Supply-chain and compliance officers are facing a head-spinning environment of constant change in their sourcing and logistics operations. Gary Barraco, director of global product marketing with Amber Road, tells us how good a job they're doing.
Q: Give us a snapshot of the way trade is going right now. What big changes are you seeing in sourcing?
Barraco: First, we need to understand how quickly things are changing. As we try to stay abreast of all these changes, we have to publish new material quickly, because changes are coming at us hour by hour, and we don't know when they're going to come.
From a sourcing perspective, it means we're going to see shifts in countries that we historically have sourced from, and possibly look to new regions for that purpose. Most importantly, we have to understand how rule of origin now plays into the way global trade is conducted. For example, if we’re sourcing from China for raw materials and parts, and bringing them into the United States for manufacturing, we need to evaluate what that cost could be with a new tariff layered on top.
Q: But companies can't turn on a dime in their sourcing strategies. It takes a while to switch, so don’t they have to sit back and wait for things to calm down before they decide whether they're actually going to make a change?
Barraco: We’re seeing companies that are jumping right away, which means that they might have had a backup plan already in their pocket. There are a lot of examples in the automotive industry, where parts can be sourced regionally or locally. But I agree – this is an ocean liner, and we need to make slow turns. Companies need to be proactive, though, and look down the road to what might be the new normal.
Q: There have already been moves to diversify sourcing to offset the effects of natural disasters. So why not extend that to changes in the geopolitical landscape as well?
Barraco: That's the agility piece that we preach. It’s one of the primary characteristics of a smooth-running supply chain. So if we can build those features into our supply chains proactively, that would help.
Q: What kind of changes are we seeing on the logistics side?
Barraco: For importing into the United States, we're seeing heavy capacity issues, in getting goods from the port to their final destination. There are major labor issues in making sure that ports, trucks and rails are adequately staffed. The other issue is gaining the true in-transit visibility that's demanded by consumers today. That could be either B2B or B2C. That capability is being provided through the Internet of Things, and more technology than we ever had before.
Q: What about the issue of trade compliance? Those requirements seem to be changing daily.
Barraco: Certainly. As more borders are crossed, the risk goes up, and we need to source from new countries and regions because of tariff shifts. If I move to another country, does my risk increase because I've got more sanctions, restrictions or other regulations that I need to follow? They might be new to my supply chain, so I need to evaluate them before making those decisions. Every border that's crossed adds a layer of risk, and as we start shipping from new regions, it's going to increase.
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