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International Truck and Engine Corporation is the operating arm of the Navistar International Corporation. ITEC produces mid-range diesel engines, medium trucks, heavy trucks, severe service trucks and bus chassis. ITEC also provides service parts and repair services under the International brand. Its operations include five truck plants, two bus plants, four engine plants, two foundries, and nine parts distribution centers located in the U.S., Canada, Mexico and Brazil. ITEC's annual sales in 2004 were $9.6bn.
Despite the International name, ITEC historically focused almost exclusively on the U.S. and Canadian markets. Well into the 1990s, 95 percent of its supply base along with nearly all of the company's sales were located in these two countries. About 10 years ago, the situation began to change as ITEC expanded throughout North and South America, while its suppliers searched globally for continuing price reductions. Simultaneous to this rapid international expansion, U.S. regulations were becoming stricter in the aftermath of the September 11 terrorist attacks. ITEC's corporate trade compliance group was challenged by company management to aggressively address its new environment without increasing headcount or total cost.
"We contacted Vastera's consulting group to perform a gap analysis and to identify what would be needed to manage trade compliance within ITEC's new changing environment," says Thomas R. Erickson, director of logistics for International Truck and Engine. Based on this original study, a business case was drafted detailing a solution using Vastera's managed services team. In the plan, ITEC was able to offset the expense of Vastera's managed services contract with the duty savings resulting from increased efficiencies in its North American Free Trade Agreement (NAFTA) program. With Vastera's managed services group responsible for trade compliance, ITEC was able to outsource all but one of its original employees.
Champions from both Vastera and ITEC led the transition to make the business case a reality, according to Erickson. To manage the complex variety of ITEC's systems and divisional structures, Vastera was forced to deeply integrate itself into all aspects of our business.
"A seamless connection now exists between Vastera and all facets of the organization including engineering, product development, purchasing, supply chain, and manufacturing operations," says Erickson. "The direct and indirect savings of the outsourcing of trade compliance functions to Vastera exceeded the boldest of expectations. By increasing International's NAFTA efficiency, the need for NAFTA refunds have decreased dramatically resulting in improved cash flow and reduced total duty costs."
In addition to the dollar impact of the outsourcing, International has best-in-class compliance processes and the flexibility needed to respond to change. These new processes were tested by the rapidly changing environment and outside review from several governmental agencies. In 2004 and 2005, ITEC was accepted after on-site review into U.S. Customs and Border Patrol's Customs-Trade Partnership Against Terrorism and Importer Self-Assessment programs. Canadian Customs performed a NAFTA audit of one of International's main production facilities and there were no negative findings.
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