August 2007 | News | Global Logistics

Global Logistics

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As the United States did by launching the Customs-Trade Partnership Against Terrorism (C-TPAT) in 2001, Europe is combating supply chain security issues with a similar program.

European companies can now apply to receive an Authorized Economic Operator (AEO) certificate from the EU Commission, signifying that they and their supply chain partners operate in a customs-controlled, financially responsible, physically secure manner.

Going live in January 2008, the AEO assessment and authorization initiative extends customs authorizations to the financial and security areas of corporate global supply chains, explains Dave Merritt, vice president, JPMorgan Global Trade Services EMEA.

Traders can currently seek three types of certification: Customs Simplification, which requires compliance with financial and customs regulations; Security and Safety, which expects companies to comply with facility and cargo transportation security requirements; and "Full" AEO, which combines elements of both.

Companies seeking AEO certification must demonstrate, among other things, a record of compliance with customs requirements, proven financial solvency, and appropriate security and safety standards.

As with C-TPAT, European traders tend to believe that the costs of implementing AEO will be greater than the financial benefits, reports Merritt.

"But the prospect of being viewed as a 'preferred trader,' reducing customs delays, and gaining the ability to work confidently with other AEO-certified partners will undoubtedly appeal to the trading community," he says, noting that a large number of companies are already formalizing assessment and application plans.

"Assuming the discussions regarding the alignment of AEO and C-TPAT result in cooperation, companies conducting a significant amount of U.S./EU trade volume will have an additional incentive to join AEO," Merritt adds.

How Global is Global?

Are global supply chains as global as they appear? More than half are not, according to a recent study conducted by BDP International's Centrix consulting unit and St. Joseph's University in Philadelphia.

Of the 220 supply chain executives surveyed, 60 percent of those from multi-national companies say they do not actually operate their supply chains on a global level. In addition, 37 percent of respondents make supply chain procurement decisions regionally, while 23 percent determine procurement strategies on a domestic basis.

When it comes to global transportation management, the landscape is similar. Asked how they manage their supply chain transportation networks, only 35 percent of respondents answered "globally," while 49 percent manage their networks from a regional perspective.

These global companies list various reasons for managing supply chain operations on a regional or local level, such as faster decision-making for improved control of service and costs, and the need to adapt to new source points, finds the study, which surveyed supply chain professionals from the chemical, consumer goods, industrial, and retail industries.

The study also examines the top challenges global supply chain executives face. Sixty-four percent of respondents report on-time delivery is their biggest concern, while total landed cost and supply chain costs tied as the second-greatest challenge at 39 percent.

How are the companies addressing these challenges? Most say they have increased inventory and embraced multiple-country sourcing to protect against global supply chain risks, the survey shows.

Technology also plays a role in overcoming global supply chain obstacles. In the past two years, nearly half—42 percent—of respondents implemented a warehouse management system. Most participants list increased productivity, improved service, and decreased lead-time as their reasons for selecting the technology.

India Expresses Its Growth

As India continues its ascent as a high-ranking source for global manufacturing and distribution, its express and parcel shipping market is reaping the benefits. The Indian express market is set to grow at more than 20 percent annually over the next few years, finds a new report from global consultancy Triangle Management Services.

This growth potential has caught the attention of global express integrators who are making investments in Indian companies. DHL, for example, now maintains Indian subsidiary Blue Dart Express; TNT recently purchased road express company Speedage; and FedEx bought out its global service partner Prakash Air Freight.

This influx of experienced companies is good news for shippers in the region, as they will have more reliable options for moving goods, notes the Triangle study, Indian Express Distribution Survey 2007.

The survey, which is based on 1,230 face-to-face interviews with both international and domestic shippers in India, also investigates factors that differentiate carriers in shippers' eyes.

Respondents report key distinguishing issues including customer care; problem resolution; the flow of information between carrier and customer; and the importance of a wide range of services—both domestic and international.

Shippers seek improvements from their service providers concerning loss and damage to parcels, the study shows. They also report receiving better pricing from local carriers than from the major integrators.

A Dallas-Mexico Connection

With the aim of improving the flow of goods between Mexico and the United States, a Mexican inland port developer and U.S. real estate development firm have partnered to promote a new trade corridor.

The agreement links Interpuerto, a Monterrey-Saltillo, Mexico-based logistics hub, and the Dallas Logistics Hub, a 6,000-acre logistics park currently being developed by San Diego-based The Allen Group.

The connection of the two hubs is part of a larger movement to improve cross-border trade by expanding infrastructure to boost supply chain efficiency. The partners expect the new corridor to improve efficiency, speed, and security, as well as the ability for the two hubs to compete on an international level.

Previously, ineffective transportation between the two countries prevented the hubs from serving companies importing products from around the world.

By adding a customs pre-clearance zone, imports can be cleared before leaving the port of origin, which should expedite shipment flow and provide additional security for companies operating within the two hubs, says Ambassador Francisco Javier-Aleko, executive coordinator for INVITE, the developer behind Interpuerto.

Dan McAuliffe, president of The Allen Group, believes the partnership will provide faster delivery times, which may result in a new competitive advantage for companies in both Mexico and the United States.

TSA Shipping Spree

Since May 2007, container lines in the Transpacific Stabilization Agreement (TSA) have reported consistently high ship utilization numbers, high monthly volume and utilization totals, and increased congestion at Asian ports—notably Shanghai, Hong Kong, Singapore, and Colombo—thanks to busy summer trade.

Despite a slower than expected first quarter, global shipments have rebounded to healthy levels this summer. June liftings by TSA carriers, for example, totaled more than 370,000 40-foot containers (FEU), up 16.4 percent from the 318,000 FEU carried in June 2006. In addition, TSA lines currently average 95-percent vessel utilization or higher from Asia on all route segments.

As a result, TSA carriers are expecting a potentially difficult peak season through October, with spillover effects likely heading into 2008.

"There isn't a lot of margin for error in the system," says TSA Chairman Ron Widdows.

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