A Global Trade Primer

The Global Trade import and export cycles are quite involved, each involving at least 14 steps, which can be summarized as follows.

The Global Trade Import Cycle

  • Supplier Selection
  • Purchase Order Generation
  • Transport Insurance
  • Financing
  • Carrier Selection
  • Document Creation
  • Goods Departure
  • Shipment Tracking
  • Importation
  • Goods Receipt
  • Invoice Receipt
  • Reconciliation
  • Payment
  • Tax Reclamation

The Global Trade Export Cycle

  • Customer Approval
  • Sales Order Receipt
  • Order Approval
  • Transport Insurance
  • Receipt of Financing
  • Carrier Selection
  • Document Creation
  • Shipment Tracking
  • Exportation
  • Goods Delivery
  • Invoice Creation
  • Payment Receipt
  • Reconciliation
  • Tax Reclamation

Even without a detailed description, one should be able to see that there are a number of core elements of global trade – seven to be precise – and it is through familiarity and mastery of these core elements that one becomes a master of global trade and all the benefits that can be derived therefrom.

The seven core elements of global trade are:

  • Strategic Sourcing
    Strategic Sourcing is a systematic corporate/institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company. (Wikipedia) It one of the most important elements as the supplier selected impacts everything: the home country of the owners of the supplier corporation impacts financial status and trade restrictions, the location of the supplier impacts logistics, the supplier’s financial status impacts financing, and the supplier’s overall capability impacts quality, risk, and visibility, for example.
  • e-Procurement
    e-Procurement is the counterpart to e-Sourcing, starting where eSourcing ends and ending where eSourcing begins. It is the “e” implementation of the procurement cycle which is concerned with the requisitioning, receiving, and reconciliation of the received goods as opposed to the analysis, auction, and award that takes place in the sourcing cycle.
  • Supply Chain Finance
    Supply Chain Finance is the optimization of both the availability and cost of capital within a buyer-centric supply chain. The availability and cost of capital is usually optimized through the aggregation, integration, packaging, and utilization of all of the relevant information generated in the supply chain in conjunction with cost analysis, cost management, and various supply chain finance strategies.
  • Trade Document Creation
    Trade document creation is the creation of the necessary documentation to satisfy import, export, customs, security, safety, port, and carrier requirements. Numerous documents are required by government bodies, customs, ports, and carriers, just to name a few, to move your products internationally. One industry estimate has noted that a single global shipment can require approximately 35 documents consisting of over 200 data elements to be created for up to 15 different parties.
  • Logistics
    Logistics is determining how the goods are going to get from the point of origin to the point of destination. What methods of transportation are going to be used? Which ports? Which carriers? Which third parties are going to be contracted to assist in managing the process? Logistics can be quite involved when goods need to be exported and imported.
  • Regulatory Compliance
    Even though the customs, logistics, and security requirements are enough to make an average person’s head spin, there is an ever dizzying away of acts and directives that a supply management professional needs to be aware of. In addition to the attention grabbing Sarbanes-Oxley Act (SOX), especially section 404 on the management assessment of internal controls, there is the Hazardous Materials Safety (HAZMAT) in the US, the European Union (EU) Restriction Of the use of certain Hazardous Substances in electrical and electronic equipment (RoHS), the forthcoming RoHS equivalent in China and other Asian countries, and the European Commission (EC) Directive on Waste Electrical and Electronic Equipment (WEEE); there’s also the EC Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), just to name a few.
  • Risk Management
    Underlying each of the previous six aspects of global trade is risk. Failure to ignore Supply Risk Management today could be devastating to an organization.

For more insights on Global Trade, check out the An Introduction to Global Trade: The Basics wiki-paper over on the e-Sourcing Wiki which includes an overview of the global trade import cycle, the global trade export cycle, and the seven core elements of global trade – each of which destined to have its own (set of) wiki papers, if it does not already.

Still quiet here.sas

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