supply chain, across the enterprise and with trading partners; ensure that products are classified correctly and comply with trade, regulatory and license requirements; screen all trade partners against restricted party lists from governments worldwide; calculate and compare total landed cost to and from multiple locations; manage critical supply chain issues; and expedite resolution of issues or bottlenecks. The Use of FTAs and Duty Deferral Schemes Free-trade agreements (FTAs), foreign-trade zones (FTZs) and other duty-deferral schemes can be a source of significant cost savings for importers, as well as speed delivery times. A survey of over 300 respondents by Amber Road, World Trade, the International Compliance Professionals Association and Braumiller Schulz found that 50 percent of

companies with 10 or more FTAs in their portfolios save over $10 million annually. However, many companies forego these benefits because of the perceived effort to manually administer them. A solution that automates the supplier solicitation, qualification, and certificate management processes for importers and exporters can streamline FTA processes while minimizing associated effort. Similarly, using automation to take a holistic, integrated approach to a company’s FTZ operations can enable companies to lower importing costs, enhance inventory control and improve supply chain velocity. A global supply chain must comply with global trade regulations to maximize efficiency, reduce costs, lower cycle times and generate profits. Without proper compliance, a company risks fines, penalties, increased cycle times, lower revenues and poor customer service. ■ Ty Bordner, vice president of solutions consulting, Amber Road.

Logistix Solutions offers affordable, on-demand software solutions that help supply chain professionals analyze and optimize their logistics operations. Each of our proven software solutions are must-have tools in the logistics professional’s arsenal to save distribution costs and driver and vehicle expenses while offering superior customer service. Hundreds of supply chain professionals from Fortune 500 as well as fast-growing enterprises have used Logix for distribution network design, driver / route scheduling and transportation optimization. Our solutions are available for instant download and priced as Software-As-A-Service. You only pay for what you use.

September 2014 Supply & Demand Chain Executive 23

case study logistics

Getting Freight Costs and Logistics UNDER CONTROL

bugphai/iStock/Thinkstock

DSI Systems experienced a growth spurt and needed help getting its supply chain operations in order

By Carrie Mantey

SI Systems, Inc., a large distributor of satellite, consumer electronic equipment, furniture and appliances, experienced a growth spurt and needed help simplifying supply chain operations. Transportation Insight, a global thirdparty logistics (3PL) provider, helped streamline DSI, while preparing it for future growth.

Getting a Hold on Distribution With 31 distribution centers (DCs), freight costs and logistics issues were a nightmare. According to Dave Seibert, the senior vice president of operations for DSI Systems, Inc., “As our product mix grew into more categories and a more diverse 24 Supply & Demand Chain Executive September 2014

customer base, we needed to control costs in inventory, warehousing and logistics without sacrificing customer service. Transportation Insight worked with us to digest the data and determine the best locations for our regional DCs to accomplish all these things.” Transportation Insight analyzed DSI’s distribution network and cut the number of its DCs down to seven, which were strategically located close to end-customers. The solution aimed to simplify logistics, especially considering the diversity of delivery options—to stores, to e-retailers and direct to consumers. “Same-day shipping is a very important go-to-market strategy for DSI and quick delivery is a need our customers demand,” Seibert said. “We can currently deliver within two

business days to over 95 percent of the U.S. population base. A large portion of our customers actually receive next-day delivery at standard freight costs.” “Fewer regional DCs allows for less redundancy in inventory, especially slower moving items. Larger volume inbound to less regional DCs helps us buy in larger quantities and in full truckloads. This is a huge benefit to not only our purchasing staff, but to our vendors as well.” DSI’s business began in 1984 with just one location in Des Moines, Iowa. Three decades later, there were locations covering the country from coast to coast. However, the new nationwide distribution network still allows DSI Systems to deliver dealer orders in a swift and efficient manner.

Logistics on Lockdown “We needed to centralize our freight negotiations and have a better handle on the best carriers for the lanes we were shipping in. We also needed a good audit process, and centralized billing and payment process, in addition to reliable reporting to manage not only our costs, but also our entire logistics process,” noted Seibert. So, Transportation Insight implemented its bundled enterprise logistics solution, consisting of freight bill payment and auditing, transportation management, business

copy copy intelligence, carrier sourcing and rate negotiation, invoice processing, information technology (IT) support and reporting, to create a strategic supply chain for DSI. Because the company used smallpackage delivery carriers and shipped full truckloads, either to stores, directly to customers or to other e-retailers, Transportation Insight helped DSI with inventory control, negotiating freight rates with carriers, creating a dedicated fleet operation, implementing a transportation management system, integrating its order management system to improve visibility of pricing, real-time tracking of shipments, auditing bill payments (and in doing so found $84,000 in invoice errors), creating reports for better decision making, and more. Now, according to Seibert, “We have access to nearly any data we can dream up. Some reports we receive automatically; others we can pull on demand. “We are able to do comparison rate shopping on each order in every lane for not only the best costs, but the best time to deliver as well. Transportation Insight’s auditing process allows us to be comfortable that our agreements with the carriers are being adhered to. We also experienced a large reduction in processing costs in our payables department,” said Seibert. In summary, DSI benefited from: ■■A reduction in freight spend with decreased freight costs and an optimized supply chain network. ■■Millions in savings by reducing 31 DCs down to seven. ■■The redeployment of four people from its payment and auditing division. ■■Visibility to inbound and outbound shipments. ■■Allowance of same-day shipments. ■ September 2014 Supply & Demand Chain Executive 25

best practice 3PLs

Thriving in the

Rapid change is the trend in the world of third-party logistics By Robert Nathan

hange moves faster when we see it in the rearview mirror. In the present, global gross domestic product (GDP) is expected to grow up to 3 percent through 2015— growth that experts are calling tepid. But if you consider that global GDP approached $75 trillion in 2013, it’s easy to see big impacts on the horizon for the logistics industry. The increase in capital leads to increased consumerism and demand. Increased demand, combined with reduced trucking capacity and the ongoing driver shortage, then continues to exacerbate the industry-wide gap in supply, ultimately driving up prices. Third-party logistics (3PLs) companies and shippers already are actively filling gaps in their own service offerings through mergers and acquisitions (M&As). Though it seems impossible to imagine in today’s slow-moving transportation industry, it is my belief that, by 2020, the logistics marketplace will go from 1,500 traditional 3PLs to just 50 industry power players. To prepare for this paradigm shift, supply chain executives must understand the underlying issues currently reinventing the 26 Supply & Demand Chain Executive September 2014

Welcomia/iStock/Thinkstock

logistics industry and how to leverage these changes to their advantage. M&As will continue to define the 3PL landscape over the next five years. Far less labor-intensive than developing specialties, M&A is helping the biggest players expand into high-margin, specialized freight, as well as niche markets that were previously too small. When the fit is right, the smallest specialized shipping firms, many of which struggled with fluctuating demand, will thrive under a larger umbrella with greater resources. Thomson Reuters reported 329 merger deals in the first quarter of 2014 alone. As the shift toward intermodal and other more cost-effective transportation modes continues, larger 3PL firms will inch and eventually accelerate ahead of the competition. Big 3PL firms with diverse carrier relationships and integrated capabilities—process reengineering, lean logistics and improvement methodologies, robust technologies, and warehousing and distribution—will be one-stop-shops equipped to save customers money in all lines of business.

Technological Impacts A constant theme in the Information Age, technology drives change as 3PLs look for ways to reduce costs and streamline processes. Cloud technology and subscription-based software-as-a-service (SaaS) firms made robust software, big data and analytics accessible to industry giants and smaller players alike. Technology companies are also entering the 3PL industry, and are exploring ways to drive innovation and automation across the industry. Improved global positioning system (GPS) mapping technologies already enable real-time routing to help avoid road traffic congestion and weather-related delays. Rail transportation’s resurgence as an energy-efficient alternative to trucking led the Association of American Railroads to invest billions in sensor-equipped cars that gather data, evaluate load integrity and enhance safety. And who didn’t hear about Google’s driverless cars? What you may not know is that the company acquired a patent for an automated container-tracking system. And while Amazon’s Prime Air service is not yet officially in operation,

best practice 3pls drone usage will be a reality, particularly for same-day delivery, smaller packages and short distances.

Going the Extra Mile Last-mile partnerships continue to gain prominence, expanding the market for delivering goods directly to end-consumers in their homes. Driven by the surge in e-commerce and consumers’ desire for instant gratification, last-mile delivery is imperative for manufacturers, but it can be too costly and complex for suppliers to manage alone. Outsourcing to 3PLs gives customers the flexible timing and specialization they need to make an impression on customers—services like overnight shipping, temperature control, deliveries weighing more than 150 pounds, and assembling products or providing other services. Last-mile deliveries reflect on the product itself. A premium product should come with premium delivery. If it doesn’t, the product’s value fades in the eyes of the consumer. Outsourcing generates savings because 3PLs spread costs over multiple customers and offers transaction-based pricing to meet fluctuations in demand. This is especially attractive to “long-tail” suppliers who make their living on a variety of small-volume products.

choices now will benefit the entire industry. Pursuing excellence creates competition among 3PLs, spurring innovation and even more progress for all members of the supply chain and the market as a whole. No one knows exactly what the future holds, but if we analyze today’s data and trends, we can begin to conceptualize the future of the industry. Like any evolutionary process, adaptation is key. To compete in the future, 3PLs need to anticipate customer, consumer and market changes, and then adapt processes and services to meet their needs. These forward-thinking 3PLs will help shape the competitive landscape ahead. So the real question is, of those 1,500 3PLs currently in business, who will be the revolutionary that ends the dominance of today’s logistics provider and paves the way for the next generation? ■ Robert Nathan is co-founder and CEO of Load Delivered Logistics LLC, a technology-enabled 3PL provider. He is a board member of the Supply Chain Innovation Network of Chicago (SINC) and one of Crain’s Chicago Business’ 40 Under 40. Nathan shares his passion for logistics and technology at conferences and events.

Everything, Everywhere Distribution Effective omni-channel distribution is critical for success in today’s retail marketplace. Digital technologies like smartphones, tablets and lightweight laptops empowered consumers to shop anywhere, anytime, sending e-commerce skyrocketing with no end in sight. In 2013, U.S. online retailers accounted for 8 percent of the country’s total retail sales, with projections topping 11 percent by 2018. But with this growth comes the challenge of meeting customer’s expectations for fast, cost-effective and seamless delivery. 3PLs must conquer these challenges by embracing technology, enabling inventory visibility across channels, offering diverse and customized solutions, and anticipating trends and their impact on the supply chain. Let’s say that my predictions about industry consolidation are correct. What will the “Big 50” logistics players of 2020 be like? They’ll be experts. They’ll specialize. And they’ll brim with resources. These firms will focus on emerging trends in supply chain and e-commerce, particularly omni-channel distribution and seamless integration with retailers, as well as cutting-edge technologies. No matter the delivery modes and methods, technology-supported, collaborative business models will be a must. Choosing a forward-thinking supply chain partner who recognizes and invests in the future will lead to better service, faster deliveries and a leaner supply chain. And making solid

S O F T WA R E F O R T H E U N L O A D I N G I N D U S T R Y

(800) 438.0558 | info@inboundtechnologies.com INBOUNDTECHNOLOGIES.COM

September 2014 Supply & Demand Chain Executive 27

case study procurement

Procurement Intelligence:

Should-Cost Modeling Drives Stronger Profitability

uz Og

bak

Dik

ock

kst

hin

k/T

oc /iSt

This tool provides a clear understanding of the specific economics behind manufacturing a particular product or service By Omer Abdullah

ver the last 20 to 30 years, the procurement and supply chain space has substantially evolved and the executives running procurement organizations have, in

turn, adopted far more progressive and sophisticated tools and approaches for the execution of their strategies. Also, with the increased recognition of procurement’s direct impact on the bottom line—and ultimately, shareholder value—it’s no surprise that executives have had to

look for more sophisticated ways to reduce total costs, improve quality and obtain value out of every phase of the process. These changes have driven the need for not only more sophisticated procurement intelligence, but also technical tools, which deliver insights that allow for tangible decisions. Should-cost modeling is one such tool, providing a clear understanding of the specific economics behind manufacturing a particular alternate implications on total cost. product or service. This Building out and vetting the final cost helps the executive achieve model involved a myriad of elements, a range of benefits—from not only covering component and assembly costs, but also energy, workimproving efficiencies force, maintenance/repairs, packaging, and delivering substantial transportation and customs fees among costs savings to improved others. supplier relationships. The final should-cost model allowed Successful should-cost the company to understand the inmodeling, whether done tricacies of the cost structure for the internally or through product, enabled for an apples-to-apa specialist third party, ples comparison across suppliers, and requires the right mix of ultimately achieved the lowest total cost skills—from a thorough outcome possible (thereby increasing understanding of the profitability and shareholder value).

A CASE STUDY:

Should-Cost Modeling for a Vacuum Cleaner A major consumer goods brand wanted to better understand the economics of manufacturing a vacuum cleaner in Mexico. To achieve this objective, the company retained The Smart Cube to break down every aspect of vacuum cleaner manufacturing to understand each component’s contribution to the end price. Key to this process was thorough research, involving primary and secondary research, as well as technical analysis, allowing the team to understand and analyze the complexity of the product. For example, while some parts were procured stock from China, others were custom made and hence had

28 Supply & Demand Chain Executive September 2014

case study procurement industry, sector and commodities involved to an expertise in financial analysis and cost accounting to a solid grasp of market variables, such as taxation, regulation, tariffs, rebates and beyond. If done right, should-cost modeling helps an organization: A major consumer brand with ■■Understand the nature of significant commercial preprint individual cost elements for a needs deployed should-cost particular product or service it modeling to better understand buys—not just materials, but labor potential supply options. The and energy costs, machinery used, analysis revealed that its vendor’s shipping, etc. This drives stronger costs were more than double data- and fact-based decisions, compared to other vendors in the which lead to benefits including industry. The research, plus the lower total costs and process subsequent conversations, also improvements. identified that the supplier was ■■Make critical decisions— not intentionally over-charging from addressing make and the client, but rather still relied on buy recommendations to manual processes in an area quickly determining the optimal location to manufacture a product, be it onshore, offshore or nearshore. ■■Negotiate with suppliers. If a supplier claims that it needs to raise prices, should-cost modeling can arm the company with a sound, fact-based counter-argument and/or ensure that the cost increase is justified. ■■Structure contracts. Ensure a basis for structuring contracts. For example, formula-based pricing structures can be derived using the model’s calculations, so the key cost drivers can be directly linked to product prices. Most importantly, effective should-cost modeling should fundamentally help buyers and suppliers better understand each others’ businesses by providing a complete understanding of how pricing changes impact the supply chain. This leads to better, more informed decisions, and a stronger partnership between an organization and its supplier. ■

A CASE STUDY:

Should-Cost Modeling for Preprint Services

Omer Abdullah is a co-founder of The Smart Cube and leads its business across the Americas. He has more than 20 years of management consulting, global corporate, and industry experience across North America, Europe and Asia. Prior roles include A.T. Kearney (North America), Warner Lambert (USA) and The Perrier Group (Asia-Pacific). Abdullah has an MBA from the University of Michigan at Ann Arbor, Mich., USA and a BBA from the University of East Asia.

moving towards the digital realm. These insights enabled the client organization to better understand the supplier situation and offer them the opportunity to retain the business, but only if the supplier was prepared to invest in the technology and systems needed to innovate and remain cost-competitive. In the end, effective cost modeling allowed the two companies to have an open conversation about costs and the supplier was able to retain the business of a valuable client.

ABOUT US:

Plantensive is an authorized reseller of JDA Software solutions that specializes in JDA’s supply chain planning suite of tools, but can assist any client with any of JDA’s portfolio products. THE 5 PLANTENSIVE OPTIONS:

1345 Covey Court, Venice, FL 34293 844-597-0450 info@plantensive.com www.plantensive.com

September 2014 Supply & Demand Chain Executive 29

ershey Entertainment & Resorts bills itself as “The Sweetest Place on Earth,” but its procurement and accounts payable processes were pretty sour. The site, founded in 1927 when Milton S. Hershey separated his chocolate manufacturing operations from his other businesses, includes The Hotel Hershey, Hersheypark, The Hershey Lodge, and numerous restaurants and shops. Hersheypark is a 110-acre theme park with more than 70 rides. The hotel has 276 guest rooms, the Lodge has 665 rooms, as well as four restaurants, and there’s a 55-acre camping resort with 300 sites and a 10,500-square-foot museum. Now imagine manually matching purchasing orders (POs), receiving documents and invoices for payment. Moreover, many of these processes varied by property and division, making tracking and accountability of spend difficult. Hershey needed a procure-topay solution to meet three needs: ■■ Streamline procurement and account payable capabilities. ■■ Improve spend management and visibility. ■■ Improve the management of vendors and contracts. Hershey’s vision looked down the road to a system that could manage inventory as well. Although not an immediate requirement, the ability to handle this would be a plus.

The Solution Hershey approached the challeng30 Supply & Demand Chain Executive September 2014

Transforming Procurement for ‘The Sweetest Place on Earth’ It didn’t happen overnight, but Hershey Entertainment & Resorts achieved impressive results

ing search with a well-thought out plan. First, the company established an e-procurement team comprised of key internal stakeholders. Next, it assessed needs by surveying all employees that would be impacted by a new system. Finally, it conducted a thorough supplier research and selection process. Through a series of interviews, references and demonstrations, Hershey identified a provider to meet its needs within its budget and have the ability

to grow along with its procurement organization. Hershey’s choice for its procure-to-pay solution: the Puridiom 4.3 Enterprise Cloud Solution.

The Implementation Hershey’s procurement transformation began in mid-July 2011 and its first electronic purchase order was submitted in December 2011. This was achieved by establishing a dedicated implementation team with an e-procurement coordinator. They

Advertorial

developed a specific implementation plan, and with coordination with the Puridiom project manager, set manageable goals. Communication was mandatory and critical to success. Importantly, suppliers were involved early on in the process so that they would also be able to reap the benefits of the new procurement system. As an entertainment organization, reliable suppliers are of utmost importance. Creating the connection between the new procurement solution and suppliers was essential. Hershey developed a supplier enablement plan to help to transition suppliers into the new system through consistent and effective communications. Hershey also implemented electronic invoicing. It chose to do this one year after going live to ensure that all the groundwork was covered, users and suppliers were adequately trained and informed, and expectations would be met. The company initially worked with one supplier to test the process and make sure that all steps were being followed correctly. Carefully monitoring the process, gently reminding users of the procedures and continual training resulted in the current status of: ■■ 597 users in the system. ■■ 1,037 suppliers registered. ■■ 44 hosted catalogs. ■■ 10 punch-out catalogs (two more are in the works).

Training As with any new process, there are those who resist change. This was true for the Puridiom users and Hershey suppliers. Training was and is re-

quired for all users of the Puridiom system and users were not allowed to access the system until training was completed. Hershey found the optimal class size, and utilized the training guides and videos provided by Puridiom. The e-procurement coordinator gathered helpful tips and published these weekly, which greatly improved the user adoption rates. Hershey employed a systematic, step-by-step approach that kept communication and training at the forefront. The result was continued success with increased user adoption. The results are impressive: ■■ 2011—16 purchase orders and $8,027 spend under management. ■■ 2012—9,242 purchase orders and $12.1 million spend under management. ■■ 2013—17,670 purchase orders, $20.1 million spend under management and 2,619 electronic invoices processed.

Keys to Success The path to procurement transformation for Hershey did not happen overnight. The implementation demanded careful planning and alignment of stakeholder goals. Open communication and visibility with procurement and finance was key, as well as active and constant collaboration with all departments. Specifically, Hershey found that senior management support is a must, total company engagement is required, expectations must be tempered—do not expect to be fully automated overnight, and the benefits

For more information: www.puridiom.com

of having a procure-to-pay solution are a direct correlation of the time and effort invested in it.

The Future Hershey has a timeline defined for its procurement success. The next steps include the implementation of administrative check requisitions and the Puridiom Budget module.

About Puridiom Puridiom, a leader in supply chain, offers innovative technology solutions, industry-specific strategies and best-practice expertise to achieve best-in-class results. Puridiom transforms procurement and accounts payable operations, and delivers real savings, control, compliance and accountability to spend activity. Puridiom serves many global organizations within diverse industries, including energy, insurance, financial, entertainment, government, healthcare and non-profit. Solutions and services include standalone modules, a comprehensive procure-to-pay suite, cloud/softwareas-a-service (SaaS) and on-premise deployment platforms, and business process outsourcing options.

About Hershey Entertainment & Resorts Hershey Entertainment & Resorts is an entertainment and hospitality company dedicated to preserving the legacy of Milton S. Hershey. It is a privately held Pennsylvania corporation. There are currently 1,650 fulltime employees, and 7,400 part-time and seasonal employees.

For more information: www.hersheypa. com September 2014 Supply & Demand Chain Executive 31

Advertorial

‘Time is Money’– And Intermodal Can SAVE YOU BOTH Many shippers don’t understand the process and opportunity of shipping into and out of Mexico By Dan Beers and Ben Enriquez,

he U.S.–Mexico border is one of the busiest and most economically important borders in the world, with nearly a billion dollars’ worth of goods crossing each day—80 percent of which are crossing by truck or train, according to the U.S. Department of State. Driving this trend are manufacturers and CPG companies that are seeking out Mexico as the preferred location for near-sourcing their operations. A growing number of U.S. retailers have begun opening stores in Mexico to grow their customer base and drive profits by capitalizing on the country’s developing middle class.

Land (and lanes) of Opportunity? Mexico has presented significant growth and cost savings opportunities for many companies looking to: ■■Decrease time-to-market ■■Reduce inventory space ■■Speed up cash-to-cash cycles ■■Cut transportation costs This low-hanging fruit has led to operational efficiencies for companies doing business in Mexico—yet for many, there is still significant untapped opportunity by using intermodal. To take advantage of the reduced transportation costs and time savings afforded by rail, shippers are starting to convert their domestic 32 Supply & Demand Chain Executive September 2014

shipments from over-the-road modes to intermodal. Many shippers still don’t fully understand the process and opportunity of shipping into and out of Mexico using multiple transportation modes. This hesitation has also harbored concerns from some shippers that view intermodal as a slower, lower quality service. However, cross-border opportunities have changed over the last few years to allow for seamless transportation of goods and quicker service at lower costs.

Intermodal Benefits Abound When shipping by truck alone, wait time at the border can vary from a couple of hours to several days. This is due to both the large volume of trucks going across the border and the lengthy inspection processes required by U.S. and Mexican Customs. In contrast, there are multiple time and cost benefits to shipping via rail: Wait time can be significantly reduced, if not avoided, as containers are not subjected to the same inspections as OTR trucks. Therefore, containers will never have to be inspected at the border when moving inbound into Mexico,

and companies can ship door-to-door without their products ever having to be unloaded for inspection. On average, rail is four times more fuel efficient than over-the-road truck, and each ton-mile of freight moved by rail reduces greenhouse gas emissions by 75 percent, says the Association of American Railroads. Shippers certainly should be aware of how to take advantage of the opportunities and benefits presented by intermodal, allowing them to bypass border crossing issues with customs and congestion at the border while reducing transportation costs.

About Transplace Dallas-based Transplace is a nonasset, North America-based 3PL offering manufacturers, retailers, chemical and consumer packaged goods companies the optimal blend of logistics technology and transportation management services. Capabilities include Transportation Management Services, Intermodal, Brokerage and SaaS transportation management solutions supplemented by supply chain network planning and design, transportation procurement and consulting services.

For more information: www.transplace.com

CROSS-BORDER SHIPPING SOLUTIONS FROM THE NORTH AMERICAN 3PL LEADER FOLLOW US

DOWNLOAD THE CROSS-BORDER EXECUTIVE BRIEF

WATCH THE CROSS-BORDER VIDEO

facebook.com/transplace

transplace.com info@transplace.com

twitter.com/transplace

1.888.445.9425

linkedin.com/company/15678

final thoughts conflict minerals reporting

AVOIDING THE

GUESSING GAME

While uncertainty over conflict mineral reporting looms, companies must deal with time-consuming, costly reporting By Sri Ramadas

hile the June 2 deadline came and went for the conflict minerals ruling, many companies still are uncertain about how to ensure compliance. Conflict mineral reports are mixed, with Apple, Hewlett-Packard and Intel submitting detailed reports, while others are being described as vague. Some, such as Tesla Motors Inc., reported that they are having difficulty determining the source of raw materials used in products due to the complexity and scope of the global supply chain. About 70 percent of the world's supply of tantalum (and large amounts of tin, gold, copper and cobalt) comes from the conflictridden Democratic Republic of Congo (DRC) in which armed groups are believed to be financing conflicts, says the U.S. Geological Survey. A key challenge with publicly held companies in reporting the origin of tantalum, tin, tungsten and gold (3TG) minerals is that they are often smuggled out of the country, making tracing origins even more difficult and prompting some companies to list suppliers as unknown. Compounding this issue is that todayâ&#x20AC;&#x2122;s supply chains can contain hundreds of suppliers. Apple Inc. noted 205 smelters and refiners in its report. As a result, many companies 34 Supply & Demand Chain Executive September 2014

say that they are spending more time and money to develop conflict minerals reports than estimated by the Securities & Exchange Commission (SEC), which projected the total cost to companies at $3 to $4 billion in the first year and $200 to $600 million in subsequent years. While companies were expected to spend about 480 hours, on average, to complete a report, many say that they have spent far more, including traveling abroad to inspect supplier facilities and practices. While privately held companies arenâ&#x20AC;&#x2122;t required to report to the SEC, even they are being asked to trace their supply chains and do a reasonable country-of-origin inquiry by their clients that are. Publicly held companies need to first determine which of their products contain 3TG minerals. Then, they must make inquiries to suppliers to determine origin, and report reasonable inquiry processes and any additional due diligence. The depth of supply chains can make it challenging to get responses and verify information, including identifying the right person and assessing if he or she has sufficient knowledge to understand requirements. Those companies that do not adequately disclose information or are found to be purchasing metals from the DRC may risk negative public sentiment. Some consumer groups

offer company rankings of those making efforts to produce conflictfree minerals in their products, providing information for consumers to make more responsible purchasing decisions. When it comes to reporting on conflict minerals, software can greatly streamline and facilitate due diligence research and reporting. Companies can easily upload and maintain bills of material; link suppliers to end products; perform risk assessments; and use templates to easily solicit responses that can be received, stored and used for audit purposes in a central database. While companies wait for feedback on their conflict minerals reports and any repercussions, time can only tell the impact of the regulations and the level of accountability to which they are held. Since they are open to greater scrutiny, many companies are finding it prudent to set thorough procedures sooner rather than later, while there may still be room to attain maturity and simplify processes. â&#x2013; Sri Ramadas, senior vice president of projects and services for Netwin Solutions, has 20 years of information technology (IT) experience in business development, account management, project management and product implementation management. His company is online at www.gtkonnect.com.

Looking for ways to impact your company’s bottom line? We can help. Supply & Demand Chain Executive magazine is solutionsbased intelligence for supply chain ROI. We deliver missioncritical editorial to executives actively searching for solutions to their supply chain challenges.

Global Solutions for Supply Chain ROI

Qualified international subscribers can receive the publication for FREE by signing up for the digital magazine, SIGN UP TODAY with promo coce “Intlsub”

http://tinyurl.com/7re9dpt

Index of Advertisers Blue Ridge

www.blueridgeinventory.com Patrick Ford 404-214-0856 patrick.ford@blueridgeinventory.com

C.H. Robinson. . . . . . . . . . . . . . . . . . . . . . . . 2

www.chrobinson.com 800-323-7587 solutions@chrobinson.com C.H. Robinson is a third-party logistics (3PL) provider that understands how to make global supply chains of all sizes smarter and more competitive. With worldwide transportation services, produce sourcing and supply chain services, the company employs more than 11,000 employees throughout the world.

Cass Information Systems, Inc. . . . . . . . 14 www.cassinfo.com 314-506-5500 cass@cassinfo.com

E2open, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 17 www.e2open.com C. Sean Rollings 650-645-6594 sean.rollings@e2open.com E2open is the leading provider of cloud-based, ondemand software solutions, enabling enterprises to procure, manufacture, sell, and distribute products more efficiently through collaborative planning and execution across global trading networks.

Emirates SkyCargo. . . . . . . . . . . . . . . . . . 36 www.skycargo.com From Emirates SkyCargo’s location at the crossroads of Europe, Africa and Asia—you can reach more than one and a half billion customers in less than eight hours with multiple destinations and a young, wide-bodied fleet.

EXTOL International . . . . . . . . . . . . . . . . . 25 www.extol.com Peter Harper 570-628-5500 info@extol.com EXTOL International provides end-to-end integration software and services that easily allow enterprises to connect with their customers and trading partners. Learn how EXTOL integration can decrease your time to revenue, control costs and accelerate growth.

GT Nexus. . . . . . . . . . . . . . . . . . . . . . . . 20, 21 www.gtnexus.com Mark Mirsky 510-808-2222 information@gtnexus.com GT Nexus provides the cloud-based collaboration platform that leaders in nearly every sector rely on to automate hundreds of supply chain processes on a global scale, across entire communities.

Inbound Technologies . . . . . . . . . . . . . . . 27 www.inboundtechnologies.com Ryan Howard 318-237-2374 ryan@inboundtechnologies.com

Index of Advertisers NetSuite

www.netsuite.com/wholesaledistribution 650-627-1000 sales@netsuite.com

Plantensive. . . . . . . . . . . . . . . . . . . . . . . . . 29 www.plantensive.com Ben Kreibel 844-597-0450 info@plantensive.com

Puridiom . . . . . . . . . . . . . . . . . . . . . . . . 30, 31

Intesource, Inc.

www.intesource.com Kelly Deacon, Director of Marketing kdeacon@intesource.com

www.puridiom.com Al Jacobs 800-388-1415, ext. 103 Puridiom offers the most comprehensive all-in-one procureto-pay solution available on cloud and on-premise platforms. For easy-to-use technology, industry-specific strategies and procurement experience that works for and with you, go to www.puridiom.com.

JVKellyGroup, Inc.. . . . . . . . . . . . . . . . . . . 16

RGIS, LLC

Logility, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 11

Saia, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

www.jvkg.com Aldo Forlini 631-427-2888 aforlini@jvkg.com

www.logility.com Lee White 800-762-5207 info@logility.com Logility provides a supply chain suite featuring advanced supply chain analytics, demand, inventory and replenishment planning, sales and operations planning (S&OP), manufacturing planning and scheduling, supply and inventory optimization, retail merchandise planning and allocation, and transportation planning and management.

Logistix Solutions. . . . . . . . . . . . . . . . . . . 23

www.rgis.com Mike Day 800-551-9130 mday@rgis.com www.saia.com Jeannie Jump 770-232-4069 jjump@saia.com Saia, Inc. offers a range of less-than-truckload, non-asset truckload and logistics services through three service groups, the primary of which operates 147 terminals in 34 states, and is home to the industry-exclusive Customer Service Indicators and Xtreme Guarantee.

Sparta Systems, Inc.. . . . . . . . . . . . . . . . . . 9 www.spartasystems.com Adam Berman 609-807-5228 adam.berman@spartasystems.com

St. Onge Company

www.stonge.com Paul Spohn 717-505-8010 pspohn@stonge.com

Global Solutions for Supply Chain ROI

SYSPRO

www.syspro.com Linda Ramirez 714-437-1000 or 800-369-8649 info@us.syspro.com

Thrive Technologies, Inc. www.thrivetech.com Rick Morris 770-222-8599, ext. 106 rmorris@thrivetech.com

Transplace . . . . . . . . . . . . . . . . . . . . . . 32, 33

www.transplace.com Kecia Gray 972-731-4793 kecia.gray@transplace.com Transplace is the North American third-party logistics (3PL) and technology company committed to helping manufacturers, retailers, and distributors reduce costs and improve service. Let us partner with you to provide solutions for 3PL, intermodal and freight brokerage services.

The Global Enabled Supply And Demand Chain Map A map with the solutions and services that will give your supply chains a competitive edge

www.logistixsolutions.com Bob Camozzo 703-796-0141 bc@logistixsolutions.com

NeoGrid

www.neogrid.com Yvette Quintanar 888-709-0018 info@neogrid.com

Version 28.0

Procurement (Direct, Indirect & Services) • Benchmarking & Metrics • Content Management • Contingent & Temporary Labor Services Management • Enterprise Supplier Collaboration • Employee Business Services Management [including Travel & Entertainment (T&E)] • Financial Fraud (NEW) • Group Purchasing Organizations & Solutions • Hedging Strategies • Marketplaces • Negotiations & Contract Management

The Global Enabled Supply and Demand Chain Map

Version 28.0 (This map replaces Version 27. 0 from the SMarch 2014 issue)

Sourcing

Supply Chain Integration & Technology Infrastructure (Lean Manufacturing, MRP, Just-in-time, Just-in-sequence Planning, Collaborative Production Management) • Automatic Identification & Data Capture (RFID & Voice) • B2B Connectivity Standards & Integration Planning • Contingency Planning • Cyber Security (NEW) • Electronic Data Interchange (EDI) • Enterprise Asset Management (EAM) • Enterprise Application Integration (EAI) • Enterprise Resource Planning (ERP) • Hardware Options • Import/Export Compliance Management

• Internal/External Portals • Network Infrastructure Enterprise Data Management & Data Synchronization • Regulatory & Customer Mandate Compliance, Governance Issues • Security • Solutions Portfolio Management: On-premises/ Cloud-based/Software-as-a-service (SaaS)/ On-demand/Hosted Applications (ASP) • Warehouse Management Systems (WMS) (NEW) • Wireless Applications & Devices

Supply Chain Integration & Technology Infrastructure Enablers C.H. Robinson E2open, Inc. EXTOL International GT Nexus Inbound Technologies Logistix Solutions

NeoGrid NetSuite Plantensive Puridiom RGIS, LLC Sparta Systems, Inc.

St. Onge Company SYSPRO Thrive Technologies, Inc. Transplace

• Benchmarking & Metrics • Capacity Planning • Demand Planning & Forecasting • Demand Sensing & Shaping • eRFI/eRFP • Merchandise Planning • Network Analysis & Optimization • New Laws & Regulations (NEW) • Order & Demand Management

• • • • •

Outsourced Manufacturing Predictive Analytics Promotional Planning Quote-to-order Automation Sales & Operations Planning (S&OP)/Sales, Inventory & Operations Planning (SIOP) • Supply & Demand Chain Network Design • Supply Chain & Production Planning • Supply Chain Coordination & Event Management

Procurement Enablers E2open, Inc. GT Nexus Inbound Technologies JVKellyGroup, Inc. NetSuite Puridiom

Sparta Systems, Inc. St. Onge Company SYSPRO Thrive Technologies, Inc. Transplace

NeoGrid NetSuite Plantensive Puridiom Sparta Systems, Inc. SYSPRO Transplace

• Reverse Supply Chain & Logistics & Returns Management • Route Accounting & Management & Direct Store Delivery Solutions • Order & Delivery Management • Service Parts Logistics & Service Supply Chain Planning • Simultaneous Outbound & Inbound Management • Supply Chain Event Management • Supply Chain Execution • Supply Chain Security • Transportation Management & Optimization • Vendor-managed Inventory (VMI) • Voice-driven Solutions • Warehouse Control Systems • Warehouse Management Services & Systems • Workforce Management • Workforce Training

Fulfillment/Logistics Enablers Blue Ridge C.H. Robinson E2open, Inc. GT Nexus Inbound Technologies Logility, Inc. Logistix Solutions NeoGrid NetSuite Plantensive Puridiom RGIS, LLC Saia, Inc. St. Onge Company SYSPRO Transplace

Payment

Order/Demand Capture Enablers

Product Lifecycle Management Enablers E2open, Inc. JVKellyGroup, Inc. Logility, Inc. Logistix Solutions Puridiom SYSPRO

e Lif

Benchmarking & Metrics CO2 Tracking & Management Customized Build & Assemble Cyber Security (NEW) Dashboards Distribution Planning & Distribution Requirements Planning Energy/Sustainability Assessment Financial Fraud (NEW) Global Trade Management Inventory Management & Optimization Lean Six Sigma Logistics Resource Management Manufacturing Execution Systems Material Handling Equipment & Services Modeling Simulation Order Management Inputs (from Order/Demand Management Pie) Outsourcing Services

Customer Relationship Management

u od

Product Lifecycle Management Collaborative Design Design for Supply Chain Design for Sustainability & Environment New Laws & Regulations (NEW) New Product Introduction Outsourced Design Services Product Data Management Product Portfolio Management Request for Information Reverse Logistics Sustainable Packaging

e cl

• • •

e em

Blue Ridge C.H. Robinson E2open, Inc. GT Nexus Logility, Inc. Logistix Solutions NeoGrid NetSuite

Logistics

Education

Plantensive Puridiom RGIS, LLC St. Onge Company SYSPRO Thrive Technologies, Inc.

• • • • • • • •

Payment

• • • • • •

Collaborative Cash Flow Management e-Credit Electronic Bill Presentment & e-Invoicing Electronic Funds Transfer & All Forms of e-Payment e-Money Financial Fraud (NEW) Financial Supply Chain Management Financial Transaction Management (All Request-to-check Processes) Freight Audit & Payment Services Global Trade Finance Letters of Credit PayPal Purchasing Cards Spend Data Management

Payment Enablers Cass Information Systems, Inc. GT Nexus NetSuite Logility, Inc. Puridiom SYSPRO

Decision Support Circles Consulting Customer Relationship Management

• • • • • • • • • • •

Supply Chain Integration & Technology Infrastructure

Order/Demand Capture

• • • •

Fulfillment

Sourcing

Sourcing Enablers C.H. Robinson E2open, Inc. GT Nexus Intesource, Inc. JVKellyGroup, Inc. Logility, Inc. Logistix Solutions

• • • •

Procurement

ing

Order/Demand Capture

• • • • • •

sult

Strategies • Performance • Spend Analytics, Product Cost Management & Supply Strategy • Sustainable & Green Supply Management • Supplier Relationship Management • Tail Spend Management • Total Cost of Ownership/ Best Value • Trading Exchanges (Public & Private) • Total Cost Analysis

Fulfillment/Logistics

Con

• Auctions • Category Management • Commodity Team & Supplier Collaboration • Compliance • Content Management • Financial Fraud (NEW) • Governance • Market Analytics • New Laws & Regulations (NEW) • Outsourced Manufacturing/ Offshore-Nearshore-Onshore

• New Laws & Regulations (NEW) • Product Cost Management • Purchase Order & Requisition Management • Supplier Enablement & Supplier Information Management • Supplier Performance Measurement & Monitoring • Supplier Relationship Management & Supplier Development • Supplier Risk Management • Sustainable & Green Supply Management • Value-Focused Supply Management

• Channel Management & Customer Analytics • Contest Management • Field Service & Service Parts Logistics • Mobile Sales Solutions • Reverse Logistics & Material &/or Merchandise Returns

• Sales Force Automation • Trade Promotion Management • Warranty Chain Management

Customer Relationship Management Enablers C.H. Robinson NetSuite Sparta Systems, Inc. SYSPRO

Continuing Education Units (CEUs) • • • •

Accreditation Associations Certification Universities

Consulting Enablers C.H. Robinson St. Onge Company

• Benchmarking & Metrics • Business Process & Performance Management; & Revenue, Price & Profit Management Automation • Dashboards • Information Sharing & Analysis; Knowledge Management & Enterprise Business Intelligence; & Six Sigma, Quality & Lean Six Sigma • Inter-enterprise & Cross-functional Collaboration; Change Management; Staffing & Incentive Management; Supply Chain Skills Management & Education; & Professional Development • Market Intelligence/Analytics • Regulatory & Customer Mandate Compliance; Governance Issues; Supply Change Risk Management; & Supply Chain Relationship Management • Research, Advisory & Consulting

Decision Support Circles Enablers C.H. Robinson E2open, Inc. GT Nexus Logistix Solutions NetSuite Plantensive Puridiom RGIS, LLC Sparta Systems, Inc. St. Onge Company SYSPRO Thrive Technologies, Inc.