At Origin: Early Data is Key

Companies who source internationally stand to lower first costs significantly.  But keeping logistics costs down can be a big challenge.  The key to controlling costs without compromising on logistics performance is the company’s ability to see and monitor supply chain flow (product flow, shipment flow, order flow, document flow) in real time. 

A lot — maybe most — of the information and documents that companies need to do this comes from external trading and service partners. 

And a lot of that partner data is created at origin:  suppliers receiving POs and creating shipping orders, then creating commercial invoices and packing lists; consolidators receiving shipping orders and creating manifests, forwarder cargo receipts, bookings and shipping instructions to be sent along to carriers.  The data created at origin, early in the supply chain, is rich and abundant.  Few companies can successfully collect all of it in a systematic way and put it to good use. 

But companies that have developed the mechanisms and programs to capture that data and standardize it, and make is accessible to their teams globally, enjoy better visibility and control than their peers.  They catch exceptions earlier, they make decisions earlier, they reduce their lead times, they reduce variability in their lead times, they create more reliability and this all translates to lower operational costs and better performance. 

But there is one other thing that these companies get.  They get a huge jump start on ISF.  The extra data that ISF compliance requires is origin “centric” — it’s collected early in the chain.  And for companies that understand the power of this, the benefits are multiplicative.  All along the chain, from that point forward, these companies and their partners have access to rich, detailed supply chain data to help them make better operational decisions. 

Put simply, companies that are good at the supply chain information game are very likely good at collecting and standardizing data early in their supply chain — at origin, through partner connections, electronically.  And these companies are far more likely to be engaging in advanced supply chain functions like “direct to store” shipment programs, or DC by-pass, cross-docking and flexible allocation postponement strategies.

And — true — they’re likely to have a better handle on ISF.

Question: How long does it take to implement ISF?

 

Answer:  It really depends on the technology platform you choose, the solution approach, the complexity of your supply chain and good change management.  You could get started within a few days for a manual e-filing solution.  However, you may need to spend more effort and time to get the process in place to collect data manually.  Timeframe for an advanced solution may vary by technology platform and the software delivery model, but it is not uncommon to have 100s of suppliers and service providers on-boarded in a matter of weeks (12-18 weeks) using a Web-based, on-demand platform.

This Q&A, and dozens of others like it, are listed in a consolidated Q&A document provided courtesy of BPE.  Follow the link below to get to the full document:

http://www.gtnexus.com/download.php?doc=news/ISF_WebinarQA.pdf

Case Study on ISF

For those of you who missed the American Shipper Webinar on ISF with Crate & Barrel you can still get to a recorded version of it at: 

http://www.americanshipper.com/newweb/ISFwebinar/index.asp

You’ll have to register to get to the link.   Good case study and interview with a practioner implementing an ISF solution, including advice and watch-outs for newcomers.

The “11th” data element

Readers close to 10+2 discussions will no doubt have encountered what is now being dubbed the “11th” data element for ISF.  While not specifically called out as a data element in the “10″ that importers must file, this 11th element is there nonetheless because it’s the all important reference key by which the other data elements are grouped and filed.  It is the ocean bill of lading number. 

Here’s the challenge.  For many carriers, that number isn’t issued early enough to use in time for filing.  It’s often issued after the vessel departs.  Providing a “token” BL number earlier — at the time of booking, for example – that is later replaced by the “real” number doesn’t work either.  That translates to an inaccurate filing, and thus a violation.  Or worse.  If we can assume that CBP is using the actual BL number issued by the carrier (as part of the carrier’s filing) to link back to the importers filing, the risk may be significant:  a Do Not Load at origin. 

One of the ways ocean carriers are working to solve this is to allow the booking number to be the BL number.  Bookings happen sooner, and if the booking confirmation number can be the bill of lading number than everyone wins.  But this is no small feat.  A number of carriers are doing this, but they need the IT agility to synchronize their booking and documentation systems internally, or to link the two numbers seamlessly so the booking number can actually become the BL number.  Importers would be well served to confirm the capability of their carriers in this respect.  It will be a big issue.

AMR weighs in on ISF

For those of you who subscribe to AMR’s research, check out Will McNeill’s piece on ISF.   For those of you who don’t, here is the header:

“We recently spoke with Beth Peterson of BPE, an advisor to shippers and Trade Ambassador to the U.S. Customs and Border Protection agency, about trade issues with 10+2. We discussed why companies need to pay attention, what the penalties will be, and if this new cost can be turned into a competitive advantage.”

The upshot is that AMR, who polled their supply chain client base not long ago and concluded that there was “no sense of urgency” around gearing up for the January 2010 deadline, is now urging their clients to step it up and get ready.  It’s real, it’s coming, and if you aren’t moving swiftly to execute accurate, complete and timely ISFs you will be putting your supply chains and your companies at risk. 

The key take-away, in Will’s own words:

“Get ready.

AMR Research and other industry experts like Beth Peterson are advising clients to prepare for January 26, 2010, as the go-live date for ISF. We include filing prior to this date as part of the preparation. Companies not readying for this initiative are in store for a rude awakening not just in terms of fines, but, more importantly, in delayed shipments. Don’t let competitors’ products get to market faster because your company failed to fill out the ISF properly.

For the majority, this initiative is simply an added cost, but companies with highly efficient supply chains will be able to use the added data to increase their advantage, with their imports speeding by their competitors’ products stuck at customs courtesy of improper filings.”

To follow the thread to AMR, see:  http://www.amrresearch.com/content/view.aspx?compURI=tcm:7-47271

“What” versus “When” for 10+2

I hear a lot of discussion around the “what” of ISF compliance, as in “what data do I need to submit?”.  But a lot less about the “when”.  Turns out that getting ISF right involves both. 

Yes, solving the What part is central and key to ISF compliance.  And even the title of the mandate (“10+2″) is data centric, or “what” centric.  10 new data elements for the shipper; 2 for the carrier.  But equally important is getting good control, visibility and monitoring over the When aspects of ISF compliance.  WHEN the data must be submitted.  The guidelines give us the targets, but for a lot of companies it will be nearly as difficult to know when their shipments have reached or passed through critical supply chain gates (e.g., container delivered to origin terminal at origin) as it will be to discover and present the additional data elements about the shipment itself. 

So, companies that are developing the know-how and muscle memory of consistently good ISF compliance will have to do two things in concert: on the one hand, they will have to facilitate the process of retrieving accurate origin shipment data that in most cases is produced and entered by partners, not by their own organizations (read: hard); and they will have to develop enough visibility and control in their supply chains to know When this information is required, When it must be submitted, and When the submission is late or altogether absent — which translates to sudden risk.  Risk of penalties, risk of delays, etc.

This is where “10+2 compliance” converges with “supply chain visibility”.  Would you have assumed, without my prompting, that to be 10+2 compliant, you’d need a visibility system?  Well, there are ways to get by without perfect visibility to shipment status and events, but these ways are error-prone, inconsistent, human labor intensive, and not designed for scaling up over broader operations and adjacent functions.  For companies that have invested in advanced visibility systems, good ISF compliance is a lot closer than they might have thought.  They have at least one of the dimensions — the When dimension — under control.

CBP issues penalty mitigation guidelines

The plot thickens.  Friday last week CBP issued 10+2 “penalty mitigation guidelines” that give importers a little more detail around how the $5,000 penalty for inaccurate or late filing can be reduced.  Top of the list:  “evidence of progress in implementing ISF compliance during the phase-in period.”  And there is further clarification of when and how the Do Not Load (DNL) order will be issued, essentially forcing the importer’s container(s) to sit at origin until CBP receives the ISF information/form it requires.  Look:  even if you aren’t worried yet about achieving compliance in this area yet, even if you’re waiting for 2010 to take it seriously, it will pay to have even the faintest track record of TRYING to comply.  So, ask yourself:  What am I doing right now to show that I’ve tried to comply, and is there a record of it?

NAM estimates 10+2 cost at $20 billion/year

The National Association of Manufacturers (NAM) recently conducted a study on 10+2 and came up with some interesting findings, including:

ISF has been difficult and disruptive to respondents’ supply chains

Will likely increase operational costs by $3.5 billion annually

Will likely add an average of 2.8 days of delay to the import process, costing an estimated $17.2 billion a year

Total annual costs for ISF requirements are estimated at more than $20 billion

And this is just for manufacturers. I wonder what a study like this would find for retailers?  Regardless, CBP is still moving ahead so you best prepare now.

You can see the report here.

Three Approaches to 10+2 Compliance

As the air begins to clear and importers begin to get a better handle on how they’re going to comply with the 10+2 regulations from CBP, a few basic approaches are solidifying:

1. Rely on your customs brokers: outsource this work to them.  Your brokers have the manpower and the know-how, and they are very likely to be selling programs to do this very thing.  You will give them the responsibility of coordinating with your origin operations and your suppliers, and collecting the additional data needed for an ISF, and you will also be granting them power of attorney to file the ISF with Customs on your behalf.  Downside is that you’ll pay for this service, and prices vary.  We’re hearing anywhere from $25 to $100 per ISF. 

 

2. Use your origin forwarders or consolidators to do the work.  Probably a natural choice for many importers, especially importers in sectors like Retail where origin forwarding and consolidation services are heavily used.  Same drill as the option #1 except that your origin service providers are more familiar with the data sets and processes at origin.  And many have made advanced technology investments in this area, so capturing and standardizing data at origin may not be has human-intensive (and expensive) as it might be for brokers at the destination.  And that can give them a price edge. But not all importers rely on origin forwarders or consolidators.  And those that do rely on them in many cases rely on several, across regions, making a single outsource relationship decision difficult.

 

3. Do it yourself.  This will be the choice for importers that have the staff and expertise to collect origin data and file ISFs directly, but it requires at least some technology to facilitate the ISF transaction.  Commercial solutions exist for this.  It will also be the choice for importers that have made more pervasive technology investments across their origin operations — for PO distribution and PO management with suppliers, for example.  For these importers, much if not all of the data required to meet the 10+2 regulatory requirements exists as a by-product of automating supply chain processes at origin.  And these importers are extending their technology investments to include direct ISF transaction capabilities.

 

With January 26, 2010 fast approaching, every U.S. importer is going to have to take stock of what they’re capable of, and then pick the approach that suits them best.  One thing is certain:  the self assessment can no longer wait, and now , fortunately, there are three very clear ways to meet the 10+2 challenge.

 

10+2 Update from the Field

American Shipper Magazine continues to do a good job covering the latest news related to the ISF rule. In the May issue they published a story titled: Struggling to make the grade on 10+2.

Among the many topics covered in the story, here are some of the highlights:

• So far, 54% of the filings are late
• Filers are getting better, with more accurate data
• Customs will show no mercy to shippers who don’t take advantage of the current grace period, once the rule goes into effect next Jan.
• Rejection rate is currently about 6%
• DHS will start providing filers with “report cards” to let them know how they are doing

The headline here is get going, start filing something immediately.  Once the one year grace period ends, the pain really begins.