SENIOR MANAGEMENT: EXECUTING A BEST PRACTICE STRATEGY

Incoterms Management

As outlined in this chapter, senior management’s engagement in Incoterms is critical to running a successful global supply chain. Senior managers must take a leadership position to ensure that middle managers and opera-tional staff comply with SOPs and best practices in what we refer to as ITM.

For senior managers of public companies this is not optional but required.

The following outline demonstrates a higher- level strategy of, for exam-ple, chief executive officers, chief operating officers, presidents, and divi-sional senior executives to implement and follow:

1. Develop ITM into your business processes.

2. Learn the basics of Incoterms.

3. Develop resources for Incoterms expertise.

4. Understand how Incoterms decisions impact the global supply chain and break down fiefdoms.

5. Create integration management into Incoterms decision- making.

6. Learn leverage options in general, and then apply to the specifics in your global supply chain metrics.

7. Establish service provider, supplier, vendor, and other business rela-tionship communications and SOPs.

8. Integrate technology into the Incoterms management process.

9. Create policy guidelines for Incoterms options and trade compli-ance management. For public companies, SOX Incoterms manage-ment is critical.

10. Engage Incoterms lobbying to increase and enhance change to your company’s benefit.

Incoterms: Foundation of Global Trade • 89

Develop ITM into Your Business Processes

Reduce risk and maximize advantage. Gain a senior management com-mitment. ITM is the new buzz for successfully developing an expertise in Incoterms within an organization and developing processes to gain leverage and competitive advantage in your global supply chain. A commitment from senior management recognizing the importance of Incoterms as a skill set and ability to reduce risk and enhance and impact profits favorably is a corporate behavior that will prove necessary and valuable for long- term sustainability.

Companies allocate funds into personnel, training, and infrastructure.

Firms and organizations develop all kinds of protocols and procedures to manage their day- to- day marketing, sales, and operations. Incoterms need to be prioritized among these management decisions and brought into corporate culture, behavior, and decision- making like in any other area of importance.

Learn the Basics of Incoterms

Senior managers do not necessarily need to understand Incoterms with the same detail as mid- level managers and operational staff, but they do need to know the following:

• Incoterms impact risk and cost.

• Companies can choose options that either increase or lower risk and costs.

• Staff making these decisions need to be educated and trained, and monies need to be allocated to this endeavor.

Develop Resources for Incoterms Expertise

Senior managers need to allocate funds and internal resources such as access to chief information officers (CIOs) and their staffs for the purpose of obtaining the wealth of information so better decisions about Incoterms and supply chain management can be made.

Understand How Incoterms Decisions Impact the Global Supply Chain and Break Down Fiefdoms

Senior managers need to budget time to interface with operational per-sonnel and observe and scrutinize their Incoterms decisions to assure that

their impacts on the global supply chain meet with long- term company objectives. An example might be just how Incoterms options that may benefit logistics choices could unfavorably impact corporate tax issues impacting P&L and balance sheet concerns. Senior management might need to break down the fiefdoms between logistics and finance to come up with compromises that meet both operational concerns and fall in line with company directives and policies. Senior managers in U.S.-based pub-lic companies are also typically charged with Sarbanes– Oxley compliance and would also incorporate Incoterms considerations in setting policy decisions in the global supply chain.

Create Integration Management into Incoterms Decision Making Senior managers need to create a platform within a corporation that not only breaks down walls of distrust but also creates a balance of integration and cooperation between divisions, disciplines, and the various entities that operate the company’s global supply chain.

Learn Leverage Options in General, and Then Apply to the Specific Scenarios in Your Global Supply Chain Metrics

Senior managers need to motivate operational personnel to obtain and review and execute Incoterms decisions based upon hard- core informa-tion, data, and resources obtained from accounting, freight payment com-panies, consultants, transportation providers, and carriers. These metrics need to be studied hard and comprehensively, and senior managers should lead the way to decision- making that combines these data with the eso-teric more “feely” data that one compiles in making the best Incoterms decisions for the company.

Establish Service Provider, Supplier, Vendor, and Other Business Relationship Communications and Standard Operating Procedures Senior managers need to lead value proposition management with all those support companies that helps or supports the company in manag-ing all the aspects of their import and export operations. They should stress the value of open, direct, and no- nonsense communications that favorably impact business communications between principals and their vendors/ suppliers. And they should encourage the implementation of

Incoterms: Foundation of Global Trade • 91 SOPs between all parties setting up lines of accountability and responsi-bility. This will assure compliance to best practice levels.

Integrate Technology into the Incoterms Management Process

Information technology can play a very important role in risk manage-ment, supply chain operations, and Incoterms management. Senior man-agement needs to set direction and encourage the interface between the IT staff and those who operate the global supply chain to establish common areas of cooperation and utilization. Senior managers need to make sure that IT and supply chain know what each other has as needs and capabili-ties, and these two should meet somewhere to their mutual benefit. IT can play a huge role in creating tools and options for better Incoterms use that reduces risk and opens opportunity for competitive betterments.

Create Policy Guidelines for Incoterms Options and Trade Compliance Management; for Public Companies,

SOX Incoterms Management Is Critical

Senior managers have to create an environment that includes trade com-pliance management in every Incoterms decision. While Incoterms structure includes compliance, it does so only in a peripheral way. Senior management has to set the guideline for compliance as a major factor in the company’s decision- making process. For senior managers leading public companies, this is an absolute because the Incoterms choice at the lowest level of that company could have a huge impact on the financial exposures that company may face.

Engage Incoterms Lobbying to Increase and Enhance Change to Your Company’s Benefit

Incoterms don’t happen by default. The ICC (http://iccwbo.org) in Paris, France, through its leadership and membership, has numerous outlets for companies to exercise influence on how Incoterms are designed, structured, and eventually implemented. Delegates are lobbied by interested parties to make certain decisions that impact how Incoterms influence risk and costs in the global supply chains of the world. By engaging and joining organi-zations such as the ICC and the United States Council for International Business (USCIB; http://www.uscib.org) in New York, there are numerous

venues, committees, and outreach opportunities for companies to lobby those who make Incoterms decisions. So participate and make a difference.

The ICC has a complete listing of its member organizations and how to contact them, join in, participate, and make a favorable impact.