As global supply chains grow in complexity, the option of deploying a foreign trade zone becomes more valuable than ever.
FTZs allow companies to conduct a number of key trade-related processes – including manufacturing, assembly, storage and exhibition – in segregated areas without being subject to Customs duties. In essence, the zones are considered to be outside U.S. Customs and Border Protection (CBP) jurisdiction.
FTZs have become a key offering of major logistics service providers, and DB Schenker USA is no exception. A North American division of Deutsche Bahn AG, Schenker operates 39 logistics locations in the U.S., comprising some 21.5 million square feet of space.
The company began offering FTZ services to a handful of clients, steadily expanding its account base over the years. Today, it directly manages three zones, one in El Paso, Tex., and two in Indianapolis, Ind. It also acts as third-party administrator and customs broker for a client-run zone in Stockton, Calif.
Schenker continues to broaden the service, with plans to open general-purpose zones for multiple clients in various gateways across the country, says Kim Taylor, director of FTZ services. But maintaining that fast-growing network presents a number of challenges, tied to meeting the unique needs of individual accounts. For example, a pharmaceuticals supplier might require refrigerated services in a cross-dock environment, while a maker of heavy-machinery components calls for a more traditional putaway-and-picking setup.
The service variations can be endless. In one facility, says Taylor, Schenker oversees a vendor-managed inventory arrangement with some 30 suppliers, on behalf of a single client. Title to the components doesn’t pass to the manufacturer until they’re needed on the production line, as part of a Mexican maquiladora operation.
Underpinning the physical requirements of a zone are state-of-the-art information systems that can tie together disparate processes and clients. For the past eight years, Schenker has relied on FTZ software from Integration Point for its single-client operations. The application supports Schenker’s accounts for the entire time that a customer’s product or component resides in the facility.
A 10-Year Relationship
Taylor’s experience with Integration Point dates back 10 years, when she was running a pair of FTZs in California and Texas. The vendor “has a good reputation for its ability to reconcile and integrate with various types of systems,” she says.
Running multiple WMS applications at its various locations, Schenker is acutely aware of the possibility of reporting and documentation error. The solution lay in the centralization of data, with the goal of asserting pinpoint control over daily operations.
Today, Taylor says, Integration Point provides Schenker with a single platform for managing and reconciling its FTZ inventory. In conjunction with the logistics provider’s warehouse-management system, the tool allows the facility to admit goods into the FTZ, reconcile inventory, carry out reporting, and assign goods to weekly entries or exports being shipped in bond. “Integration Point is the platform under which anything that’s part of the FTZ is managed,” she says.
The old system of managing Schenker’s FTZs involved manual processes and spreadsheets, says Jeff McCauley, vice president of global accounts with Integration Point. Lacking one integrated application, the system did not easily allow for the movement of data between systems.
Today, says McCauley, Schenker’s WMS melds seamlessly with the Integration Point application, so that inventory levels can be verified, and documents created in compliance with all regulatory requirements.
Prior to acquiring the Integration Point software, Schenker was relying solely on its internal WMS. It saw the need for an additional tool that could confirm inventories and ensure that the right products are being picked at the right time. The system “gives us an immediate snapshot of where we might be out of balance between WMS and FTZ inventory, and allows us to reconcile that on a daily basis,” says Taylor.
Management of the zone entails a first-in, first-out (FIFO) system for picking inventory, requiring the accurate assessment of duty rates for items leaving the facility. “FIFO inventory is critical to FTZ operations,” says McCauley.
Implementation of the Integration Point application was done at multiple locations simultaneously. The tool resides in the cloud, hosted by Integration Point from servers at its headquarters in Charlotte, N.C.
Key to the system’s effectiveness is its ability to adapt to the varying needs of clients at all of those facilities. Schenker handles a wide range of products within the zones, including high-value electronics and medical devices.
I.T. as a Selling Point
For Schenker, Integration Point’s software is more than a means of ensuring internal efficiencies – it’s a selling point to prospective accounts. “We show customers how their inventories will be managed, and what tools we use to do that,” says Taylor.
Systems such as the Integration Point application will take on even greater importance as Customs ramps up its long-awaited Automated Commercial Environment (ACE), intended as an electronic “single window” for the reporting of imports and exports by the trading community. Currently ACE is set to go fully live in December 2016. As of early April, Customs had completed three of seven deployments that make up the total system.
Schenker’s goal is simplification of a complex process. Taylor says the company continues to work with Integration Point to add appropriate fields within the item master or entry process, in order to communicate with as many government agencies as possible, and prepare for the coming of ACE.
Applications such as Integration Point’s FTZ software are seen as essential to making Customs automation a reality. “If we can get ACE up and operating,” says Taylor, “our lives will be much better.”
For its part, Integration Point hopes to talk with Schenker about extending its use of the vendor’s software on a global basis. The goal, says McCauley, is to be able to take data from multiple countries and make it visible on the Integration Point platform.
“As the whole concept of the foreign trade zone continues to develop, I’m sure we’ll continue to work with them,” says McCauley.