CSCB Report
Surprise - SCM is about people, not technology
In a recent interview Colin Billinge, European marketing director for General Electric’s global, Internet-based supplier network, expressed dismay. The Internet, it seems, is not the universal panacea he once thought it was. When it comes to making supply chain management (SCM) work, it turns out that people play just as important a role as technology.
So perhaps Oracle founder Larry Ellison got it wrong. The Internet changes a lot of things, but it does not change everything. One of the things it does not change is this: supply chain management is about knowledge and relationships — which means it is about people.
Now, do not get me wrong. As readers of this column know, I am no Internet-basher. The Internet – along with the technology that lets us digitize and automate information exchange — is, without doubt, the single most important tool for enabling SCM. Business worth trillions of dollars is flowing through Internet-based supply chains today, and growth estimates for the foreseeable future are astounding.
But Internet-based supply chains do not turn bits and bytes of data into the knowledge you need to manage all that activity — people do that. And the Internet does not turn data exchange into meaningful, trusted business relationships.
That is something that many of us, mesmerized as we are by technology, tend to forget. But sooner or later, the truth comes home.
Take, for example, the role of customs brokers in the supply chain. For years, companies have turned to brokers to help manage the relationships between themselves, other supply chain partners, and customs authorities. With good reason. Brokers have the knowledge and expertise in cross-border logistics, tariffs and customs procedures. They understand how customs affects their clients’ business needs and operations. They have well-established working relationships with customs authorities, and the skills to manage their clients’ relationship with customs effectively.
But in recent years, technology has sometimes obscured the real value of a broker’s knowledge and relationship management role. Automated customs coding software comes along. Customs agencies introduce new automated clearance systems. Globalizing free trade agreements seem to strip customs transactions of any real significance. Some companies start to think of the broker simply as the one who flips the switch that sends transaction information to customs — a useful function perhaps, but a simple one, not a high-value, critical business process.
Companies that think that way see the broker’s role in SCM as a very narrow, limited one: minimize customs transaction costs, and get goods cleared as fast as possible. That is a shame, because brokers can — and do — bring much more value to the process.
The reality is, relationships with customs are far more complex today than ever before. From a customs perspective, technology-driven globalization results in more complex trade management issues. Tariffs have been reduced, but new complications arise regarding things like rules of origin, end use, labelling, health and safety standards. Internet-based procurement means a greater variety of products from a greater variety of source countries — leading to more complex trade, regulatory and logistics challenges, over and above the traditional challenges of customs clearance.
As a result, customs authorities are using technology to shift procedures away from transaction-by-transaction clearance and accounting at the border, towards a more holistic focus on monitoring and auditing an importer’s business. In Canada, the new Customs Self Assessment program can virtually eliminate clearance procedures at the border — provided that importers maintain comprehensive data trails on each trade transaction, from initial order through to delivery of goods to their final destination. The data reporting and post-clearance audit requirements are extremely detailed, placing far greater demands on importers in terms of knowledge, customs liabilities, and technology capabilities.
For companies interested in SCM, it is becoming clear that the real value a broker brings to the process is not technological sophistication — although that is something brokers have in spades. The real value is in a broker’s knowledge and expertise in managing this increasingly complex customs relationship, facilitating the flow of information between importers, carriers and customs authorities. More than ever before, that expertise is essential to the expedited movement of goods across borders.
Internet-based SCM and automated SCM processes are here to stay. For many companies, they are not an optional luxury. They are a do-or-die necessity. But if you think that technology is the essence — not just the platform — for SCM, you may miss the mark completely. As the experience of customs brokers shows, more and more companies are learning that the value of the SCM revolution lies not in the enabling technology. It lies in what the technology makes possible — the application of knowledge in new ways, and the management of new, more complex supply chain relationships.
More than ever before, SCM is about people.