Effective control of global trade processes is often 100 to 200 times worse than control of accounts payable processes in the same company. Undetected and unmanaged risks in the global supply chain are costing businesses millions of dollars annually in hidden costs, destroying company profits and eroding global competitiveness.
An empowered trade professional can become a catalyst for effective change by clearly, concisely and persuasively presenting an executive business case that quantifies opportunities and provides well-organized plans to fix problems.
Following the framework described in this article will help trade professionals prepare and present an executive business case for change.
1. Research Industry Data
Research sources may include industry information, data analysis, company information and networking.
Example 1: A study in CFO magazine shows supply chain risks, trade policies and regulations were major concerns for financial executives in 2010. Six of the top 20 concerns listed by CFO’s are related to, or impacted by, international trade effectiveness.
Example 2: Shipping container shortages are pushing up prices, with the average price for a 20-foot shipping container increasing from $2,000 to $2,700 – a 35 percent increase. Analysts conclude, “It may be well into 2011 before production will be able to catch up with demand.” The lowly container has become the bottleneck for global trade, and businesses are feeling the impact. So much so that Wal-Mart has recently commissioned a shipping company to build three state-of-the-art ships for its own fleet.
2. Create Stories
By networking within the company, one can come up with anecdotal case studies to illustrate the direct effect of supply chain inefficiencies. The following is an example of creating a personal, easy-to-understand case study using relevant examples:
“I know we have been buying apparel from China for a long time now, but conditions have changed, and we should take a hard look at some options. Do you know we are paying over 16 percent duty and nearly $1 million every year just to import our t-shirts? The data reveal that our direct U.S. competitors are importing more than $1 billion annually, duty free, from 25 different source countries.”
3. Link Relevant Studies
Linking business trends, national studies and the analysis of industry experts can strengthen the impact of case study examples, give the presenter depth and credibility, and help lead effective change in the company.
Continuing from the example above:
“And the t-shirts are just the tip of the iceberg. Aberdeen Group did a study of 233 enterprises and revealed poor global trade procedures are costing companies millions of dollars annually. Based on the value of our direct imports, Aberdeen estimates we may be able to free annually between $7 million and $28 million in cash by better controlling our basic global trade processes in the areas of trade agreement management, sourcing opportunities, supply chain finance strategies and foreign trade zone utilization. We can use our transactional import data to quantify the exact costs in each of these areas.”
A few examples of sources to consult:
The National Association of Manufacturers, which estimates the 2009 Importer Security Filing regulation will create a permanent 2.8-day delay in supply chain speed. Manufacturers say the effect of additional operational costs and supply chain delays effectively double the costs of U.S. import tariffs;
PricewaterhouseCoopers (PWC), which in a recent study, found that supply chain disruptions destroy shareholder value and corporate profitability. The study shows the market is quick to punish companies that report supply chain disruptions. On average, affected companies’ share prices dropped 9 percent below the benchmark group during the two-day announcement period;