Going

Global?
Logistical Factors
to Consider Before
Establishing Global
Supply Chain
Operations

May 2008
 WHITE PAPER

May 2008

Going Global?
Logistical Factors to Consider
Before Establishing Global Supply Chain Operations

SUMMARY
In today’s global economy, many US-centric manufacturers and distributors
are increasingly feeling the pressure to become niche, competitive play-
ers overseas as well as domestically. American-based companies seeking
to expand their product lines internationally for the first time or attempting
to enlarge their existing global footprints will need to keep up with global
trade growth and increased competitive demands. To succeed in the global
marketplace, companies wanting to capitalize on the compelling interna-
tional market’s opportunities must prepare their supply chain operations for
the onslaught of logistical challenges of foreign markets.

OVERVIEW
Before his 1492 voyage to the “New World,” Christopher Columbus spent
several years trying to explain his belief that the world was round. He
exerted all his passions, efforts and energies in convincing any and all who
would listen that the world was a sphere and not a flat landmass.

Ironically today — over 500 years after Columbus’s insistence that the
world was round — advances in transportation, technology and telecom-
munications have seemingly “flattened” the Earth once again, making com-
munications and global interaction with foreign markets highly accessible
and instantly viable.

While there may be many advantages to having a flatter world, we should

not assume that flat equals simple. In many cases, flatness does not diminish
complexities. This is especially true in the arena of international transporta-
tion logistics, where a flatter world does not simplify the daunting logistical
challenges of managing global supply chains.

If your company has been contemplating broadening its supply chains inter-
nationally, it would not be alone. Today’s highly competitive global market-
place demands, at the very minimum, some level of active involvement or
participation in foreign markets due to rapidly changing market conditions,
aggressive competition and dramatic growth in foreign exchange. Diagram

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1-1 showcases an arresting statistic which underscores just how much

“With the emergence of
the free-trade movement,
low-cost country sourcing,
and the rising affluence
of large segments of
the world’s population,
companies now aim to
gain market penetration in
foreign markets as deeply
as the penetration they
enjoy at home.”
John Fontanella
AMR Research, 2008
foreign exchange transactions have increased between 1970 and 2004. The
dramatic night-and-day difference within this 34 year timeframe strongly
validates just how much world commerce has expanded by leaps and
bounds. Such statistics command attention and reinforce an undisputable
fact: if your strategy is to stay wholly domestic, your competition is com-
ing (or will soon come) from every area of the globe.
“Even if a company only has domestic suppliers and domestic customers,
it must always be analyzing whether it would be better to go overseas. And
companies are always subject to global competition, they must be conduct-
ing constant analysis of their global competitors,” says Yossi Sheffi, Direc-
tor, Center for Transportation and Logistics, MIT.

Foreign Exchange Transactions

$10 Billion $10 Billion

a day a second
1970 2004

Diagram 1-1
From a March 2006 “Meeting the Challenges of the Global Supply Chain”
presentation by ORACLE

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SOURCING GLOBALLY
As domestically focused companies stand by in the sidelines, aggressive
and fierce competitors are going global, seeking ways to improve their
competitive edge by streamlining manufacturing production and distribution
channels worldwide.

Forrester Research’s study entitled “The State of Global Supply Chain Man-
agement,” reinforces the now ubiquitous act of sourcing globally. The study
asked 168 respondents from North American retail, manufacturing, and
other industries if they have business units based outside of North America.
Not surprisingly, an overwhelming majority do globally source to the fol-
lowing international markets:

Where US Companies Most Source To

China 67%

Asia Pacific
countries 57%

South 47%

Eastern 43%

Central 32%
America

Turkey 20%

North 18%
Africa

Diagram 1-2
— 2006 Forrester Research study, “The State of Global Supply Chain Management”

Perhaps your company would like to increase its competitive advantage by

outsourcing its production beyond US borders. Or maybe your business has
been presented with compelling opportunities abroad. Whatever the case
may be, if your organization is in the process of extending its supply chain
beyond domestic US borders, you can’t just dive in. Nor can you simply
try to “extend” your domestic systems and assume that what works for you
locally will work for you globally. While surely some aspects of your do-
mestic logistics can be applied to your supply chain abroad, there are many
more intricate details and logistical variables you should consider before
you steer towards the global economy.

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This white paper will provide a high-level overview of key logistical chal-
lenges organizations can face as they launch their global supply chain
voyage as well as offer viable, real-world solutions to help you align and
facilitate your corporate supply chain strategies abroad.

GLOBAL SUPPLY CHAIN COMPLEXITIES

Global supply chains are overwrought with complexities. While this is not
to say that domestic supply chains are not without their own unique set of
To achieve higher service
levels, better asset
challenges, international trade inherently tends to be more complicated.
utilization, and lower
logistics costs in the In other words...
modern supply chain, a
new breed of transportation
“Sourcing and selling internationally is an alarmingly inefficient process
management solution today,” according to Beth Enslow, Aberdeen Group’s Vice President of
is required—one that Enterprise Research. “Today’s cross-border supply chains are strapped
supports multiple modes
and many languages at a
together with disconnected, manual processes. They are buffeted by high
reasonable cost. supply chain unpredictability and continually evolving regulatory demands.
Making matters worse, we found that more than half of the companies
— Transportation
Management Solutions
Aberdeen surveyed do not even measure their global trade performance.
Forrester Research Most also lack the technology to help them do so.”
Report, January 2008
Patrick M. Connaughton — Findings from Aberdeen Group’s
“New Strategies for Global Trade Management” Report, 2005

The Aberdeen study findings as cited above were collected from a survey of
over 170 companies which were examined and surveyed about their proc-
esses for sourcing goods with overseas suppliers, selling goods internation-
ally, financing global trade, managing cross-border logistics, and complying
with increasingly stringent trade and cargo security regulations.

As the Aberdeen findings indicate, amongst the biggest problems in global

supply chains include:

Ÿ Long and uncertain lead times which inhibit the ability to respond to
market demands and adequately fill orders on a timely basis

Ÿ Projected product cost savings are absorbed by unanticipated, higher

costs from operating longer and more complex global supply chains

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Let’s briefly examine some of the broader aspects of global logistics that
should be on your “Going Global 101” framework:

Extended Distances and Multiple Variables

Goods are typically traveling a far greater geographical distance, possibly
requiring different modes of transportation and multiple hand-offs that must
be managed. As a result, extending a supply chain beyond borders obvi-
ously lengthens the chain and results in exposure to greater variables. These
variables can include border crossings, multiple modes of transportation and
multiple hand-offs, different government systems, technology issues and
security concerns. Every one of these variables presents opportunities for
errors that can stall the entire supply chain. “There is far more uncertainty
and risk in global trade and you have to plan for and be aware of that,” says
John Langley, Professor of Supply Chain Management, the Logistics Insti-
tute at Georgia Tech University.

Challenged Visibility
Visibility in global logistics becomes very complex and difficult to achieve
in an international supply chain. “You need to know where the goods are,”
says Mike Peters, First V.P., ProLogis Solutions Group. This is particularly
critical in order to allow companies to manage their supply chain strategi-
cally, identifying various points throughout the supply chain where goods
can be held to reduce the risk of delays. And, with capacity issues still a
concern in North America, a delay-reduction strategy applies across the
board, resulting in the need for specific skills and expertise to manage a
global supply chain.

Inconsistent Technology
Technology and infrastructure tend to not be as sophisticated as in North
America, meaning the pace of information flow and management of cross-
border logistics in developing countries is quite challenged. Missing and
unreliable information adds risk and decreases flexibility in the international
supply chain. Often supply chain managers and the ultimate customer can’t
be sure what they’ll be receiving until the shipment actually arrives.

Unfamiliarity with Cross-Border Trade Regulations & Issues

Companies want to access the foreign markets such as Canada or Mexico,
but “are afraid to deal with issues at the border,” says Larry Fyke, President,
Fyke Trading & Logistics. Undoubtedly, many domestic companies are in
the same shoes, wanting very much to capitalize on the opportunities of the

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The acceleration of global
sourcing and selling activ-
ity and the increasing need
to monitor multiple tiers of
the supply chain to remain
agile and cost competitive
is challenging companies
to rethink their business
models and automation
strategies.
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international market and neighboring economies but uncertain as to how to
proceed or venture forward. And who could blame these organizations for
their trepidation? Most companies are not sure how to get their goods from
origin to port in-country, how to ship from port to port over the ocean, and
then shipping from port to destination in North America. Joining the ranks
of global economy players is not easy and requires a lot of forethought,
planning and consideration.
Undeniably, designing and implementing global supply chains can be dif-
ficult and taxing. But while unique variables facing global transportation
logistics do exist, this is not to say that these challenges cannot be overcome
or, at best if unsolvable (e.g. foreign regulation challenges), then managed to
mitigate risk and inefficiencies that inevitably lead to cost overruns and poor
customer service.
BEST PRACTICES:
KEY FACTORS STEER YOUR SUPPLY CHAIN
IN THE RIGHT DIRECTION
While there may be different ways to address the numerous challenges
involved with global transportation logistics, it is important to note that this
white paper only touches on a few of the most critical factors required for
improved global supply chain performance:
“Holistic” Management Approach
One of the most common culprits found in poor global transportation lo-
gistics is senior management’s inability to establish and follow a unified
approach towards a strong logistics execution. Approaching global logistics
management as an “afterthought” has a tremendously negative impact on
more than the supply chain. The ability to establish a robust network of sales
becomes strained and bottlenecks in transport affect distribution and cus-
toms clearance, further resulting in the interruption of scheduled marketing
strategies and production timelines.
To achieve operational excellence in global supply chain logistics, senior
managers must focus on crux management and operational issues beyond
the supply chain. Each department must work in concert with other internal
departments — from marketing and sales to accounting and IT -- to identify
challenges and opportunities for improved efficiency to improve overall
business functions.
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GLOBAL TRADE
MANAGEMENT TIP
--------------
Institute a global trade
center of excellence that
advises the corporation on
total landed cost and risk
reduction actions from the
point of product design
and sourcing through final
delivery decisions.
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Dismantling Old-Style Organizational Structures
For years, managers have complained of the “silos” within their organiza-
tions, an arrangement that results in fragmented internal communications
amongst various departments and poor cooperation in the interest of forging
a truly unified supply chain. This type of organizational environment has
been shown to create significant lag times in the sharing of critical infor-
mation to the parties who need it most. In the end, customer service levels
plummet to lows so low that an organization’s ability to maintain a contin-
ued, long-term competitive position in the marketplace suffers tremendously.
Consistency in Execution
By virtue of the “e” in ERP, many organizations have already learned the
value of managing data and processes at the enterprise level. Typically, best
practices are defined, refined, and made part of the ERP solution prior to
implementing or during the implementation process. Values recognized from
this approach can and should be carried over to transportation management
solutions as well. With global instances of the ERP, one should follow suit
for all subsystems or complimentary applications to maintain consistency
in execution for all the same reasons as those taken into consideration when
exposing the ERP on a global basis.
Centralized Technology and Data
Too often with geographic diversity, whether it is domestic or global, cor-
porations have a tendency to create islands of technology. This phenomena
is often seen at a high degree when growth is obtained through acquisition,
where systems were in place prior to the acquisition taking place, and in an
attempt to allow the flow of information to occur between the two disparate
systems and organizations short term communications interfaces are devel-
oped as a quick fix, and often times not transitioned for many years. Islands
of technology also create data silos which result in disparate knowledge
across global supply chain operations.
Centralized Business Rules
Once an application becomes an enterprise application, and only when it
becomes an enterprise application, can the business rules which define and
drive best practices be put in place and managed centrally. This does not lim-
it diversity among the various factions of the entire organization, but rather
allows flexibility for the facility to meet demands and expectations of both
the customer and the carrier, while maintaining the integrity of the corporate
governances and best practices.
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Global Visibility
As the likes of manufacturing, distribution, technical and customer support
move to regions of the world where they can prove to be more cost effective,
one must also provide the information to support these activities. This infor-
mation needs to be available at the fingertips of those in these support roles.
With this requirement, global visibility can only be provided by interoper-
ability among the execution systems. And the interoperability must be real
time to be effective at accomplishing visibility of any value. Old information
is only valuable to historians, analysts and auditors. To support the customer
or trading partner, information must be current. In addition to being timely;
information needs to be presented to the person requiring this visibility
through one common interface.

COLLABORATION:
WORKING WITH TRUSTED, OUTSOURCED LOGISTICS PARTNERS

The opportunities and challenges created by globalization are requiring

companies to establish relationships with new types of reliable and specific-
country-savvy suppliers. Why? Very simply: companies can’t possibly know
all the ins and outs of doing business in every single foreign market their
global supply chain touches.

While an organization may develop a certain level of knowledge about man-

ufacturing product lines into China, for example, what may work in China
may not work in Denmark or Ghana. While some knowledge acquired in
doing business in China may be applicable to Denmark or Ghana, Denmark
and Ghana are essentially not China. Each country has its own unique set of
trade compliance regulations and certainly each pose its own set of logistical
challenges.

As a result, companies are turning to outsource providers who can offer the
expertise needed to keep the supply chain moving.

“Your supplier [3PL] should have a global footprint. They need to un-
derstand the region, and should have the knowledge and facilities to fix
problems,” says Jack Gross, VP & GM International, Schneider Logistics.
“Companies are now looking for help inland [on the ground in the foreign
country]. The world has never been more open to international trade; the
time is right for testing the waters once you have the right guides on board.”

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Technology is crucial.
It speeds the supply chain
and creates visibility.
An enterprise solution
that is incorporated into a
company’s transportation
strategy introduces the
additional benefit of being
able to leverage buying
power across the enterprise
to help achieve maximum
volume discounts
for shipping.
.
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TECHNOLOGY:
ENTERPRISE-WIDE SOLUTIONS
HEIGHTEN SHIPPING EFFICIENCIES
Once solid management practices and trusted outsourced partners are in
place, companies expanding their global footprints can further heighten their
shipping efficiencies by the deployment of technology to help streamline
logistical processes.
Today’s most powerful, best-in-breed enterprise solutions for administering
all aspects of global transportation logistics are Web-based systems that per-
mits close collaboration among suppliers, producers and logistics providers.
Web-based Enterprise Shipping System
Assuming your senior management has already adopted sound global trade
best practices and you have the right partners in place, it is important to note
that no amount of managerial integration and partnership collaboration can
replace the critical role played by information technology in the enablement
of operational, logistical excellence.
While most research in the subject matter of technology-enabling global
trade points to the importance of integrating an enterprise-wide web-based
system into your supply chain design and strategy, you would be wise to first
do your research. A recent September 2007 SAP study found that many of
today’s Global Logistics Service Providers (GLSPs) are at the same point
manufacturers were a decade ago: burdened with proprietary, outdated and
non-scalable systems. As a result, organizations seeking to work with a
GLSP must be selective and ensure a provider’s technology solution is an
efficient web-based, enterprise-wide shipping system that streamlines opera-
tions, achieves financial and strategic objectives and meets customer expec-
tations.
What to Look for in a Global Logistics Web-Based Solution
When seeking a company to provide enterprise-wide global logistics solu-
tions, make certain the web-based solution or services available will be in-
tegrated into senior management’s overall global supply chain design. Such
tools, when effectively included into your global logistics strategy, can play
a mission-critical role in improving many of your operations and business
processes, including but not limited to:
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LEARNING FROM OTHERS — Part I
APPLIED BIOSYSTEMS GLOBAL SUPPLY CHAIN WOES
Who
Applied Biosystems, a business unit of Applera
Corporation, serves the life science industry and
research community by developing and marketing
instrument-based systems, consumables, software,
and services.
Where
Foster City, California
The Problem
The company, with an installed base of
approximately 180,000 instrument systems in
nearly 100 countries, was unable to effectively
keep up with the increased, global demand of
its products due to the company’s dependence
on sorely dated, un-centralized and disparate
transportation management systems. The reliance
of such systems hindered everything from the
ability to access accurate and timely data, the
shipment of dangerous goods and overall customer
service and fulfillment levels.
Key Challenges
Applied Biosystems’ primary challenges included
the need to:
Ÿ implement global visibility for shipping
operations
Ÿ centralize systems administration
Ÿ leverage automation processes originally
designed for a legacy solution
Ÿ administer dangerous goods shipping
effectively
Ÿ develop systems for package tracking
Analysis Findings
OUTDATED SHIPPING SYSTEMS CAUSED YEARS OF
INEFFICIENCY-RELATED EXPENDITURES
& OPPORTUNITY COSTS
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Applied Biosystems had endured years of
inefficiency in its shipping management. These
inefficiencies resulted in millions of dollars of
lost opportunities for the company. Motivated by
the promise of enhanced productivity and multi-
million dollar cost savings, Applied Biosystems
set out to overhaul their company-wide shipping
processes from the ground up.
The Need for Standardization
In addition to accessing centralized data with
ease, Applied Biosystems also needed to eliminate
inconsistencies in its worldwide transportation
management processes. Because staff were
attempting to access data and important logistical
information from disparate systems, processes
and shipping management services were fraught
with inefficiencies that routinely cost the company
thousands of wasted dollars. Standardizing and
simplifying both processes and technology became
a priority to improve global distribution of Applied
Biosystems human health, research technologies
and diagnostic products to the international
marketplace.
Addressing the Problems
The company’s vast transportation logistics
makeover began by addressing numerous
business processes and technology needs in an
effort to do away with obsolete systems and
dated infrastructure. In their extensive effort to
accurately define their requirements, Applied
Biosystems determined one of the many mission-
critical goals of any newly implemented shipping
system would require the centralization of
consistent, accurate and timely data that could be
accessed from any location, 24 x 7.
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Ÿ reducing time to market for new initiatives

Ÿ handling new areas of business including Internet sales
Ÿ managing the distribution of outsourced manufacturing
Ÿ service international markets
Ÿ improving customer service levels

Collectively, when deployed in concert with global supply chain best prac-
tices, enterprise solutions are designed to dramatically improve your com-
petitive advantage in bottom lines in today’s global economic stage.

As your company begins the process of identifying which enterprise solution

will be the best fit for your global trade initiatives, be sure to also examine
the following critical requirements:

Flexibility
You are looking for an easily customizable GUI and/or the ability to run the
SUPPORTED solution in the background, using your system’s front end to process transac-
CMS WORLDLINK tions.
CARRIERS
--------------
FedEx® Productivity and Customer Service Enhancements
UPS™ Features that give you the ability to dramatically reduce your shipping costs,
USPS®
DHL Express® decrease your shipping turnaround time and enhance your customer service
Expeditors® offerings.
LTL & Generic
BAX Global
Purolator Courier® Global Visibility
TNT Express Allows all your worldwide shipping processes and data to be accessible by
Exel authorized personnel from anywhere in the world.

Rating Engine Independence

Provides your company flexibility in choosing the already built in, third
party or carrier-supplied compliance engines that best suit your needs and
preferences.

Variable Business Rules

Enables you to have various business rules assigned to different stations, us-
ers and sites.

Database Flexibility
Ability to support both Oracle® and/or Microsoft SQL Server® databases.

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LEARNING FROM OTHERS — Part 2

APPLIED BIOSYSTEMS GLOBAL SUPPLY CHAIN SOLUTION

Determination to Remedy Supply Chain Inefficiencies

Applied Biosystems exited its obsolete transportation management technologies and deployed CMS
WorldLink as the company’s enterprise-wide global transportation logistics tool, allowing the company to
standardize its shipping processes and systems configurations across numerous warehouses based on its
own needs and criteria. While the tool allows for customization for site-specific needs, the standardization
has allowed Applied Biosystems to do away with the inconsistencies and resource-consuming
customizations of its past.

In addition to standardization, CMS WorldLink is a web-accessible live system, allowing Applied

Biosystems logistics managers and team members alike to access vital shipping data when needed, no
matter their location.

Deployment of CMS WorldLink Benefits

Ÿ Simplified transportation management processes
Ÿ Allows for site-customization without losing company-wide standardization
Ÿ Reduced wasted costs; enjoyed multi-million dollar savings
Ÿ Easy to use, scalable and flexible 24 x 7 solution

Applied Biosystems’ Global Supply Chain Today

To date, Applied Biosystems has enjoyed million-dollar cost savings year after year since its
implementation of CMS WorldLink. As the company continues to grow, it continues to manage its
expanded global shipping operations via CMS WorldLink. Significant savings in time, money and
resources have made CMS WorldLink an invaluable shipping management tool, allowing the company to
better administer the worldwide distribution of its human health and biotechnology products throughout
Europe, Asia and beyond.

Designed with Today’s Most Advanced Technologies

Compatible with various MS Windows technologies including Microsoft
SQL Server & Oracle Database, OLE Automation, C++, COM+, .NET,
OLEDB, XML and IIS.

CMS WorldLink can easily operate with virtually any host application by
using standardized templates and communication methods hosted within
your environment including SAP®, Oracle Financials®, JD Edwards® or
any custom ERP system, allowing you to view shipping in the context of
your other functions.

CMS WorldLink provides you with the power to manage and maintain all of

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your shipping points via a single application. You will benefit by centralizing
shipping history reports, location cost reporting and carrier rules, thereby
significantly improving efficiency, cost savings and a standardized global
shipping process regardless of location(s).

To find out how CMS WorldLink can streamline your domestic and
cross-border transportation logistics, we welcome you to please
download our CMS WorldLink brochure.

For additional information about CMS WorldLink or how CMS

GlobalSoft can be play a key role in your organization’s global logistics
success, please contact Wil Fekeci at wfekeci@cmsglobalsoft.com or go to
www.cmsglobalsoft.com.

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