Global Sourcing Logistics: How to Manage Risk and Gain Competitive Advantage in a Worldwide Marketplace

chain, and promote sizable efficiencies in inventory control

and management. With support and encouragement from

the diverse and influential elements of the government and

private sectors, acceptance of a basic RFID environment is

something to expect in years ahead. Inbound supply chain

executives need to pay attention to RFID, proactively, be-

cause it is likely to become an integral part of import pro-

cesses, not only to be competitive but to meet regulatory

demands.

SARBANES-OXLEY

The fiscal landscape of American corporations changed

dramatically since the accounting scandals of the last few

years were made public. When the federal government wit-

nessed such poor corporate accounting practices and lack of

responsibility by corporate officers, they intervened with

legislation. SOX regulations required very strict lines of

communications and better fiscal accounting practices

within public corporations.

These regulations have had a major impact on American

public corporations in forcing them to create SOX operating

guidelines and procedures. These extend to global supply

chains. With SOX now in place, the chief executive and the

chief financial officer will be held responsible. The law states

that both must sign off on and can be held accountable for

the following:

• All financial statements, both internal and external,

such as those published and distributed to sharehold-

ers, the SEC, and analysts. These include quarterly and

annual forecasts, 10(k) and 10(q) filings, and other

statements.

• Accounting practices and SOPs.

• Certification from internal and external auditors vali-

dating that SOP documentation and practices are legal

and accurate.

194 GLOBAL SOURCING LOGISTICS

The company must make itself available for scrutiny by

outside auditors, the SEC, and government investigators. If

wrongdoing is uncovered, company officials will be held re-

sponsible and punished.

This added scrutiny has benefits for supply chain profes-

sionals. Anne Marie Griffin, Microsoft’s senior manager for

global trade compliance, noted in 2004 at the summer’s

American Association of Exporters and Importers confer-

ence that SOX has helped with export compliance. “There’s

money now, there’s high visibility,” she said. “Our CFO

comes and sees us and gets us the resources we need, in-

cluding IT systems.”

For years, CBP, the Bureau of Industry and Security (BIS),

the Census Bureau, and other government agencies have re-

quired companies to submit import and export documenta-

tion that includes Entry Summary forms 7501 and 3461 (for

imports); Automated Export System electronic version of the

Shipper’s Export Declaration (for exports); commercial and

pro forma invoices, certificate of origin, correct Harmonized

Tariff System of the United States (HTSUS)/Schedule B classi-

fications to determine duty rates and taxes, letters of credit

and money transfers, applicable licenses or permits, quota

documentation, and packing lists.

This documentation and related shipping and receiving

SOPs authenticate a company’s trustworthiness to conduct

international business. It is only natural that these processes

be incorporated into the SOX Act’s requirements. With mil-

lions of dollars expended daily in this area, this will become

an area for audit and prosecution. There is a dotted-line pro-

gression of the C-TPAT into the SOX arena. In December

2004, a new intelligence agency was authorized by congress

and signed into law by President George W. Bush that will

have ramifications not only in compliance and security but

also for applications to administer the new SOX regulations.

Companies have found that C-TPAT participation has

helped with supply chain management. Many corporations

are creating import and export compliance departments

DEVELOPING AN INBOUND SUPPLY CHAIN RISK MANAGEMENT STRATEGY 195

that usually report directly to corporate counsel or internal

audit departments and have important input in supply

chain, manufacturing, and risk management decisions.

These professionals have become the de facto watchdog

over the entire supply chain.

Many companies with limited staff retain consulting

firms to manage their compliance programs. Not only does

the consultant monitor supply chain, manufacturing, and

risk management issues but also broker and service provider

relationships.

Corporations are discovering the importance of a safe,

competitive, and secure global supply chain. Operating

within the SOX guidelines has become another skill set that

must be mastered by logistics, traffic, and warehousing

managers, as well as chief executives and chief financial of-

ficers. The success of a company’s import and export opera-

tion may depend on it.

196 GLOBAL SOURCING LOGISTICS

→FIDUCIARY ISSUES

→SOP CREATION

→DOCUMENT

PREPARATION

→PRICING

→VENDORS

Sarbanes-Oxley

→INTERCOMPANY TRANSFERS

→VALUATION

→MONEY TRANSFER

→SUPPLIERS

→C-TPAT

→RECORD KEEPING