Global supply chains may force internal system changes

North American-based companies looking to automate transnational supply chains frequently have to alter their internal systems in order to handle the technical and business variables that await them in other countries, according to attendees at a supply-chain conference held in Cancun, Mexico this week.

Among those variables are different tax and customs rules, multiple currencies and numerous logistical problems in regions such as Latin America, where roads and air transportation may be less reliable than they are in North America. That can force companies to tweak their supply-chain management and enterprise resource planning (ERP) systems, said users and analysts at the Supply Chain World Latin America conference.

Customizing supply-chain and ERP systems and then trying to link them to suppliers, distributors and other business partners in far-flung countries is an Achilles’ heel for many companies, said Skip Grenoble, executive director of logistics research at Pennsylvania State University in State College, Pa. The connectivity complexities may mean users will have to rely on some manual processes for business tasks such as procurement, he added.

One such company is Hunt Corp., a Statesville, N.C.-based maker and distributor of office supplies and graphics products. Hunt does business with manufacturers in the Far East and Europe and is now looking at adding suppliers in Latin America, said Ted Raiman, the company’s director of supply-chain logistics.

But Hunt currently uses faxes and telephone calls to process transactions with some of its suppliers in Asia, a process that Raiman said slows down the movement of goods through the company’s supply chain. If Hunt does establish business relationships with suppliers in Mexico or other Latin American countries, he added, it may install electronic data interchange terminals in their facilities to reduce the amount of manual processing.

Longer term, Hunt likely would seek to roll out Web-based supply-chain applications to overseas suppliers. But that would require a big investment in training to ensure that workers at the suppliers used the proper documentation for business transactions, Raiman said. Security would be another big concern, he said, because U.S. laws provide more copyright protection on business data than is the case in many foreign countries.

Despite the complexities, though, Raiman said transnational supply chains are the wave of the future as business executives recognize that there now “is truly a global economy.” He added that customizing the MFG/PRO software from Carpinteria, Calif.-based QAD Inc. that Hunt uses for its procurement and supply-chain processes shouldn’t be a major challenge.

Another obstacle cited by attendees at this week’s conference, which was sponsored by Pittsburgh-based Supply-Chain Council Inc., is convincing suppliers in Latin America and other regions to convert to e-business applications for procurement and other business transactions.

“Even in North America, there are [big] challenges in convincing partners that the way to go is e-business,” Grenoble said. “It’s even tougher in developing countries.” That requires companies to invest money simply in trying to get their business partners to go along with the whole idea, he added.

“The big problem is that Mexican companies are not aware of the value of a successful [supply-chain] application,” said Alejandro Nieto, an author and logistics consultant in Dallas. “There is a lot of fear about unsuccessful software applications, and this creates a cautious environment.”

But not everyone was as downbeat. “I don’t think there is any more resistance to [e-business initiatives] in Latin America than there is in the United States,” said Miguel Ruiloba, business development manager for e-commerce in Latin America and the Caribbean at FedEx Corp.’s FedEx Express subsidiary in Miami.

FedEx Express offers online services to Latin American companies connected to U.S. supply chains, including the recent addition of Portuguese translation capabilities to its Web-based shipping and package tracking systems. In addition, Ruiloba said, U.S. companies can use a mix of off-the-shelf and homegrown applications to track inventory moving through their supply chains via FedEx Express.