- Proliferation of bilateral and regional free trade agreements — The Doha Development Round of World Trade Organization negotiations aims to lower trade barriers around the world, permitting free trade between countries of varying prosperity. Talks have been hung up over a divide between the European Union and the United States and the major developing countries (represented by the G20 developing nations). As a result of this breakdown in talks, free trade agreements will continue to multiply.
Today, 10 regional free trade agreements are in existence, while nine newly proposed regional agreements are in various stages of agreement. Twenty-seven countries have bilateral agreements in place today, while more than 80 additional agreements are in various stages of negotiation. In September 2006, The European Union said it would seek bilateral trade deals with China and Korea, exploring new ways of conquering foreign markets as talks over a global trade pact flounder.
As free trade agreements proliferate, many companies are leaving millions of dollars worth of duty savings unclaimed. Don't be one of those companies. The complexity associated with understanding and leveraging free trade agreements is beyond the scope of many companies because their staff either lack the expertise, resources, technology or all of the above to do it efficiently and cost-effectively. Many companies eventually come to a decision point: either invest internally or outsource to a global trade expert.
- On-shoring — Though the global sourcing boom has put Asia and Eastern Europe in the spotlight recently, manufacturers increasingly are looking at on-shoring opportunities closer to home in response to higher than anticipated total landed costs, quality issues, longer lead times, port congestion and higher fuel costs. There are also concerns over the potential impact if and when the Chinese RMB (yuan) floats on the open market. As a result, tried and true markets like Canada and Mexico are being revisited.
Companies must evaluate sourcing alternatives based on the strategic and financial value they bring to the overall business strategy. When making the decision to move or strengthen manufacturing operations, companies should consider conducting a strategic sourcing study. Strategic sourcing studies look beyond typical unit cost or landed cost comparisons. Analyzing the impacts of potential sources to working capital, time to market (profit) and risk of disruption due to political and economic risk, physical supply chain risk (weather, natural disasters, security and health epidemics) is critical to good decision-making. Creating different "what-if" scenarios that model real world variability enables a company to understand a range of potential costs versus a single "perfect world" estimate.
- Radio frequency identification (RFID) — RFID is gaining ground in supply chain systems around the world, and adoption is just going to increase. Retail is one of the primary sectors, with the oft-quoted Wal-Mart mandate to its suppliers to adopt this technology, but other retailers around the world are also finding benefits from implementing RFID.
Industries adopting RFID run the gamut, from labeling cheese in Italy to livestock in Australia and just about everything in between. However, it is the increased adoption of RFID by logistics and service providers that provides benefits to all other verticals. A distribution center or cross-dock facility that has tested and proven efficiencies from this technology shares this improvement with any client's products received with compatible RFID tags — be they fine wines, auto parts or razor blades. Increased automation of pallet and container tracking results in efficiencies and cost savings, regardless of the product they transport.
Two major obstacles to widespread immediate adoption are cost and security. Calculating the hard cost of equipment and tags is much easier than calculating the economic benefits and assigning costs across the supply chain. Second is security. Concern about proprietary information, be it product related or personal, being intercepted cannot be discounted. The benefit of dialogue with opponents who resist RFID adoption out of privacy concerns is an increased level of awareness and improved solutions to address these concerns. Any conversation about RFID needs to include a plan to address security.