Managing the trade functions of global business today is like trying to find your way through a dense forest on a starless night...terribly difficult to do. Along with changing market conditions, companies bump into hundreds of import/export rules and regulations centered on tariffs, customs-clearing procedures, intellectual property, labor laws, and environmental protection, all differing by region and country. Add to that list of current business challenges in global integration: longer delays for tighter border security checks, increased air freight costs, and higher insurance premiums due to terrorism activities.
The result is corporations with rapidly shrinking margins...making trade management a mission-critical competency.
Looking for a solution for those challenges while in the midst of a volatile time for the telecom industry, Lucent Technologies Inc., headquartered in Murray Hill, New Jersey, opted for a strategic outsourcing alliance in 2001 with Dulles, Virginia-based global trade management provider, Vastera, Inc.
More than trying to drive costs out of its business, Lucent wanted to increase its efficiencies at border crossings. "This brings a competitive edge to our business," explains Greg Johnson, Lucent's director of Logistics, Supply Chain Networks. "If we have credibility and a good track record with the various customs and border crossings, that brings us quicker to market for our customers."
Luan Giannone, who oversees the Vastera operations at Lucent, adds that they also "wanted to have the best and most robust compliance process globally that a company could have. It's very important that we follow the local laws and that we execute flawlessly with each country's complexities."
Value-Oriented Business Solution
Their relationship truly is an alliance. The strategy leverages Lucent's internal specific trade and technology knowledge of professionals (who have now transitioned to Vastera) with Vastera's technology solutions and best practices in global trade management services. Vastera also opened a satellite facility to support the Lucent account.
Other than in North America, they're pioneers together. "We're going into countries together, putting in compliance programs, processes, and technology where nobody has done this before," says Johnston. To some extent, such as in Mexico, they've followed on the coattails of automobile manufacturer, Ford (another Vastera client); but, for the most part, they're on a new mission in each country.
It requires a collaborative effort in change management and knowledge sharing, as Lucent moves from a hands-on model to a virtual supply chain solution. Prior to outsourcing, Lucent, which had evolved through acquisitions during the 1990s telecom boom, found that its trade management functions were in silos. Each business unit had its own processes and programs; in some locations, people did the work only on a part-time basis. Moving away from a decentralized operation became a business imperative in connecting with supply chain partners, especially when Lucent began outsourcing its manufacturing processes.
Moreover, Lucent's information systems supporting global trade management had not evolved with all the acquisitions. Its financial applications needed to factor cross-border-specific shipping details (like tariffs/duties, country-specific regulatory compliance and variability of delivery times for shipments transited over multiple transportation modes). "It was the whole issue of data gathering and information management," explains Giannone. "Through Vastera, we can capture data, then analyze and manage it to see what's moving, in what direction, and how to enhance the supply chain."
Vastera inherited operation of Lucent's legacy order and material management systems when Lucent was in the midst of an SAP implementation. The challenge for Vastera to put its arms around Lucent's decentralized systems and find the right information was "a huge undertaking," and integrating Vastera's software into Lucent's SAP and warehouse management systems required the outsourcer's flexibility. "We've changed direction a couple of times," Giannone says. "Vastera has weathered every storm with us for every type of change we've had."
A critical piece of their successful relationship, she adds, is "open and candid discussions -- lots of communication."
Johnston notes that the service provider works well with Lucent's export partners, building strong, robust relationships with suppliers for Lucent. "Vastera is a super face to our supply chain providers," he says. "Vastera is looked upon as our partner and as a knowledgeable resource. They've done an outstanding job with our supply chain."
Staying profitable and competitive in global trade functions today requires streamlined, integrated eBusiness solutions. The competitive advantages offered by an outsourcer's multi-client, multi-national experience and technology solutions are crucial to regulatory compliance as well as the buyer's bottom line. Lucent, for example, can reap the benefits of Vastera's comprehensive electronic library of country-specific trade and regulatory data, which is updated daily. Vastera also has an electronic customs filing solution that reduces costs, expedites customs clearance, and facilitates the increased information requirements now necessary for importing goods into the European Union countries.
More than anything, the outsourcing relationship gives Lucent "an opportunity to be better," Giannone believes. The investment provides a pool of talent and technologies, allowing Lucent to be the most compliant, best-practices company in its industry. Since theirs is a risk-sharing alliance, both parties have something at stake in preventing compliance penalties.
Bottom line: Outsourcing gives Lucent a competitive edge.
Lessons from the BPO Outsourcing Journal:
- An outsourcer's technology solutions and best practices can increase efficiencies at border crossings, thus speeding the buyer's time to market and increasing its competitive advantage.
- It requires a collaborative effort with the outsourcer in change management and knowledge sharing, as companies move to eBusiness and virtual supply chain solutions.
- Service provider selection criteria should include the outsourcer's ability to work effectively and build strong relationships with the buyer's supply chain partners.