On Demand News: 05/17/18

Letter Perfect

17 May, 2018 // This week, we’re at Gartner Supply Chain Executive Conference, where “digitization” is the buzz in the Arizona desert air—and the subject of so many sessions.

With so much talk here about all things digital—from visibility to blockchain and the Internet of Things—we thought it a great opportunity on our own blog to take a break from the hype cycle and go old school and unplugged with a link to a great discussion about some of supply chain’s most critical and often misunderstood elements: Incoterms (courtesy of Supply Chain Brain). 

Incoterms, as you might know, are those funny three letter codes in contracts that specify the buyer’s and seller’s responsibilities as goods move from origin to customer. FCA. DDP. CIF. OMG. LOL. Just kidding about those last ones.

Before you run for the exit from what sometimes can be a dry subject, you owe it to yourself to read John Vogt’s highly readable take. A visiting professor at University of Houston-Downtown, president of WWBC LLC Consultants and a retired Halliburton global logistics VP, Vogt knows the ABCs of logistics (or more accurately, the CDEFs of logistics, for the four main Incoterm letter coding categories).

Vogt calls out enterprises that allow salespeople to insert terms into contracts without input from the supply chain / logistics team. Too often, Vogt says, there’s an attitude that “Incoterms are simple. Pick one and use it in all your contracts.” That attitude can cost you money, competitive advantage and risk.

Even if you know what all the letter codes mean, there are subtle but important distinctions. For instance, Vogt points out that the official Incoterms are published by the International Chamber of Commerce and revised every 10 years. But, some of those same letter codes, with different definitions, are also used in the US Uniform Commercial Code.

So, do you know which “FOB” you just inserted into that contract?

At Morgan, we believe that it’s important to design integrated business processes for in-transit operations. Getting terms right is just part of the end-to-end optimization, and having the right strategic partner to help you can make all the difference.

Meanwhile, maybe you better read up on your Incoterms….