Implications Of New Contract Commerce Essay

Global supply concatenation direction has fostered and developed with the rise of globalization and realization of international trade Supply Chain direction involves be aftering ( demand prediction, merchandise pricing, and stock list direction ) , sourcing ( procurance, finance and invoicing ) , doing or fabrication ( merchandise design, production direction and installations direction ) , and bringing ( managing client orders and their bringing ) , ( Holloway and Grace, 2010, page 34 ) .

International supply concatenation is evidently one of the manifestations of international trade affecting international histrions. Broadly, international supply concatenation involves multi histrions and multiples of procedures to procure the motion of goods from its topographic point of beginning as natural stuff to a designated concluding finish as a manufactured goods to a consumer through a multilayered procedures and locations.

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It is stated that “ provide concatenation direction focuses on how houses utilize their providers ‘ procedures, engineering, and capableness to heighten competitory advantage ( Farley, 1997 ) and the coordination of the fabrication, logistics, and stuffs direction maps within an organisation ( Lee and Billington, 1992 ) ” ( cited in Tan K.C ( 2007, page 40 ) . Conventionally, supply concatenation direction was coined with buying and supply, and transit and logistics that are more focussed on economic facets, fabrication or productiveness, client satisfaction, gross revenues addition, goods bringing or motion, warehousing, stock list etc. In modern-day thought supply concatenation direction is about the integrating and coordination of the above elements coined with installations, substructures, engineerings and partnerships. Tan, C. K ( 2007 ) links supply concatenation direction with incorporate buying scheme, integrated logistics and physical distribution, supplier integrating, buyer/supplier partnerships, supply base direction, strategic provider confederations, and supply concatenation synchronism constructs and concern schemes.

The 9/11 terrorist onslaught in the US has exceptionally intensified the demand for planetary supply concatenation security. As planetary supply concatenation substructure and the goods are the primary marks of terrorist onslaughts, as observed in the conveyance industry, the demand for secured planetary supply concatenation is rationally justified every bit far as it does non halter international trade flow ( World Bank, 2003 ) . In response to the demand, assorted security enterprises have been in topographic point at planetary, regional and national degrees. Security steps can merely be successful if shared among histrions – lodger and regulative bureaus, trading community and supply concatenation facilitators such as transporters, logistics suppliers, forwarders, ports and terminuss etc.

Supply concatenation direction security aims at a secured flow of goods and services from the provider to the terminal consumer through multiple procedure and histrions characterised with cost decrease, efficiency, regulative conformity, value adding, expedited bringing, addition in gross revenues of goods and services and client satisfaction in incorporate and co-ordinated attempt of all involved including authorities ( regulative ) and concern.

The intent of this paper is to show the impact of supply concatenation security enterprises of the US in peculiar on supply concatenation direction determinations as applied to the Bright Sparks Pty Ltd current planetary sourcing theoretical account. The paper is structured to include brief debut to provide concatenation direction, contextualising planetary sourcing and the instance of Bright Spark, analysis and impact of US supply concatenation security enterprises, deduction of the new distribution contract of Bright Spark, and eventually drumhead and recommendations.

I will reexamine relevant literatures in the country of supply concatenation security and will try to analyze straight related US enterprises to place the impacts on planetary supply concatenation in general and the deductions of the current planetary sourcing theoretical account of Bright Spark. Therefore, the findings of this briefing study is to be limited to theoretical deductions drawn from logical analysis of the bing supply concatenation security enterprises of the US.

Global Sourcing and the Case of Bright Spark Pty Ltd

General Background

It is practically observed that a specific merchandise is manufactured from inputs sourced from different parts of the universe distanced with 1000s of stat mis for many grounds to include seeking for inexpensive labor, forte expertness, entree to cheaper natural stuffs, revenue enhancement inducements, lower duty rates and other economic advantages. This web of supply where a company is sourced its natural stuffs or semi-finished constituents from different states is called ‘global sourcing ‘ . In planetary sourcing multiple histrions are involved to include natural stuff providers, natural stuff makers, semi-finished constituents makers and providers, logistics suppliers ( transporters, warehouses ) , forwarders, uncluttering agents, regulative agents etc supported by proper concern procedure, paperss and information, and human expertness and determination devisings.

Global sourcing has its ain advantages and disadvantages. As summarised in the survey usher of this unit ( Holloway and Grace, 2010 ) , planetary sourcing has advantages of perforating possible markets, tapping scarce resources, developing surrogate provider, increasing entire supply capacity, lower production cost, larning new concern civilization, acquiring beginnings closer to markets, working better engineerings and substructures etc. On the other manus, planetary sourcing is exposed to varied hazards to mistreat rational belongings rights ( hallmark, patent, right of first publication, trade name etc ) , exposure to break or break of supply, political instability in 3rd universe states, unknown or unsure regulative steps, exchange rate fluctuations, possible of quality via medias, possible holds and other transverse cultural troubles.

Bright and Spark Global Sourcing Model

Bright and Spark assembled their merchandises from natural stuffs and semi-finished constituents supplied from several states around the universe. A cardinal constituent used in the assembly of a merchandise is supplied from a state that is labelled by the US authorities as ‘security concern ‘ . Here, it is clear that a ‘security concern ‘ agencies there is a possible security menace regardless of its degree and precedence that will imply tougher security steps on goods coming into the US. It is obvious that this state has significantly lower labor cost than other possible providers and the authorities is prepared to supply extra revenue enhancement inducements availing economic benefits and competitory advantages. The clear issues here is security steps by the US Customs and Boarder protection may impact the economic and competitory advantages of the company.

Although the distributer, Flotsam and Jetsam Inc. , is a member of the US C-TPAT Program, that can be entitled to the benefits declared such as “ 4 to 6 times less probably, to incur a security or conformity scrutiny ” ( US Customs and Border Protection, page 1 ) , this may non be applicable as the supply is to get down yet with no anterior hazard appraisal made by the governments. That means the distributer or its provider should be assessed harmonizing to the C-TPAT Five Step Risk Assessment Process Guide ( 2010 ) . That means there is likeliness of comparatively rigorous security or conformity intercessions impacting the efficiency of supply concatenation direction as will be discussed subsequently.

Bright and Sparks Pty Ltd Global Sourcing and Supply Chain Model Based on New and Payne ( 1995 ) cited in Tan, K. C ( 2001, page 40 )

Supply Logistics – Physical Distribution and repositing

Tanjung Pelepas Port

US Boarder

Quality Inspection, Boarder & A ; Regulatory Controls

into Malaysia

Raw stuff



Flotsam & A ; Jetsam Inc

Bright Spark PTY Ltd ( Malaysia

Semi-finished or Component maker

Natural stuff maker


/ – Information, papers exchange

– Physical distribution – goods bringing, repositing, forwarding, uncluttering etc

– Regulatory conformity steps, quality reviews etc

US Supply Chain Security Initiatives and Its Impact

Following the 9/11 atrocious terrorist onslaught in America and the continued menaces and belligerencies, the US has put in topographic point assorted supply concatenation security initiatives be givening its centre place from trade facilitation to commanding. The enterprises include legal and structural responses as will be briefly discussed below in relation with the given scenario.

Consumer Product Safety Improvement Act ( CPSIA ) – This act trades with consumer merchandise safety that peculiarly deals with cooperation and the exchange of information associating to consumer merchandise safety. Harmonizing to this act, providers are required to supply enfranchisement for their merchandises destined to the US corroborating conformity with all applicable consumer merchandise safety and similar regulations and criterions. This means that Bright Spark should happen out if the merchandise is capable to the proviso of consumer merchandise safety enfranchisement and if so such papers should be sought from competent governments for the merchandise and its constituents including the point supplied from the ‘security concern ‘ state. This will incur extra cost of processing and certification besides the bureaucratic inefficiencies that may confront.

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The US 9/11 Commission Act of 2007 – Harmonizing to this act, Transportation Safety Administration ( TSA ) requires 100 % testing for all cargo flights on rider air trade, supported through a mechanism called a “ Certified Cargo Screening Program ” ( supposed to be to the full implemented on August 1, 2010 ) which is a voluntary plan designed to travel some of the showing procedure to shippers, 3rd party logistics suppliers, and forwarders ( Saphir, 2010, DHS, 2007 ) . That means Bright Spark ‘s merchandises are capable to 100 % testing unless the distributer has to relinquish such demands as member of the C-TPAT after traveling through the hazard appraisal that has a direct impact on glade clip given the engagement of a constituent from a ‘security concern ‘ province that may present a menace.

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Customs – Trade Participation against Terrorism ( C-TPAT ) – is a joint conformity plan between CBP and the trading community leting participant ‘s or member ‘s ain appraisal that may assist to avoid unneeded intercessions and non-compliance. ( DHS, 2007 ) This enterprise has an existent and possible benefits to participants including minimal lading review, accelerated boundary line crossing and preparation installations. The distributer is C-TPAT plan member and can bask the benefits subject to hazard appraisals and conformities, nevertheless, as the importing of the Bright Spark ‘s merchandise is new phenomenon, there is a procedure to be fulfilled ( subscribing understanding, carry oning self assessment, file security profile, enfranchisement and proof of tier1 and 2, etc ) that will take considerable clip. Here, the issue of the supply from the ‘security concern ‘ province should be assessed and cleared which is non simple to bask the particular benefits. Here our company should work in close cooperation with the authorities and the distributer to construct the trust ; otherwise, it will bear the effects of CBP lading scrutinies. The impact here is once more increased cost, serious challenge to convert CBP sing the security of the cardinal constituent. Strategically this can convey an advantage in a long term conformity records, self appraisal and avoiding security hazards as portion of the enterprise.

24 Hour Advanced Manifest Rule ( AMR ) ( 2003 ) – This instrument requires providers to subject lading informations to US Customs and Border Protection electronically at least 24 hours a caput before the lading is loaded on the ship. This means Bright Spark is required to “ roll up, procedure and convey the informations to CBP on clip ” ( Holloway and Grace, 2010 ) in electronic agencies. . This farther intensified by an improved act called advanced security filing non merely includes extended informations but besides requires proper system set up to pull off the informations aggregation, processing and transmittal to CBP from both provider and importer. This demands the company excess attempts, electronic engineering implying extra cost, nevertheless, efficient usage of this demand can salvage it from unneeded hold and non-compliance steps. The issues of state of beginning is of import here and the importer/supplier should do certain the right statute law or criterion in this respect on how to handle the cardinal constituent that comes from the ‘security concern ‘ province.

Container Security Initiative ( CSI ) Port Program ( 2006 – 2011 Strategic Plan ) – CSI is built on the rule of partnerships between the US and other states and the trading community with a end of inspecting high hazard containers destined to the US before they are loaded in other state ‘s port ( CBP, 2006 ) such as Malaysia ‘s Tanjung Pelepas port. Saphir ( 2010 ) nevertheless, denied that CSI is a authorities -to – authorities partnership and does non affect private concern. As stated by Commissioner Basham W. Ralph in his introductory comment to the CSI scheme ( CBP, 2006: two ) CSI plan enterprise

1 ) . Identify high hazard lading containers at Tanjung Pelepas port before they are shipped guaranting progress information and intelligence

2 ) . Pre-screen and measuring containers at Tanjung Pelepas before they are shipped,

3 ) . Use engineering to pre-screen bad containers to guarantee accelerated showing, and

4 ) . Use smarter, more unafraid containers, which will let CBP officers to place any effort to mess about during transit and theodolite.

This is portion of the US intercession from abroad and can give better assurance on goods coming from Tanjung Pelepas, which can let less intercession to our merchandises or interfere in the beginning avoiding farther complications, costs and non-compliance effects abroad.

Other execution schemes and 100 % Cargo Scanning Initiatives – The US has other instruments that apply 100 % lading scanning, when executable, and strategic programs notably Strategy to Enhance International Supply Chain Security ( DHS, 2007 ) have significantly fortified the security and conformity steps on international lading and goods imported into the US.

In general, the security enterprises have important negative impact in footings of increased cost of operations and stock lists, hold in traversing boundary line, effects of non-compliance, inability to increase gross revenues, client dissatisfaction, inefficiency in the direction of the supply concatenation and damaging client trust and trade name to advert some of the most common expected 1s. But every bit, care of supply concatenation security is a felt involvement globally as security menaces and merchandise non-compliances can impact citizens of the universe, supply concatenation substructures and the international trade itself.

Interrupting a supply concatenation can make a serious mayhem over the flow of international trade and stableness. What is hoped with regard to the US place is that, technological installations and efficient and effectual systems can ease trade without critically compromising security in coaction with other states ( customs-to-customs ) and the concern itself ( in both customs-to-business, and business-to-business ) using the WCO SAFE model criterions because supply concatenation security can non be achieved by a individual histrion. As clearly stated in the DHS scheme papers ( 2007, page I ) “ Many parts of the supply concatenation are outside the legal power of the United States, and merely through strong partnerships can provide concatenation security be achieved. ”

Deduction of the New Contract to Distribute Bright Spark Products to the US

The new distribution contract, as discussed above, will hold important deductions negatively and positively to Bright Spark. The supply of our technological merchandises to the US market, the biggest consumer state, is evidently expected to increase gross revenues volume and market chance. The distributer ‘s rank to C-TPAT is another possible advantage that will in rule enable the importing easier, efficient and effectual provided that the hazard appraisal if promising and accepted by US Customs Boarder Protection while basking most effectual supply concatenation to the US because of the inexpensive labor cost and the intended revenue enhancement inducements for the cardinal constituent. This demands our company and the distributer to guarantee conformity and avoid related hazards continually. The comparative successful execution is a promising for us excessively.

The port of export ( going ‘s ) , Tanjung Pelepas port, being CSI can assist to cut down the degree of intercession by CBP because the pre-screening and rating of a container before it is shipped, CBP designation of high hazard containers through the progress information and intelligence exchange, usage of more secure and smart containers and application of hi-tech engineerings to guaranting rapid showing. This is believed to ease security and conformity steps by CBP leting our merchandise to come in the US comparatively with limited intercessions. This inaugural prevents illicit trade or security menaces and helps to ease legitimate trade flow every bit high hazard are identified in progress and other CSI and C-TPAT strategies discussed supra. ( CBP, 2006 )

However, the contract can besides imply some possible negative deductions merely because of the cardinal constituent sourced from the ‘security concern ‘ state to America. Equally far as the constituent from this province is significantly cardinal, it affects the production and supply. As a new import point, C-TPAT rank can non convey immediate benefits ; instead it comes with a scope of clip of successful battles in the supply concatenation direction. It is besides the policy of the US that security including 100 % review of lading and other conformity reviews for high hazard cargos will restrict the efficiency, effectivity and bringing of our merchandise. Therefore, the following specific deductions are forecasted.

Hazards of intensive intercession and non-compliance: There is likeliness of hazard of non-compliance of security, quality and other legal criterions and demands and such hazard can imply:

hold in traversing lodgers – inability to run into contract deadlines for deficiency of on clip bringing, and extra costs for warehouses and stock list

Fiscal punishments and/or condemnable prosecution

Distrust and hapless trueness of consumers/customers damaging trade name and doing fiscal loses

Distrust of regulative bureaus implying tight control, increased intercession

Increased Cost – It is evidenced that tight security steps, intensive intercessions can do an addition in cost of the direction of international supply concatenation including transit, repositing, stock list, and inefficiencies and other operational disbursals including CSI and other demands ‘ cost.

Potential Hazard of US Impositions – Another far opportunity deduction is that if the cardinal constituent poses serious hazard, the US may enforce farther countenances impacting the supply that can imply to cutting or interrupting the supply either straight or through spouse country/government ( Malysia ) . This is irrespective of the supply to the usage is successful or non.

Summary and Recommendations

“ Increased supply concatenation security enterprises lead by the U.S. Government and unprecedented planetary sourcing has led to new challenges for supply concatenation directors. “ ( Saphir, 2010, page 1 ) . As to my understanding and sentiment, the being of many security enterprises is non simply an obstruction by itself to our instance ; instead the job of Bright Spark is that its cardinal constituent is sourced by a province problem with the US that can easy be targeted. It is really clear that terrorist and other security menace is solidly prevailing and in the same item, the demand for trade facilitation is likewise graphic. In fact, these apparently viing involvements are non reciprocally sole.

This means that inordinate security steps can halter international supply concatenation efficiency and effectivity, and likewise hapless security steps can easy expose our security and the planetary supply itself will be threatened. Therefore, it is theoretically, right to state that a balance should be reached by using hazard direction, supplying hi-tech engineering and installation, heightening coaction between regulative organic structures within and between States and partnerships with the concern in co-ordinated and incorporate mode. As a imposts officer, I reasonably understand this easy stating than making but that seems the lone solution at planetary degree where there are viing involvements between security witting and trade flow witting provinces and other histrions.

Efficaciously implemented hazard based conformity direction can advance voluntary conformity and thereby easing trade in a co-ordinated attack with all involved histrions in the supply concatenation.

To reason, the most cost effectual agencies of providing our merchandises to the US will put into two options. The first and recommended one is strongly monitoring and commanding the bing supply fulfilling the demands and demands of the US deploying assorted mechanisms depicted below. This is the most cost effectual sing the competitory advantage of the inexpensive labor and intended revenue enhancement inducements. The 2nd option is if the US is immune and we are non able to fulfill the security demands, there is possibility for alternate beginnings subject to profitableness.

I would urge the first option because some of the US supply concatenation security enterprises, specifically CSI ( Tanjung Pelepas port ) and C-TPAT ( through the distributer ) programmes can assist to avoid the US concern coined with good designed and supervised supply concatenation direction by Our company. In this respect, I would propose the undermentioned actions to be taken to implement the recommended supply concatenation of our merchandise to the US within the bing models of security enterprises.

Extensively research and understand the US and local supply concatenation security initiatives demands, criterions and develop proper antiphonal schemes to carry through the demands.

Design and implementing enhanced supply concatenation security policies, schemes and confirmation mechanisms to place and avoid any security menaces. These should include the all facets of supply concatenation direction such as buying, supply, stock list, repositing, logistics, information direction etc with particular attending to planetary sourcing and the associated hazards and challenges discussed.

It is non ever simple to objectively cognize dependability of the provider and histrions involved and hence, uninterrupted ego appraisal of the current supply concatenation of the cardinal constituent including any sub-supplier ( if any ) , other histrions involved ( transporters, exporting agent, financer, warehouses etc ) and placing any related hazards and non-compliances.

Avoiding the hazards and non-compliances in coaction with the provider to the common benefit of both companies.

Develop and implement partnerships with Tanjung Pelepas port governments, CSI ( as applicable ) advancing voluntary engagement and conformity including subscription to procure trade partnerships,

Subscribing to the Malayan import/export Authorised Economic Operator alining with the US C-TPAT programme import AEO strategy as a foreign maker.

Adoption of and conformity to the enterprises carry throughing the demands and schemes.

Negociating with the authorities of the provider and the provider itself to put and implement common security criterions ( straight the US enterprises or at least WCO SAFE Framework criterions ) .

Supplying all necessary information including the self appraisal of hazards to the distributer to utilize it to treat an understanding with CBP to subscribe this specific supply concatenation to the C-TPAT programme and acquire enfranchisement and proof to bask easy boundary line crossing and minimised intercessions. C-TPAT rank of the distributer and usage of the CSI port are of import enterprises.

In constructing comparative assurance and trust towards the supply concatenation of our merchandises, entirely oversing the provider in footings of security menaces.

In making so, seeking for alternate provider from safer states to avoid continued hazards is recommendable as a safety valve, analyzing the advantages and disadvantages discussed above.

As supply concatenation security director, I would wish to indicate out at this phase that this briefing study shall be enriched through treatment and we need to move instantly to avoid unneeded negative deductions and to take advantage of the current cost effectual supply concatenation theoretical account in the US market.

Berhane Yimer Desta

Supply Chain Manager

Bright Spark Pty, Ltd