The retail fashion industry is a fast-paced business with ever-changing consumer trends, emerging innovative materials and continuously changing color palettes and silhouettes, which creates a scenario of never-ending mismatch between supply and demand.
Sourcing professional facing this environment have to be keyed into the constantly changing global regulatory requirements in order to ensure products are compliant in every region where they are sold.
Even as retail sales figures are down and major brands are closing brick-and-mortar locations, U.S. retailers and brands are experiencing upward growth from global sources. The European Union (EU) has emerged as a key market for these companies and one that has seen positive growth rates for apparel and footwear in recent years.
According to a Euratex report released in January, imports into the EU rose significantly in 2014 and 2015. Other trade data shows 28 straight months where the value of footwear entering the EU increased from the previous year. This should be no surprise as EU import tariffs are among the lowest in the world.
As a result, it’s never been more important for companies selling product in the EU (and other regions around the world for that matter) to fully understand and adhere to the varying compliance requirements.
Consideration of these trade restrictions needs to happen early in the manufacturing lifecycle to be sure the end product will meet specific country standards.
Compliance management is part of the daily fabric for today’s global business world, and sourcing professionals know ignoring or overlooking these complex regulations can result in shipments identified for investigation, seizure or destruction. But let’s face it: global trade regulations are complex and sourcing professionals need to leverage other means to ensure all of the areas of product, supplier and import compliance are covered when managing cross-border trade.
The primary areas where sourcing teams need to have a complete understanding of global regulations include:
Supplier vetting and selection
Supplier relationship management (SRM) has gone through a massive transformation in recent years. Gone are the days of finding the best deals within a supply base primarily based on cost. The new approach to SRM necessitates the creation of partnerships that extend beyond cost-cutting and offering value-added services and resources. As you broaden your retail base, you need to be cognizant of country-specific sanctions that block products sourced and produced from other countries. Just last year, the EU imposed sanctions on goods imported from Russia, Belarus, Burundi, Yemen, Libya and Iran, and it also extended its sanctions against Myanmar until April 3o, 2017.
This means brands need to keep a keen eye for contractor locations and vet their suppliers against multiple restricted party lists.
Product design, component and finished goods testing
Imagine the impact to your inbound supply performance if the 10,000 units of garments you ordered from Vietnam were flagged by EU Customs because they contain a questionable animal product that may be banned in some member states.
As you consider new product development and innovation, it’s increasingly important to have a comprehensive understanding of the bill of material for each global product. With so many import regulations focusing on the chemical and material make-up of clothing and footwear, you must maintain current and accurate product specifications to avoid violating any EU import restrictions. Continuous product, production, material and style changes add to the complexity of fully tracking BOM info to meet regulatory requirements for the EU REACH program and others. However, the results and benefits are worth the effort.
Import and export documentation
EU and its member states’ import requirements also differ from other countries, and it’s imperative that sourcing professionals stay current on the differences. The EU Union Customs Code (UCC) went into effect on May 1, making a significant step toward the modernization of EU customs and creating a new framework regulation for the rules and procedures of customs throughout the EU. The UCC should be seen as a natural evolution toward a modern customs environment, as it allows customs legislation to be streamlined and marks the final shift of 28 customs authorities to a paperless and fully electronic environment. This new system will help simplify import activities into the region and ensure goods meet cross-border shipment regulations.
By addressing compliance and various country regulations upfront, you can avoid service delays, harsh fines or consumer dissatisfaction. However, many organizations often overlook this consideration during the initial product innovation and design processes, leading to negative consequences further downstream.
The benefits of including trade compliance considerations earlier into your supplier selection and product development processes include:
- Compressed cycle times
- Improved sourcing decisions
- Reduced corporate risk
- Increased supplier performance
- Decreased Customs delays
Fortunately, companies need not face the global trade complexities that impact sourcing activities on their own. The right automation tools and solutions can help your business successfully meet compliance requirements and avoid the associated sourcing risks.
The reality is that you can’t perform all of these activities efficiently with manual methods or track all of the relevant product, supplier and trade information manually. Today, many organizations are relying on a technology solution to centralize the relevant data and make it available to all of the people in your organization along with your trading partners that require access to the information. These companies are gaining business benefits with the use of agile technology to integrate the processes of all departments, actors, and stakeholders in the trading process to meet the full range of compliance obligations and ensure product is available to their eager consumers.
Gary M. Barraco is director, global product marketing for Amber Road. To learn more about Amber Road’s Global Trade Management software, visit http://www.amberroad.com/solutions/home.shtml.