Supply chain risk management solutions must encompass process, content, and connectivity. Even before the economic downturn, large enterprise software vendors like SAP and Oracle had begun to introduce Governance, Risk, and Compliance (GRC) solutions in response to a growing customer requirement: the ability to respond to risks more efficiently.
Initially, these solutions were largely process based—i.e., they created process flows for dealing with specific compliance requirements. Companies would define tasks that needed to be completed by a certain time, by the pertinent company personnel. These tasks were monitored for completion and certain types of events could get escalated to high-level executives along with relevant information.
More recently, these solutions have become a lot more interesting. SAP, for example, has an end-to-end solution for food and beverage manufacturers to proactively manage food safety. It starts with recipe formulation and goes through raw material procurement, production, sales and distribution, and recall management. In short, it encompasses the entire end-to-end process and it embeds safety across the organization in order to minimize risk while reducing the cost of safety.
The recent economic downturn forced many companies to provide financial support to their key suppliers. As a result, solutions that can help companies detect potential supply disruptions have gained added attention, and new types of web-based content solutions have emerged in this area. For example, Panjiva provides a central database of supplier data gathered from credit reports, black lists, and customs data that companies can search. Why customs information? If customs entries from a foreign supplier decline sharply, this could indicate the supplier has a greater risk of bankruptcy.
For companies that import and export goods, Global Trade Management (GTM) solutions fall under the GRC umbrella. Here the large enterprise suppliers have process-based solutions like those described above, but ARC is particularly interested in best-of-breed solutions that combine process, content, and connectivity (see “Beyond Software: The Role of Content and Connectivity in Global Trade Management”).
Management Dynamics’ GTM solutions, for example, are powered by its Global Trade Content database. The company claims that it has the industry’s most comprehensive and up-to-date database of global trade content, based partly on the number of people it has focused in this area. The database contains content for tariff and contract rates, preferential duties and taxes for calculating total landed cost, import and export controls, restricted parties lists, and all trade documents required for cross-border commerce. And the content is created in a hierarchy that mimics the process trade lawyers go through to classify goods. In short, Management Dynamics excels in the content portion of GTM.
Descartes Systems Group, on the other hand, excels at connectivity. How does connectivity come into play? Connectivity is necessary because many different parties are involved in global trade—e.g., carriers, customs agencies, freight forwarders, logistics service providers, and regulatory agencies—that need to communicate and collaborate with each other. In addition, information entered by one entity often needs to be leveraged my multiple parties in the end-to-end process. For example, a waybill is necessary for an air freight shipment. But customs also needs advance notice before a shipment can be loaded for departure. The pertinent data should flow to customs without rekeying. Having to rekey information is not only time consuming, but can also introduce errors. Descartes’ connectivity solutions have data quality capabilities to help ensure the required data is entered and in the correct format.
When it comes to GTM, there is still no perfect solution. The content required is so vast that no single vendor can provide it all. And although Descartes has a very large global logistics network, the company concedes that its work is not done and more acquisitions are possible. Descartes recently completed its acquisition of Porthus, which increases its connectivity to several European customs agencies.
In short, there are both new solutions in supply chain risk management, as well as solutions that are maturing in their breadth and depth.
(Note: Descartes, Oracle, and SAP are ARC clients)