All posts by mitch

Nuts & Bolts

Logistics and Baseball

I’ve always loved baseball and attribute my math skills to studying the back of favorite players’ cards. The basic statistics were batting average, home runs, and rbi for hitters. For pitchers it was wins-losses and earned run average. These measures don’t even scratch the surface compared to the sabermetrics used in today’s game.

Logistics and baseball have some common features. We play every day, errors can have a big impact , managers get criticized, and there are plenty of rules and regulations. Like sabermetrics in baseball, we can measure logistics performance in many different ways.

Measuring and managing logistics performance is a full time job for professionals and the volume of data can be daunting. Managers in other functions such as finance, marketing, or manufacturing may need a quick view of logistics data as it relates to their responsibilities.

Here are a few general measures for the dashboard:

Absolute Performance- monitor absolute logistics failures rather than percentages. For example, 99.5% on time performance appears very good. However, in a high volume operation, it could mean hundreds or thousands of late orders per day.

Inventory Turnover- common measurement in asset mgt.

Order Fill Rate- customer service and warehouse productivity measurement. Can also use item, line, or value fill rate.

Warehouse Utilization %- indicator of good asset mgt.

Warehouse Productivity- measure of units received, stored, picked, packed, and shipped per hour.

Order Cycle – reduced order cycle means less inventory in the system and greater customer satisfaction. Longer order cycle means more inventory in the system and reduced customer satisfaction.

Lost Sales- inverse relationship with inventory. Higher inventory costs, lower risk of lost sales. Lower inventory costs, higher risk of lost sales.

Transportation costs- always a trade off….bulk shipments can reduce transportation costs but leads to higher inventory levels in system. Higher transportation costs due to mode shift (air vs. ground or air vs. ocean) can reduce inventory in system by shortening the order cycle.

Commodity value- higher dollar value means increased transportation, inventory, and packaging costs.

Density of product- High density (lbs/ cubic ft or kgs/ cubic meter) means lower transportation and inventory costs since the product takes up less space in containers or warehouse.

Loss and Damage- greater susceptibility to loss or damage means higher transportation rates and higher warehousing costs due to special handling.

Location Decision- Distance from sources or markets = relative advantage or disadvantage vs. competitors. This is a C level responsibility.

Need help? contact mitch@52.91.45.227

Regulatory Updates

Compliance Roadblocks

Exporters, what has prevented you from implementing an Export Compliance Program? Here are the most common self-imposed roadblocks:

Inertia- initial steps are taken to develop an Export Compliance Program but progress stalls as more urgent tasks need attention.

Management believes that company is too small or doesn‘t export enough to need a formal ECP.

Lack of upper management commitment and/or willingness to put in the time.

Management doesn’t want to spend the money or devote resources to create an ECP.

Compliance is managed at lower levels with limited authority to get the project done.

Reliance on Logistics Service Providers for compliance. While LSPs are valuable business partners, the exporter is ultimately responsible for compliance.

An effective Export Compliance Program includes these elements: Management Commitment, Risk Assessment, Export Authorization (Agency Jurisdiction), Record Keeping, Training, Audits, Handling Export Violations (Corrective Action), and Build and Maintain an ECP Manual.

The most important element, by far, is Management Commitment. C-Level executives must allocate resources, communicate the importance of an ECP throughout the organization, and hold everyone accountable. Without strong management commitment and involvement you will end up with a weak program.

If you would like to get started contact mitch@52.91.45.227

Nuts & Bolts

LinkedIn Comments- Double Brokering

https://www.linkedin.com/posts/activity-7035240457882206208-oTJO?utm_source=share&utm_medium=member_desktop

Mike, can you give a brief explanation of what double brokering is? Thanks

Hi Mitch, it can be a couple things but 90 percent of the time it’s a carrier who is on a load board that is asking to haul your load as a broker who then in turn hands the load off to another carrier. When this happens, the original carrier who is posing as an asset carrier then usually doesn’t pay the actual carrier who hauled the load and it creates a lot of issues with freight liability as well. Because basically a criminal is involved and is scamming you and the carrier. It’s really bad and it’s out of control rampant now. Scammers have figured out how to work the system. Not enough checks and balances.

Nuts & Bolts

Be a Trusted Traveler

Our international travels resumed in 2022 after a two year hiatus. The challenges involved in air travel are well known and it is wise to be prepared for flight delays so they don’t spoil your entire trip.

We just renewed our Global Entry enrollment for another 5 years. The cost ($100 for 5 years) is well worth it. Global Entry, which includes TSA pre-check, enables the traveler to avoid long customs lines upon returning to the US after a tiring trip. Here is the link if you are interested:

https://www.cbp.gov/travel/trusted-traveler-programs/global-entry

Next up Portugal, Spain, and as always, Canada.

Nuts & Bolts

LinkedIn Comment- Hand Carries

David Noah

President at InterMart, Inc.

Companies that allow employees or contractors to take commercial items across a border—known as a hand carry—are taking on a big compliance risk. Here’s what you need to know to stay compliant.

Mitch Kostoulakos, LCB

Excellent post David. I think most hand carries are treated casually without much thought to the risk.

Nuts & Bolts

Country Due Diligence

In previous posts we have noted 3 common causes of customs delays: vague or incomplete descriptions, questionable valuations, and lack of IOR contact info on commercial invoices. These are the easy fixes. The real complexity in international trade is due to the many different regulations applying to destination countries.

Customs delays in other countries are problematic for exporters, requiring a lot of time and effort to resolve. Best practices in exporting include due diligence and research when shipping to a country for the first time. The Country Commercial Guides published by the International Trade Administration are an excellent no cost starting point. Here is the link:

https://www.trade.gov/ccg-landing-page

Contact mitch@52.91.45.227 for help.

Regulatory Updates

Want Fast or Accurate Classifications?

Tariff classification requests are often for a “quick code lookup” or a “ballpark duty rate”. For many commodities I may actually be able to provide plausible codes and duty rates with no research, but that would be malpractice on my part . Compliance adds value through attention to detail, established protocols, oversight, and documentation. HTS classification is the first step in both export and import compliance.

Proper classification includes HTS lookup, GRI (General Rules of Interpretation) review, checking both chapter and additional notes, as well as CROSS (Customs Rulings Online Search System). Specs, diagrams, and manuals are helpful. For some commodities it may be necessary to consult with a subject matter expert in engineering, purchasing, or manufacturing for details about the item.

These are the procedural steps of classification, but there is more. Most listings require interpretation of the tariff language based on experience. Finally, the process needs to be documented for future reference and parts lists updated.

For accurate classification help contact mitch@52.91.45.227.

Nuts & Bolts

Hire a Geek

Nerd: “socially awkward” and “an intelligent but single-minded person obsessed with a nonsocial hobby or pursuit” Geek: “a digital-technology expert or enthusiast” and “a person who has excessive enthusiasm for and some expertise about a specialized subject or activity”. Compliance folks sometimes refer to themselves as Geeks.

Demand for compliance professionals has never been higher, as LinkedIn users can readily see. Companies of all sizes and in all industries realize that being in compliance means fewer supply chain disruptions. At the very least compliance is good risk management. Think of it as insurance.

Compliance is about attention to detail, consistency, process, and oversight. I guarantee that your compliance folks are not trying to practice “sales prevention”. The goal is to complete transactions the right way, avoid customs or logistics delays and reduce exposure to fines and penalties. However, there is no doubt that complying with all of the agencies involved in international trade generates a lot of red tape and can be frustrating.

Compliance managers must have the authority to stop shipments when red flags appear. In order to ensure independence compliance folks should not be in the supply chain, finance, or marketing chain of command. Better reporting relationships would be with the legal department, CEO, or COO.

Consider just a few of the details that can make or break a smooth transaction:

Harmonized Codes to the full 10 digits including heading and sub heading. It is very easy to transpose digits.

Schedule B Codes, ditto

ECCN , Alpha numeric, number, letter, followed by 3 numbers. Example 4A994. Then followed by sub paragraph level and don’t forget the dot between the last number and the sub para.

License Exceptions are designated by 3 letter codes and must be compatible with the ECCN listed.

COO, Country of Origin markings and proper codes on documents and AES filings. Best not to guess here. Have you ever entered CH for China?

Valuation must be determined accurately and is best covered in a separate post which I have done on 05/09/2019.

These tactical elements are just some of the basics. We could also mention commodity descriptions, red flag screening, and plenty of other details. Trade policy is more strategic, encompassing trade agreements, incoterms, and dealing with enforcement agencies. There is a lot at stake so, hats off to the compliance teams.

For assistance contact mitch@52.91.45.227