Would you travel by air and declare that someone else packed your bag when checking in? Of course not, but when it comes to freight, it seems an accepted risk that is taken on a daily basis around the world.
International supply chains are often complex, unpredictable and difficult to control, each shipment contains an element of risk and yet when it comes to declaring exactly what is in the container, we rely on trust from the person that we are buying from to provide accurate information from which the importer makes a declaration and pays the local customs duty.
David Hesketh, Head of Research and Development at HMRC, and leader of the CORE work package 10 project, identified this in his paper on ‘Who Packed the Box?’ and explains further.
“I have spent 40 years working in all areas of international supply chains, and despite major advances in technology and communications, quite often a UK buyer does not know what their order contains until the container arrives and it is unloaded. And, all of that is down to the lack of good quality data.
I am part-way through a four-year project to prove that good supply chain visibility can help British businesses save money, react faster to market conditions and give them the confidence to deliver innovation and quality.
In the past, the international trade process was relatively simple. The buyer would travel to another country, identify the goods they wanted, pay for them, load them onto a ship, return to their own country, unload them, pay the Customs duty and sell them.
When the buyer stopped travelling to buy the goods and there was no face-to-face transaction, international commerce became more complicated. Communication became more difficult; trust and agreements were replaced by contracts, jurisdictions, different currencies, systems of payment and different languages.
Coupled with the fact that globalisation during the last 30 years has seen many companies put productivity into developing economies, and supply chains have increasingly lacked certainty and clarity from a security, legal and commercial point of view.
Historically, sea and air cargo carriers have been the main data collection points in the supply chain, but this information focuses on limiting liabilities and defining roles rather than ensuring an accurate description of the goods and the people involved.
With this lack of accurate data, the regulatory authorities do not get the information they need to carry out the risk assessments and create efficiencies. This lack of visibility makes supply chain costs unclear, profit margins unpredictable and the price to the end consumer ambiguous. Research has shown that data inaccuracy among the UK’s top five retailers and their suppliers is costing as much as £1.4billion a year.
For major multi-national brands that can afford to implement their own in-house quality control procedures, these risks can be mitigated, but for other national UK retailers and SMEs without those levels of resource, the losses can be significant.”
So as an SME how can you control your risk and plan for the future, without accurate supply chain data?
It may seem to date that everything is ‘working fine’; your business is growing and orders are being delivered to your customers on time.
You have just secured an amazing new contract for your product that you are very excited about. Jointly you decide to market the launch of the product range in the customer’s store(s); there are social media campaigns, printed marketing material in the stores, flyers ready to go out, the online shop is primed and ready to take orders. Everything is focused around the launch date and the overseas supplier tells you the products are on their way, great we are ready to go!
You open the first container that arrives, and unload the stock, some of it is missing?! Other containers also follow and all fall short or have other product in them than what you thought and some of the containers don’t arrive as planned. You phone the supplier. “They didn’t ship those containers, I think they are still on the quay”. The dreaded words hit you like a brick, they just shipped what they had – how do you tell your customer? You can’t delay the launch..
This may seem like an extreme case but for businesses which grow quickly and don’t have the right data pipelines and tools in place, it is an unfortunate occurrence that they have to learn a hard and costly lesson. It’s not just stock levels that are low, it’s your new customer’s trust in you too.
The CORE project focuses around providing accurate information from the natural source i.e. the person who loaded the container, the forwarder and the shipping line through to delivery. Getting accurate information from trusted sources in advance to the regulatory parties will reduce the possibility of cargo being stopped at the border too and also means their limited resources can be focused on the unknown.
So how can a good data pipeline and accurate information help?
In the above case, as an importer you would have had a notice that the supplier had placed a booking for shipment, containing each product quantity for your purchase orders. You would then have the opportunity to check it and decide whether to approve the shipment or make contact with your supplier to rectify the anomaly BEFORE it ships. You could even choose to shift production to one of the other suppliers or factories to compensate for this shortfall or move a small amount by air later.
At the consignment completion point (when the container doors are closed) the exact quantities are confirmed as being within the container and the paperwork is instantly available – you can now plan your warehouse storage for these goods based on the due date.
An alert when the container has left the port means you can relax in confidence that the goods are really on their way to you; regular updates to the scheduled arrival in the UK mean that you are always in a position to keep your customer informed in advance.
Delivery slots are pre-booked ahead of time and your warehouse staffing levels and shift patterns are now confirmed in advance.
Advance information in a CORE style data pipeline means that the border agencies have already identified your container and goods as low risk so no planned stoppages have been notified to you ahead of time.
The goods arrive in the UK and you are notified immediately, they are now on track to be delivered by the due date as promised.
On arrival the containers do indeed contain the goods that were accurately declared by the shipper a month or so ago, your launch date is next week, grab a beer and relax. This is the future for all SME’s not just the big corporates.
This article was first published on LinkedIn 7th August 2015