CBSA COMPLIANCE REPORT

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Mountain Equipment Co-op – Directed Studies 2011

Mountain Equipment Co-op Directed Studies 2011

P r e s e n t e d b y :

S e t h L a n g & D a n T u r n e r

5 / 1 1 / 2 0 1 1

Mountain Equipment Co-op and the British Columbia Institute of Technology have collaborated on a project involving two important areas of focus within the logistics side of the organization, and the industry itself. ------------------------------------------------------------------------ The first part of this study focuses on identifying MEC’s current compliance level in regards to Canadian Border Service’s Agency’s (CBSA) rules and regulations, and determining best current industry practices that can be implemented into MEC’s supply chain management ------------------------------------------------------------------------ The second part of this study relates the effect transportation fuel surcharges have on the overall logistics expense of MEC’s business, and how these surcharges may be kept to a minimum.

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ACKNOWLEDGEMENTS

The following individual’s contributed in making this project possible.

This project could not have been successfully completed without a steady flow of support, guidance and leadership that was provided to us throughout our Directed Studies experience.

A very special thank you goes to the following:

Mountain Equipment Co-op

Debbie Sung Mike Au Paul Robles

Logistics Analyst Manager Supply Chain

Services Logistics Analyst

British Columbia Institute of Technology

Gordon Kennedy Instructor

and Project Advisor

And all others who offered advice and assistance in contribution to the

Mountain Equipment Co-op Directed Studies 2011.

THANK YOU!!!

And a special thank you goes to our families for your patience and understanding with late nights, early mornings, and high stress moments!!

“In helping others, we shall help ourselves, for whatever good we give out completes the circle and comes back to us”

Flora Edwards

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TABLE OF CONTENTS

Acknowledgements .............................................................................................................................................. 1

Table of Figures ..................................................................................................................................................... 4

Report Structure .................................................................................................................................................... 5

Organization Overview ....................................................................................................................................... 6

Background ......................................................................................................................................................... 6

Organization Belief’s ....................................................................................................................................... 7

Part 1: MEC’s CBSA Compliance Analysis .................................................................................................... 8

Executive Summary.............................................................................................................................................. 9

Introduction ..................................................................................................................................................... 10

Purpose and Objective ............................................................................................................................. 10

History of CBSA .......................................................................................................................................... 10

CBSA Compliance Programs ...................................................................................................................... 11

MEC’s Current CBSA Compliance Practices ......................................................................................... 13

People ............................................................................................................................................................ 13

Physical ......................................................................................................................................................... 15

Data and Documentation ........................................................................................................................ 16

MEC’s Reassessment History 2008-2009............................................................................................. 17

Key Performance Indicator’s-CBSA Compliance ............................................................................... 18

KPI’s –MEC Practices .................................................................................................................................... 18

KPI’S-Industry Practices ............................................................................................................................. 19

Key Findings ......................................................................................................................................................... 20

Reassessment Analysis ................................................................................................................................ 20

Movement of Documentation ................................................................................................................... 23

Internal Documentation Responsibilities ............................................................................................ 23

External Documentation Responsibilities ........................................................................................... 24

Recommendations ............................................................................................................................................. 24

Benchmarking and Key Performance Indicators .............................................................................. 24

Supply Chain Communication ................................................................................................................... 25

Internal Movement of Documentation .................................................................................................. 26

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Internal Interface....................................................................................................................................... 26

External Interface ...................................................................................................................................... 26

Primary Benefits Of Recommendations ................................................................................................ 27

Secondary Benefits of Recommendations ............................................................................................ 27

Bibliography ......................................................................................................................................................... 29

MEC Internal Document’s Used In This Study ........................................................................................ 29

MEC Internal Sources ....................................................................................................................................... 29

Appendences ........................................................................................................................................................ 30

Appendix A-Process Map of Documentation Movements ............................................................ 30

Appendix B-Top 15 Error Prone Vendors from 2008 and 2009 ............................................... 31

Appendix C- Customs Compliance Weighted Measuring Tool ................................................... 32

Appendix D-Errors by Type and Source-2008 and 2009 ............................................................. 32

Appendix E- Weighted Scores by Type and Source-2008 and 2009 ........................................ 32

Appendix F- Vendor Report ..................................................................................................................... 33

Appendix G-Supply Chain Management Report 2012 ................................................................... 34

TABLE OF FIGURES

Figure 1-Organizational Chart ..................................................................................................................... 6 Figure 2-Error by Type-2008 and 2009 .............................................................................................. 17

Figure 3-Error by Source-2008 and 2009 .......................................................................................... 17

Figure 5-Error Type by Vendor ................................................................................................................ 21

Figure 4-Weighted Measurement Results .......................................................................................... 21

Figure 6-Vendor Information 2008 ....................................................................................................... 22

Figure 7-Vendor Information 2009 ....................................................................................................... 22

Figure 8-Internal Documentation Responsibilities ...................................................................... 23

Figure 9-External Documentation Responsibilities ..................................................................... 24

Figure 10-Time Cost to MEC Logistics-2008 and 2009 ................................................................ 24

Figure 11-Paperless Supply Chain Management ............................................................................ 27

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REPORT STRUCTURE

The purpose of this report is focused on two areas within Mountain Equipment Co-op's daily business

practices. It has been separated into two documents in order to maintain a clear focus on what is being

demonstrated on each topic. Each topic has no direct correlation to the other, and should be

considered as individual subjects.

The first stage of this report is an analysis of Mountain Equipment Co-op’s (MEC) current levels of

compliance with the Canadian Border Services Agency (CBSA) trade requirements and the opportunities

of improvement that may be incorporated into the organizations practices.

The second part will explain the relationship that MEC has with their supply chain partners in regards to

fuel surcharges that are included in the contract of each carrier that are defined within the scope of the

study. An analysis of best practices that organizations in the trade industry use, and recommendations

to reduce this expense for MEC will be provided.

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ORGANIZATION OVERVIEW

BACKGROUND

Mountain Equipment Co-op (MEC) was founded in 1971 with six original members. From the opening of

the first store in Vancouver, the co-operative has grown to 14 retail stores across Canada, with plans for

expansion by 2012. When MEC first started out, they wanted to distinguish themselves from other

outdoor retailers through eco-friendly product lines and an intensive focus on corporate social

responsibility. These values have led MEC from establishing one location to start with, to a large-scale

provider of sporting goods and services.

MEC has over 3 million members worldwide, and are considered the largest retail co-operative within

Canada. The co-operative is run by the CEO who is selected by the Board of Director’s, and have senior

management in place for various departments such as Logistics, Production, Finance and Marketing (see

Figure 1). These departments work together in order to create a successful co-operative that has the

ability to help others within the community at the same time. (Mountain Equipment Co-op, 2011)

Board of Directors

FIGURE 1-ORGANIZATIONAL CHART

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ORGANIZATION BELIEF’S

PURPOSE

“To help people enjoy the benefits of self-propelled wilderness-oriented recreation.”

MISSION

“Mountain Equipment Co-op provides quality products and services for self-propelled wilderness-oriented recreation, such as hiking and mountaineering, at the lowest reasonable price in an informative, respectful manner. We are a member-owned co-operative striving for social and environmental leadership”

VALUES

MEC’s core values and beliefs revolve around their influence on their surroundings, and the people that

inhabit them. Not only does MEC want to minimize their effect on environmental issues, but they also

support improving these conditions for the future. Key values revolve around how they encourage their

employee’s to be involved with improvement opportunities of their business. Employee’s opinions are

important at MEC, and are encouraged in relation to determining future decisions made as a co-

operative.

MEC focuses sales primarily within Canada. Their contribution to globalization consists of relationships

with suppliers from up to 12 countries other than Canada. Within these relationships, MEC applies strict

ethical sourcing regulations in order to support international communities where suppliers are located

around the world.

THE LOGISTIC’S TEAM

The Logistics team of MEC consists of a small department located within the Head Office in Vancouver.

They are consistently searching for ways to reduce costs, minimize risk, and improve efficiency to the

supply chain that help the organization achieve annual goals.

As a service provider within the sporting goods industry, MEC has put into place supply chain

management systems in order to oversee the inflows and outflows of products and product components

to their necessary locations. The Logistics department of MEC, who this Directed Studies is based with,

works with all suppliers, carriers and the DC in Surrey to ensure freight expense is minimized, deliveries

are on time, and accurate shipments are being transported. (Mountain Equipment Co-op, 2011)

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Mountain Equipment Co-op – Directed Studies 2011 PART 1: MEC’S CBSA COMPLIANCE ANALYSIS

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EXECUTIVE SUMMARY

Mountain Equipment Co-operative is focused on becoming a member of the Custom’s Self-Assessment

(CSA) program under the Canadian Border Service’s Agency (CBSA), which involves demonstrating a high

level of compliance in regards to the security of documents and goods moving into Canada.

The purpose of this report is to identify MEC current compliance levels in regards to CBSA regulations

and determine best industry practices that can be implemented into the MEC supply chain

management. An important aspect of the Logistics department is to become more pro-active with

vendor-trade compliance and establish benchmarks to see where it stands compared to leaders within

the commercial import industry.

Industry trends show that businesses are focusing on improving customs compliance practices by

restructuring supply chain relationships. The changes involved in this transition consist of higher levels

of communication in regards to commercial imports, and the ability to transport key documentation in

the most efficient, secure manner.

Methodologies used within this report include collecting internal data through MEC records, researching

industry practices, and communication with industry professionals. Actions have been taken to examine

procedures currently in place, analyzing areas such as:

Current levels of CBSA compliance for MEC

Industry wide levels of CBSA compliance

Best practices in KPI’s and benchmarking

Reassessment of past MEC commercial documentation

The results of the findings showed that although MEC applies an acceptable level of compliance with

CBSA, there are opportunities that exist to achieve higher standards in regards to supply chain security

management. It has been determined that MEC will accomplish goals of top levels of CBSA compliance

with the following recommendations:

Establish uniformed KPI’s and benchmarks

Raise levels of information sharing between all supply chain relationships

Implement paperless document management system

By following these recommendations MEC will have the opportunity to establish themselves as leaders

in CBSA vendor-trade compliance, and have the ability to respond quicker to any changes within the

international trading environment.

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INTRODUCTION

PURPOSE AND OBJECTIVE

The purpose of this report is to identify MEC’s current compliance level in regards to CBSA’s rules and regulations, and to determine best current industry practices that can be implemented into MEC’s supply chain management. MEC’s objective is to transition towards becoming a more “pro-active” participant within the vendor-trade compliance with the CBSA, identifying best practises to improve their operations. MEC’s is currently striving to stay compliant with CBSA rules and regulations and benchmark themselves against leaders and trendsetters of CBSA compliance within the industry.

As an importer of commercial goods, concentration of efforts must be applied to ensure that proper security and full documentation is provided throughout the supply chain. This ensures that no fines from the Administrative Monetary Policy System (AMPS) are received, or worst case scenario, the restriction of imports is imposed on the business. (CBSA, 2011)

After completing a full analysis of MEC’s compliance levels compared to best industry practices, a recommendation of opportunities for improvement within vendor-trade import/export practices will be applied. Gaps in MEC’s supply chain management system will be identified, in order to enhance the organizations compliance with CBSA.

HISTORY OF CBSA

In regards to international trade, border security and compliance has

increased significantly over the past decade. Due to factors such as the

rapid growth of globalization, and the threats of terrorism such as the

event of 9/11, the creation of the Canadian Border Services Agency

(CBSA) was formed in 2003. Prior to this time, there were three major

groups of government that were responsible for border security within

Canada.

Citizenship and Immigration Canada

Canada Customs and Revenue Agency

Canadian Food Inspection Agency

The CBSA was formed to oversee the responsibilities and functions of these groups, offering services at approximately 1,200 points across Canada and over 30 international locations. CBSA manages the commercial import/export sector of Canada, regulating the inflows and outflows of goods within the Canadian borders. Programs have been established for importers and exporters of commercial goods such as Partners in Protection (PIP), Customs Self-Assessment (CSA), and Partners in Compliance (PIC) to help streamline the border process for low-risk importers and carriers. (CBSA, 2011)

IN A TYPICAL WEEK, THE

CBSA*:

Welcomes 1.7 million travellers

Examines over 105,000 travellers

Seizes drugs worth over $7 million

Seizes an average of over $780,000 in undeclared currency

Intercepts 1000 food, plant and animal products that pose a threat to Canada's agriculture

Removes 250 people who are inadmissible to Canada, including over 30 criminals

Collects $75 million in import duties, and $330 million in GST/HST

* Based on FY 2008-2009 data. All data is approximate.

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CBSA COMPLIANCE PROGRAMS

CBSA works with multiple programs to help ensure safe and secure border crossings across Canada. The

three main points that CBSA focuses on in regards to commercial compliance programs are

Smoother border clearances

The development of information resources

Security and enforcement in dealing with trade

Programs such as Partner’s in Protection (PIP) are provided on a voluntary basis, while the Advanced

Commercial Information (ACI) program is becoming a mandatory step in the border compliance stage of

the import/export industry.

ADVANCED COMMERCIAL INFORMATION

CBSA established the Advanced Commercial Information (ACI) program in 2004 with the focus being on

risk management of goods crossing the border. ACI requires that all partners associated with this

program to submit all documentation electronically to CBSA prior to arrival at any border crossings. This

helps Custom’s identify any possible threats ahead of time, and provides a smoother security process for

all parties involved.

The Advanced Commercial Information program is currently being implemented in three separate

phases for the transportation industry of Canada.

Phase 1 -Marine Mode

Phase 1 was implemented in 2004, requiring all marine carriers to electronically

submit cargo data to CBSA 24 hours prior to arrival

Phase 2 -Air Mode and Marine Shipments Loaded in United States

Effective in 2006, requiring all air carriers to electronically submit cargo data to

CBSA 4 hours prior to arrival

Phase 3 –eManifest (in process)

This phase requires all highway carriers to submit cargo data to CBSA 1 hour

prior to arrival and rail carriers 2 hours before arrival

The eManifest program is currently in a transition stage, with an implementation

timeline starting in late 2011

By 2013 all CBSA clients will be required to incorporate the ACI program into daily business practices. All

clients will be able to submit documentation through regular EDI programs, or the new eManifest portal

that will be provided late 2011. (CBSA, 2012)

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PARTNERS IN PROTECTION

Partner’s In Protection (PIP) was originally constructed in 1995 as a voluntary program with a focus on

promoting business awareness and compliance with customs regulations. After September 11, 2001,

PIP altered their approach to focus more on trade chain security. The level of importance for the PIP

program increased in 2002 when it became mandatory for importers to have a PIP designation in order

to become involved in the FAST (Free and Secure Trade) initiative. PIP has aligned similar security

standards with compliance related programs around the world in order to enhance the international

trade network of low-risk businesses.

The application process for PIP starts with potential members submitting a security profile to CBSA. The

profile demonstrates whether or not the business is meeting security requirements, in order to qualify

for the second stage. After the security profile has been submitted, a CBSA officer reviews the

information, determines if security requirements have been met and if approved, schedules an on-site

validation with the organization. After the security profile and on-site validation has been approved, a

Memorandum of Understanding (MOU) is signed to finalize the PIP designation. PIP members must

provide updated security profiles and schedule site validations every three years. (CBSA, 2012)

CUSTOMS SELF-ASSESSMENT

The Customs Self-Assessment (CSA) program was designed 2001

to streamline the clearance process, and simplify accounting and

payment procedures for border crossings. With a CSA

membership, businesses have the ability to submit import

documentation once a month instead of one transaction at a

time. This reduces the amount of time and money spent on

custom processes for businesses, and allows a more accurate

documentation on all imports.

As with PIP, there is a three-step process in order to receive a CSA

designation. First, businesses are subjected to a risk assessment of

compliance history with CBSA. Once the first stage has been

completed, a detailed report showing that business practices,

books, records, and all other documentation, supports

compliance history records that have been examined.

This shows that a CSA member has implemented steps to remain

compliant with supply chain security in any situation that can

arise. In the final stage approved members are required to sign a

Summary of Program Requirements that states all specific

requirements of that business. (CBSA, 2011)

CSA APPLICATION PART 2

REQUIREMENTS

A demonstration of the flow of documentation and goods must be provided, in both a report and process map, of different import scenarios such as:

a purchase where you direct ship the goods to a third party

a purchase where you enter the goods into your receiving system

an importation where you make no payment for the goods

other adjustments such as overages, shortages and damaged goods

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MEC’S CURRENT CBSA COMPLIANCE PRACTICES

With the rapid increase in global trade and border security becoming more focused on maintaining a

safe and seamless flow of import/exports, MEC recognizes that as an importer of commercial goods,

having high levels of compliance is important to the daily business practices of the organization. In

order to achieve such high levels, procedures have been put into place in all departments, with

compliance and security being focused towards three main areas:

People: employees, suppliers, carriers, brokers

Physical: Head Office, Distribution Centre, containers, trailers

Documents: filing systems for invoices, customs forms, payment receipts

Mountain Equipment Co-op has been a member of the Partner’s in Protection program since 2008, and

only uses carriers that are PIP, FAST, or C-TPAT (Custom’s-Trade Partnership Against Terrorism) certified.

The Partner’s in Protection membership is concentrated on the physical security and compliance

measures that are put into place at MEC.

Currently, MEC is going through the process of the second stage of a CSA designation. As a PIP

designation shows a business has achieved the physical security requirements from CBSA, the CSA

program demonstrates that a member has taken the steps necessary to ensure the security and

compliance of all paperwork involved in the movement of goods. They have undergone a risk

assessment of CBSA compliance history, and have provided detailed information on corporate structure,

key business activities, and policies related to risk management. The second part of the CSA application

focuses on the documentation aspect of the organization, with MEC developing a report that details all

book and record keeping, and the controls put into place to manage this system.

PEOPLE

INTERNAL

Personnel Security

Potential MEC employees go through a screening process, which includes background and reference

checks when applicable. Once a candidate for employment has been hired, they are required to sign a

confidentiality agreement. If necessary, depending on position of the new employee, responsibilities

such as swipe keys and online system access are assigned.

MEC has steps in place to manage the termination of employees when the situation arises. Terminated

employees are required to submit all MEC property such as swipe keys, and management levels are

required to ensure the removal of IT access before the employee is escorted off MEC property.

Procedural Security

MEC takes certain measures such as process mapping in order to recognize gaps in the security of the

supply chain. Process mapping helps identify where MEC needs to concentrate efforts, and which areas

offer room for improvement. The DC of MEC has procedures put into place for shipping and receiving

departments for accepting deliveries and organizing outbound deliveries to other locations. Warehouse

staff receives notice and documentation prior to the arrival of all inbound carriers in order to prepare

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for transfer of goods from container to warehouse. Shipments are checked and counted for accuracy

and damage, with any discrepancies being reported to management.

Security Training and Awareness

MEC requires that all employees, old and new, are aware of possible security threats within their

environment, and the proper building security procedures are implemented to handle those threats. It

is the management’s responsibility to maintain this awareness, and ensure that every new employee is

provided this information through an orientation. Policies that employees are educated on include

Information Systems and the Business Code of Conduct policy. In the event of emergency situations at

any MEC location, the Business Resumption Plan has been put into place, in order to maintain high

levels of security throughout the supply chain. The Crisis Management Team in the Head Office

monitors this plan.

Management monitors security training and awareness, and meetings are held to ensure proper

awareness is educated to all employees. Changes in security or PIP related news is communicated

through the MEC intranet.

EXTERNAL

Supply Chain Security

Through the course of the supply chain, MEC has developed business relationships with entities such as

vendors, carriers, brokers, and freight forwarders. Responsibility over the introduction and supervision

of these relationships has been broken down into three different areas. These three departments at

MEC constantly review all supply chain partner’s security profiles, to strive towards supply chain security

risk levels of zero.

Production- uses a “MEC Production Facility Technical Evaluation Form” and a “STEP” process

for choosing manufacturers. These two documents help review potential suppliers technical

capabilities and social compliance. It is MEC’s goal to ensure that high standards of ethical

sourcing have been applied to each supplier, with regular visits being made to factories to

monitor this compliance.

Buying and Design- responsible for product vendor’s selection. Managers of this department

are trained in vendor selection, which takes a look at criteria such as financial health, product

strength and supply capabilities.

Logistics-the Logistics department at MEC is responsible for carrier selection to transport

products from manufacturers and vendors. A list of carrier selection criteria has been

established that includes rates, services, claims, and any security compliance designations that

may apply to that carrier (PIP, FAST). Vendors are forwarded a letter of “Supply Chain Security

Partnership Requirements” that request all WCO-accredited security programs they are involved

in. If vendors do not respond, they have to complete a supply chain security profile

questionnaire or provide a statement declaring security compliance with MEC

The Logistics department is also responsible for maintaining records on security profile, and

communicate any irregularities that occur to the Production and/or Buying and Design

department.

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PHYSICAL

Physical Security and Access Controls

Physical Security- MEC has implemented high levels of security compliance within all physical

buildings under the business. The DC located in Surrey is where the majority of cross-border

shipments arrive, and security measures have been put in place to prevent and to react to

possible security threats in the most efficient manner possible. DC management are responsible

for ensuring that all entry points into the building and property are securely locked, including all

windows, doors, gates and fences. Shipment handling areas and storage facilities are equipped

with video surveillance and alarms, and DC management is responsible for issuing access to all

areas. This access is provided through the control of keys, pass cards and locks that are

distributed to selected levels of personnel.

The DC has maintained security control around the premises through a system of gates

surrounding the location. Loading bays are designed in a secure fenced area, and gates are

open from 6:00am to 4:30pm in order to prevent after-hours access. The stability of gate and

fence security is continuously monitored, and signage has been put in place to make visitors

aware of “No Trespassing” or “Authorized Personnel Only” areas. Adequate lighting has been

put into place inside and outside the DC facilities. This helps make visitors aware of all signage,

and which areas of the DC can be accessed without supervision.

Access Controls- When a visitor arrives at the DC they must park in a designated visitor’s area,

or if entering the loading bay, they have already made an appointment with the office to notify

of arrival. Once a visitor has parked, they need to buzz in at the entrance, and a MEC employee

has to let them into the building. A carrier dropping a load off in the bay has to buzz in as well,

at an entrance to the cargo handling area. At this point a MEC employee will check all

paperwork and documentation to start the unloading process.

All employees at DC are required to have proper identification in order to access certain areas of

the facilities, and the issuance of all identification badges and key cards are properly

documented by management. This helps clearly identify threats that may be presented on the

MEC property. MEC has procedures in place for employees in dealing with the challenging and

removal of unauthorized visitors. Communication systems are defined in the orientation to new

employees that have steps in place for contacting internal security personnel, and local law

enforcement if necessary.

Container, Trailer and Railcar Security

Shipments are received on a daily basis from MEC’s carriers to the DC in Surrey. All shipments are

delivered by service providers who are FAST, PIP, and/or C-TPAT certified. Once a shipment has arrived

at the warehouse, a MEC employee will examine the outside of the container and check the seal on the

door and verified against the waybill to ensure cargo integrity. Seal numbers are recorded, and any

discrepancies such as broken seals will be reported to the Logistics department at Head Office.

Once the outside of the container and seal has met requirements, the doors are opened on the

container and secured against a loading door to prevent access by unwarranted individuals. There is no

unauthorized entry to the container, trailer or storage area within the DC.

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DATA AND DOCUMENTATION

The accounting trigger1 of all paperwork involved in the transport of goods is crucial to the business of a

commercial importer. An organized and secure flow of documentation shows CBSA that goods and

sensitive information are maintaining high levels of security throughout the supply chain. MEC has

policies and procedures put into place in order to maintain a directive of high levels of compliance with

CBSA in regards to paperwork involved in the transport of goods.

The paperwork involved with transporting goods across the Canadian border begins with the Buying

department at MEC submitting a PO to the chosen vendor. Once vendor has confirmed order with a

receipt, the introduction of the BOL and commercial invoice is implemented into the documentation

flow. Once this paperwork has been developed, it is submitted by vendor to the MEC Logistics

department for review. Once the paperwork has been accurately confirmed, it is sent to broker for the

preparation of customs documents, which are introduced to the set of paperwork. This set is also sent

to the DC in Surrey in order to prepare to receive the shipment. At this point, copies of documentation

are under the responsibility of the broker, the distribution centre, and also the carrier to ensure the

release of goods at the border.

Once duties and tariffs have been paid to customs, the broker sends the documentation package to MEC

Finance to prepare for payment to vendor. During this process, DC receives shipment and immediately

checks the packing list against the BOL to confirm that an accurate order has been sent. If an issue with

the shipment is encountered, an over/under in total pieces or the damage of goods is found, a claim is

filed to the appropriate parties. Whether a claim is warranted or not, sets of documentation are sent

daily by courier to the MEC Head Office to proceed with the next stage in the paperwork process.

The H/O is where the documentation flow reaches its final stage, proceeding with further review to

confirm accuracy and compliance with all CBSA regulations. Finance department is responsible for

monthly sweeps2 of matching3 documentation and reviewing sets of paperwork to prepare for

finalization. If errors are determined within the paperwork, a reassessment process is initiated, with

Finance sourcing the error and communicating with Logistics in order to proceed with a B2 submission

to CBSA. Completed matched sets of documentation, and adjusted B2 cases are completed with

payment to vendor and filed for storage within a secure area at the Head Office.

The flow of documentation through the import process is fully demonstrated in Appendix A of this

report with a detailed process map.

1 Accounting trigger is the internal process of using books and records to account for all imports to submit to customs 2 Monthly sweeps are the reconciliation of any unmatched documents missed by the “Accounting Trigger” 3 Matching is the process of analyzing documentation received from DC with sets of paperwork from broker to maintain accuracy in areas such as quantities received, proper payment, and CBSA issues such as HS coding, C of O, and Value for Duty.

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MEC’S REASSESSMENT HISTORY 2008-2009

As a large retailer, MEC experiences the same issues to overcome as any business involved with

commercial trade. Mountain Equipment Co-op maintains records of CBSA compliance for every invoice,

shipment, and product that passes through Canadian

borders, in order to reveal gaps they may have

throughout their supply chain.

A large focus of CBSA compliance is the re-assessment

of all import documents that are utilized throughout

the year. MEC reviews documentation on a consistent

basis in order to catch any mistakes that may occur

during the course of the logistics process. These

procedures help prevent future errors, and maintain a

good standing with CBSA.

When taking a look at imports that need reassessment,

MEC has broken down the types of errors into seven

main categories. The records in Figure 2 demonstrate areas

of improvement that MEC, their broker’s, and vendors may focus on for the future. This helps limit

errors that may occur, and shows CBSA that the business is dedicated to becoming 100% compliant with

trade regulations.

Once MEC has analyzed an error that has been made in CBSA documentation, it is then traced back to its

source and recorded. First, errors are categorized by broker, vendor or MEC themselves to identify

initial responsibility. The elimination of using a broker for custom related documents, upon approval of a

CSA designation, would take away a source of 37.6% of compliance errors between 2008 and 2009.

As seen in Figure 3, documentation errors

have reduced from 2008 to 2009, but are

still a significant issue for MEC’s business

practices. Between these two years, MEC

found 876 compliance errors within their

custom’s paperwork. This results in a time

and money cost for all parties involved.

MEC is obligated to reassess paperwork as

detailed in report, which reduces available

time and resources that can be directed to

other areas of focus within the co-

operative.

After compliance issues have now been

assigned to a source, MEC has the ability to go

into more detail on addressing mistakes that

have been made. This specifically is helpful to analyze mistakes at the fault of vendors that have

established a relationship with MEC. Appendix B illustrates the top 15 vendors that contributed to

errors on CBSA documentation during 2008-2009 for MEC.

FIGURE 2-ERROR BY TYPE-2008 AND 2009

FIGURE 3-ERROR BY SOURCE-2008 AND 2009

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KEY PERFORMANCE INDICATOR’S-CBSA COMPLIANCE

Key Performance Indicator’s (KPI’s) help organizations understand how well they are performing in

relation to their strategic goals and objectives. The three main reasons

that KPI’s are used within businesses are:

To learn and improve

To report externally and demonstrate compliance

To control and monitor people

Compliance KPI’s are put into place by businesses

in order to follow regulations for CBSA

standards, and must be continually monitored in

order to maintain control of business practices. (Advanced Performance Institute, 2011)

KPI’S –MEC PRACTICES

Businesses today are using benchmarks and KPI’s to help define areas of

improvement within their organization. By clearly identifying logistical

benchmarks, the ability to determine where they are today in regards to

compliance, and where they would like to be for the future becomes

clearer. The MEC Logistics departments benchmarking process and

KPI’s consist of focusing on three specific areas

Benchmarking against CBSA requirements for PIP and CSA programs Utilizing information recorded through the movement process of documentation Reviewing degree of compliance in regards to all parties involved in the supply chain

relationship

The MEC Logistics department keeps records on all documentation movements, collecting data that can

be used to source specific information on carriers, vendors, broker or internal branches of MEC. These

records are all stored by paper, or electronically stored within MEC’s computer system. Reviewing

occurrences such as errors made in documentation is an important aspect of how MEC measures KPI’s

specifically for compliance with CBSA. Errors in documentation are recorded by type, source, and when

source is found to be vendor; the specific vendor that was responsible for the error is identified. By

using this information in KPI’s, MEC can review which sources are remaining in compliance with

documentation security, and which ones need to be focused on in order to achieve levels that are

acceptable for CBSA standards.

The steps taken in the reassessment process is fundamental when analyzing MEC’s compliance with

CBSA. MEC uses information that is recorded annually such as type of error, and error source as a KPI in

order to focus on areas in improvement within the supply chain. If a gap in communication with logistics

FOUR ISSUES COMPANIES SEE AS IMPORTANT TO GLOBAL TRADE AND

COMPLIANCE

Growing global operations (sales, purchases, and distribution networks

Need to improve operational inefficiencies due to incomplete visibility or disparate systems

Growing complexity of security regulations for international trade

Growing risks associated with non-compliance

19


partners such as brokers and vendors is identified, MEC has the ability to restructure commercial import

functions and determine better business practices that will help reduce the opportunities for an error to

occur. If high levels of error are linked to one specific source such as a specific vendor or MEC

employee, the source is sent an email to create awareness that there is room for improvement in the

process.

As stated, MEC is currently a member of the Partner’s in Protection program, and is in the second stage

of the Custom’s Self-Assessment application. The CBSA and all related programs have detailed

requirements for maintaining an acceptable level of compliance with border security. MEC incorporates

these requirements and uses them as a benchmark when any new scenarios that are introduced to the

business. This includes new stores being opened, the relocation of any property (such as Head Office),

and any new relationships established with vendors, carriers, or brokers. By using PIP and CSA

requirements as a benchmark for changes within the business

plan MEC is able to sustain levels of security that are necessary for

vendor-trade compliance.

The requirements that are communicated through the CBSA

website, and import program requirements show what level MEC

wants to be, in order to be considered a “pro-active” participant

with vendor-trade compliance. MEC Logistics department is

continuously monitoring the CBSA website for any new

regulations being introduced, or adjustments to issues such as HS

coding or new areas of focus CBSA introduces annually.

KPI’S-INDUSTRY PRACTICES

The relationship between commercial importer’s and the CBSA

must be measured to give the organization an idea of what level

of compliance they are at, and what improvements can be made

through the conclusions of the KPI’s used during the process.

The transportation industry uses KPI’s to determine what level of

compliance it is situated at. Five KPI’s that are used to benchmark

against industry standards are:

Average trade compliance cost

Total ratio of trade related costs to declared value (including software, labour, fines,

tariffs, duties, broker fees)

Perfect order rate received

Complete and on-time shipments exported to international locations

Perfect order rate delivered

Complete and on-time shipments exported to international locations

Businesses within the commercial import sector also incorporate continuous benchmarking processes

against previous years to help display progress in the organization. This helps identify trends and gaps in

annual reports that can be focused on for the following years.

COMMERCIAL IMPORTER’S TRADE COMPLIANCE

PRIORITIES FOR 2011

Improve productivity and visibility using new technology (get automated)

Streamline process’s

Centralize trade compliance function across the enterprise

Utilize or collaborate with service providers

Move toward a paperless process with improved visibility

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Average trade compliance cost

Percentage change in ratio of trade related costs to declared value (including labour,

software, fines, broker fees, etc.)

Total landed cost

Percentage change in total global trade costs (including compliance,

logistics/forwarding, transportation, warehousing, etc. Plus actual cost of goods

(Bob Heaney, 2010)

KEY FINDINGS

After analyzing MEC’s compliance with CBSA, there were some areas where room for improvement

exists in regards to import procedures. The organization is currently targeting September of 2011 to

proceed with the second stage of the CSA application, with the focus being on the security of

documentation within their supply chain. MEC has put procedures in place for the physical security of

daily business practices that are at acceptable levels for commercial importers. Organization facilities,

the physical movement of goods, and training of employees have been aligned with CBSA

recommendations. These factors will continue to have an influence on what direction MEC takes for the

future.

REASSESSMENT ANALYSIS

Upon a CSA approval, the significance of each type of documentation error will change, as MEC will be

able to apply any necessary paperwork to CBSA after they have received shipments. A weighted

measuring tool has been established with the Logistics department that determines the degree of

compliance that each type of documentation error has on daily business practices (see Appendix C).

This tool measures the impact on time cost, money cost, and the difficulty of recovery cost through a

rating system of high, medium and low for each type of error provided. High, medium and low degrees

of impact are scored as 10 points, 5 points, and 2.5 points each. By summarizing the total degree of

compliance, each type of error influences over MEC, an opportunity for creating awareness between

MEC and supply chain partners is provided.

The calculation that determines the degree of

compliance is the following:

Example: Using the vendor Seattle Bike Supply,

it has been determined that between 2008 and

2009, that the business was responsible for the

errors of 14 different transactions between MEC and themselves. The errors were broken down to 8

quantity issues, 4 pricing errors, and a NAFTA and invoicing error each.

(# of Errors)(Weighted Measure) Number of Transactions

21


This would be broken down to a weighted measurement calculation of:

This reaches a conclusion of Seattle Bike Supply receiving a

weighted score of 2.15 in regards to the degree of impact

that the business has over MEC’s reassessment of all

documentation. This measurement tool also shows that

with 14 errors occuring out of of 86 total transactions, the

Seattle Bike Supply company has a 83.7% reliability rating

when dealing with transactional issues. Once this formula has been implemented for all vendors, these

results will give an idea of where each vendor stands in regards to CBSA compliance and provides a

forecast for accuracy of each shipment provided by vendors well.

This formula was put into effect for ten vendors(see Figure 4) that were responsible for

documentational errors that caused MEC to reassess customs documents during 2008 and 2009. Figure

5 demonstrates how each error from vendors have different degrees of impact in the responsibilities

that the Logistics team at MEC oversees. Comparing the

vendor’s Defeet and Chaco, it can be seen that Chaco

was responsible for 7 errors in documentation and

Defeet 10 errors.

Due to the fact that Chaco’s main source of mistakes was in applying a discount, the company scored

much higher then Defeet when dealing with the degree of impact. Chaco may have had 3 less mistakes

then Defeet, but due to the fact that 90% of Defeet’s mistakes were a result of inaccurate quantities

shipped, the degree of compliance was minimal for an organization like MEC that is looking towards a

CSA future.

(8*7.5)(4*20)(1*25)(1*20) 86 Transactions w/vendor

FIGURE 4-WEIGHTED MEASUREMENT RESULTS FIGURE 5-ERROR TYPE BY VENDOR

22


When viewing all assessments completed during the two-year period, it was found that a total of 876

errors were made in compliance related documentation. This resulted in providing information that can

be analyzed in different ways. Statistics such as weighted degrees of compliance, time cost, and

accuracy of documentation can be studied in order to determine improvements that can be made in

regards to customs compliance. An example can be found in Figure’s 6 and 7 that show vendor

information that can be utilized from 2008 and 2009.

These vendors play an important role within the commercial importing responsibility of MEC; providing

information on HS coding, establishing documentation such as commercial invoices, and preparing

orders for shipment to the MEC DC. It has been found that a significant amount of errors found in

documentation for MEC are being sourced back to vendors, accounting for 34.6% of necessary

reassessments between the years of 2008-2009.

Company Total Transactions

Total Error

Scores Transaction Accuracy

Cascade Design 119 9 0.82 92.4%

Highway 2 6 4 13.33 33.3%

Mission Playground 7 4 11.07 42.9%

Cyclone 25 6 2.80 76.0%

Softride 8 3 7.50 62.5%

Veltec 15 5 3.83 66.7%

Metolius 14 7 3.75 50.0%

Visual Graphic Design 11 2 4.55 81.8%

Seattle Bike Supply 38 5 1.32 86.8%

Carve Design 2 3 23.75 -50.0%

Company Total Transactions

Total Errors

Scores Transaction Accuracy

Chaco 11 7 12.27 36.36%

Terry Precision 9 5 10.28 44.44%

Seattle Bike Supply 48 8 1.88 83.33%

Defeet 28 10 3.13 64.29%

Teko Socks 19 5 3.95 73.68%

BOB Trailers 28 4 2.41 85.71%

Cyclone 15 6 3.83 60.00%

Leatherman 29 4 1.90 86.21%

Eastern Warmth 9 6 5.00 33.33%

Eco Lips 7 3 6.79 57.14%

FIGURE 4-VENDOR INFORMATION 2008

FIGURE 5-VENDOR INFORMATION 2009

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MOVEMENT OF DOCUMENTATION

The movement of documentation plays a critical role in receiving a CSA designation from CBSA.

Responsibilities of movements have been divided between different departments within MEC, and

external sources such as vendors, carriers and brokers.

An investigation of the movement of documentation has been completed, starting from an original

purchase order being processed to the final storage of all paperwork for audit purposes. Process

mapping, internal research and the development of industry wide practices have outlined MEC’s level of

compliance with CBSA. Figure 8 and 9 provides a summarization of internal and external responsibilities

over the movement of documentation for MEC related transactions.

INTERNAL DOCUMENTATION RESPONSIBILITIES

FIGURE 6-INTERNAL DOCUMENTATION RESPONSIBILITIES

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EXTERNAL DOCUMENTATION RESPONSIBILITIES

RECOMMENDATIONS

BENCHMARKING AND KEY PERFORMANCE INDICATORS

Although it is important to determine industry wide levels of

compliance and benchmark against competitors, more focus must be

maintained on internal KPI’s. A commercial importer should strive to

become 100% compliant with CBSA regulations, and shift focus from

comparing levels of compliance that competitors have, to how those

levels are maintained.

As shown in Key Findings, MEC has recorded information that may be

utilized in taking a look at where the organization stands with

custom’s compliance. It has been determined that although Logistics

takes great care in collecting data such as error reports,

reassessment history, and vendor related information; the

organization has the opportunity to utilize this information in a more

effective manner. In the years 2008 and 2009, it was found that a

total of 291.7 man-hours worked for the Logistics department were

focused strictly on the reassessment of compliance errors. (See

Figure 10)

Logistics has the information necessary to benchmark against their

previous compliance history, just as MEC demonstrates KPI’s and

benchmarks in areas such as the annual Financial and Sustainability

Reports. The organization also provides daily updates in sales for

each store, benchmarking against the previous year’s sales on the

Time Cost to MEC Logistics 2009

Min Hours

Broker 1860 31

MEC 2040 34

Vender 2520 42

Panalpina 60 1

Grand Total 6480 108

Time Cost to MEC Logistics 2008

Min Hours

Broker 4500 75.0

MEC 2980 49.7

Vender 3540 59.0

Grand Total 11020 183.7

Note: Table shows error by source and calculations are based on a twenty one minute time cost per error as per Logistics department

FIGURE 7-EXTERNAL DOCUMENTATION RESPONSIBILITIES

FIGURE 8-TIME COST TO MEC LOGISTICS-2008 AND 2009

25


same day. This is delivered through an online system data management system.

It is recommended that the MEC Logistics department establish a Supply Chain Management Report

(Appendix G) with uniformed KPI’s on an annual basis to help identify areas of focus for years to come.

This will help MEC maintain high levels of customs compliance, provide accountability performance

awareness to parties responsible for documentation, and reduce the time cost of reassessing Custom

packages for the Logistics department.

SUPPLY CHAIN COMMUNICATION

As part of MEC’s Supply Chain Security Partnership Requirements under

the PIP program, the Logistics department oversees security profiles

that are submitted by all vendors. This shows CBSA that, from origin to

destination, measures are in place to ensure that MEC goods coming

into Canada are secure.

It is recommended that the MEC Logistics department continue to take

steps in increasing supply chain security by establishing a higher level of

communication with vendors. Due to a rise in border security on an

international level, commercial import expenses are becoming a higher

area of focus for business. It is in the best interest of MEC to apply a

closer relationship with supply chain partners, through the sharing of

information that is related to all transactions between all parties. This

can be provided through regular compliance reports that update

vendor’s on where MEC stands compared to benchmarks and KPI’s that

have been set at the beginning of each business year.

It has been concluded that benchmarking and KPI’s are a necessary part

of MEC’s business practices. It is assumed that organizations within

MEC’s supply chain relationship are incorporating these principles

within their own business. MEC’s Logistics department collects enough

information on commercial imports to demonstrate to vendor’s how

they are helping establish high levels of compliance. This information

may be shared through the implementation of a Vendor Report

(Appendix F) that can be issued to vendors on a regular basis. A

scorecard will allow vendors to review strengths and weaknesses in

their commercial import compliances involving MEC transactions. By

sharing information on issues such as documentation errors, vendors

will be able to assess MEC reports to help focus their own KPI’s and

improve efficiency of their business.

MEC LOGISTIC’S CASE

STUDY-THE SUSHI ROLL

In 2008 MEC conducted a study to see if the packaging process of imported garments could be improved upon. By rolling garments like “sushi”, MEC was able to create a new logistics alternative that helped:

Save almost 1.4 kg of plastic per box shipped

Reduced receiving times by up to three minutes on average

Made sorting at the distribution centre easier

Reduced the number of distorted or damaged products received

After testing this with one overseas vendor and receiving such successful results; MEC incorporated this practice into all relationships with suppliers. Once initiated, vendors experienced a reduction in transportation expenses that were then felt downstream by their customers.

26


MEC has experienced productive results in establishing cost saving relationships with vendors, as

described in the Sushi Roll Case Study. By establishing a higher level of communication between supply

chain partners through the sharing of information, MEC will continue towards goals such as:

The reduction CBSA documentation errors

The reduction of time cost involved in the reassessment process

The improvement in efficiency of the flow of MEC good’s into Canada

INTERNAL MOVEMENT OF DOCUMENTATION

MEC has provided the necessary resources to analyze the movement of documentation within the

organization. The movement of paperwork involved in the logistics function of all goods received by

MEC is displayed in a detailed process map found in Appendix A. It has been determined that MEC has

installed high levels of monitoring the security of all documentation, through an organized structure that

has been divided between departments such as Logistics, Finance, Buying and the DC located in Surrey.

MEC has the opportunity to increase these levels of security, and it is recommended that the focus on

implementing a paperless document management system that will streamline movements throughout

the supply chain relationship. The creation of an online network will help MEC continue a seamless flow

of document management, starting from the creation of a purchase order from a vendor, to the

communication between DC and departments within the Head Office.

Currently there are many logistics software companies that can modify their products to align with their

customer’s daily business practices. E-logistics programs can be set up to have internal and external

interfaces with different levels of security restrictions. This will allow all documentation involved with

moving goods into Canada to be stored, retrieved, and inputted with one single source (See Figure 11).

INTERNAL INTERFACE

Information on transactions, commercial documents, and reassessment process’s may be

pulled from database; helping departments such as Logistics and Finance establish strong

benchmarks with ease.

More efficient organization of paperwork, inputs of new information are available

instantaneously

Higher level of communication between DC and Head Office, reducing movements of

physical documents

EXTERNAL INTERFACE

May be applied to establish closer relationship with vendors, communicating key

information on new HS updates, changes in Country of Origin, tariffs and discounts applied

All vendors documentation involving MEC will be formatted into one single process

The reduction of errors made in documentation between MEC and vendors, as all

information can be pulled from one source

Movements of carriers can be monitored more effectively

27


MEC is currently working on transitioning to a larger Head Office in 2012, and it is recommended that

during this movement that a paperless document management system is included with this new

direction MEC is taking. By storing all internal and external information using an electronic database, a

higher level of CBSA compliance is reached and a more effective documentation management is

ensured.

FIGURE 9-PAPERLESS SUPPLY CHAIN MANAGEMENT

PRIMARY BENEFITS OF RECOMMENDATIONS

All recommendations made will enhance MEC’s compliance with CBSA commercial import regulations.

The instalment of a paperless document management system will help establish higher levels of security

in regards to customs compliance. The introduction of this system will also help MEC establish stronger

and clearer KPI’s for the organization, and bring a higher level of communication between all parties

involved in the security of supply chain management.

MEC will benefit from these recommendations by displaying a secure movement of documentation to

CBSA, and reducing the time cost involved with monitoring these movements. This will allow the

Logistics department to focus on other areas to improve upon, within the responsibilities of the

movement of MEC products into Canada.

SECONDARY BENEFITS OF RECOMMENDATIONS

MEC displays a great deal of focus on sustainable practices involved within their business. By

establishing strong benchmarks, maintaining higher levels of communication with supply chain partners

External Users Internal Users

28


and transitioning towards a paperless document system, an improvement in sustainability practices will

follow. These recommendations will help:

Eliminate supplies necessary to complete documentation

Reduce methods of transportation of documents such as DC to Head Office and Broker to Head

Office by freight forwarders, reducing carbon footprint

Reduce amount of errors made in documentation and orders prepared by vendors, therefore

lowering transportation costs necessary to correct such errors

By implementing the suggested strategies, a higher level of sustainability is achieved at a lower cost to

MEC. This aligns with the organization’s values, and at the same time helps MEC move towards the goal

of high levels of vendor-trade compliance and a CSA designation.

29


BIBLIOGRAPHY

Advanced Performance Institute. (2011, April 14). What is a Key Performance Indicator. Retrieved April 14, 2011 from Advanced Performance Institute: http://www.ap-institute.com/Key%20Performance%20Indicators.html

Bob Heaney. (2010). Global Trade Management. Aberdeen Group.

CBSA. (2011, April 14). CBSA-About Us. Retrieved April 14, 2011 from CBSA: http://www.cbsa-asfc.gc.ca/agency-agence/menu-eng.html

CBSA. (2012, April 23). Importer Programs. Retrieved April 23, 2012 from Canadian Border Service's Agency: http://www.cbsa-asfc.gc.ca/import/ip-pi-eng

Mountain Equipment Co-op. (2011 йил 14-April). MEC-About MEC. Retrieved 2011 йил 14-April from Mountain Equipment Co-op: http://www.mec.ca/Main/content_text.jsp?FOLDER%3C%3Efolder_id=1408474396039423

MEC INTERNAL DOCUMENT’S USED IN THIS STUDY

MEC‘s Partners in Protection Application

MEC’s Partners in Protection Security Profile

Custom’s Self Assessment Application Part 1

Reassessment Data for 2008, 2009, and 2010

Vendor Transaction List

MEC Custom’s Compliance Manual

MEC Global Supply Chain Management

MEC INTERNAL SOURCES

Mike Au, Manager Supply Chain Services

Debby Sung, Logistics Analyst

Paul Robles, Logistics Analyst

Kathryn vander Linden, Account’s Payable Supervisor

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APPENDENCES

APPENDIX A-PROCESS MAP OF DOCUMENTATION MOVEMENTS

31


APPENDIX B-TOP 15 ERROR PRONE VENDORS FROM 2008 AND 2009

32


APPENDIX C- CUSTOMS COMPLIANCE WEIGHTED MEASURING TOOL

Low = 2.5 points Medium = 5 points High = 10 points

*Feedback was provided by Logistics Department

APPENDIX D-ERRORS BY TYPE AND SOURCE-2008 AND 2009

APPENDIX E- WEIGHTED SCORES BY TYPE AND SOURCE-2008 AND 2009

No Brokerage C of O Discount HS Code Invoicing Nafta Pricing Quantity RTV

Time Cost Low High Medium Medium Medium Medium Medium Low Medium

Money Cost High High High Medium High High High Low Medium

Difficulty of Recover Cost Medium Low Low Medium Medium High Low Low Medium

Total Scores 17.5 22.5 17.5 12.5 20 25 20 7.5 15

2008Problem

At Fault No Brokerage C of O Discount HS Code Invoicing Nafta Pricing Quantity RTV Grand Total Min Hours

Broker 2 16 201 2 4 225 4500 75.0

MEC 20 2 9 110 3 3 2 149 2980 49.7

Vender 2 13 2 10 5 38 106 1 177 3540 59.0

Grand Total 20 6 38 313 13 7 45 108 1 551 11020 183.7

2009

Problem

At Fault No Brokerage C of O Discount HS Code Invoicing Nafta Pricing Quantity RTV Grand Total Min Hours

Broker 1 4 8 76 1 2 1 93 1860 31

MEC 19 5 75 2 1 102 2040 34

Vender 2 1 4 2 19 3 14 80 1 126 2520 42

Panalpina 2 1 3 60 1

Grand Total 22 5 19 154 20 5 17 81 1 324 6480 108

Time Cost

Time Cost

Scores 17.5 22.5 17.5 12.5 20 25 20 7.5 15

2008No Brokerage C of O Discount HS Code Invoicing Nafta Pricing Quantity RTV Grand Total

Broker 0 45 280 2512.5 0 50 80 0 0 2967.5

MEC 350 45 157.5 1375 60 0 60 15 0 2062.5

Vender 0 45 227.5 25 200 125 760 795 15 2192.5

Grand Total 350 135 665 3912.5 260 175 900 810 15 7222.5

Scores 17.5 22.5 17.5 12.5 20 25 20 7.5 15

2009No Brokerage C of O Discount HS Code Invoicing Nafta Pricing Quantity RTV Grand Total

Broker 17.5 90 140 950 20 50 20 0 0 1287.5

MEC 332.5 0 87.5 937.5 0 0 40 7.5 0 1405

Vender 35 22.5 70 25 380 75 280 600 15 1502.5

Panalpina 0 0 35 12.5 0 0 0 0 0 47.5

Grand Total 385 112.5 332.5 1925 400 125 340 607.5 15 4242.5

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APPENDIX F- VENDOR REPORT

Vendor Report

Vendor

Seattle Bike Supply

2008-2009

Overview

Mountain Equipment Co-operative is in the process of initiating higher levels

of communication with vendors such as you. This will involve the process of

sending Vendor Scorecards to suppliers involved in the supply chain of our

organization. In this Scorecard we will provide information related to

commercial imports, and what our supply chain relationship can do to reduce

costs, and maintain high levels of compliance with customs.

Priorities

Over the course of the next year, our main priorities in vendor-trade

compliance are reducing errors in documentation.

Adaptations

MEC will be setting up a paperless document management system that will

help both our companies establish an organized efficient form of

communicating documents necessary in transactions for the future

Evaluation

We found that MEC and SBS should focus on quantity issues over the next

year, and see if we can raise levels of invoice accuracy. If we achieve these two

goals, it will reduce time and money cost towards our organizations. MEC is

also focused on improving efficiencies, and if there is anything we are doing to

effect these two areas of focus for the next year, please let us know.

Thanks,

Logistics Team,

Mountain Equipment Co-operative

Invoice Accuracy

Seattle Bike Supply (SBS) experienced

an Invoice Accuracy percentage of

86.8% in the year 2008, and a

percentage of 83.33% in 2009

Invoice Errors

It was shown that 75% of compliance

errors from SBS were due to quantity

issues over the two-year period.

Objectives

Areas of high degrees of impact for

Mountain Equipment Co-op

Correct Country of Origin

Issues under NAFTA

Invoicing and Pricing issues

34


APPENDIX G-SUPPLY CHAIN MANAGEMENT REPORT 2012

MOUNTAIN EQUIPMENT CO-OPERATIVE’S SUPPLY CHAIN MANAGEMENT REPORT

MEC decides to go “paperless” with Supply Chain Management

Establishing higher levels of custom’s security, and at same time, reducing our impact on the environment…

In maintaining a goal of

high levels of compliance in

regards to commercial

import regulations,

Mountain Equipment Co-

operative is transitioning to

a paperless supply chain

management system, and

we would like our supply

chain partner’s to get

involved! By turning to a

web-based document system,

MEC will reduce the risk of

non-compliance issues, and

in turn reduce costs as well.

In the year 2012, we are excited to bring new elements to our business. This includes providing all suppliers with MEC Vendor Report’s. In the report, we will demonstrate what is most important to us in regards to

establishing high goals of compliance with commercial imports, and how your business is influencing the

direction we are taking. The Vendor Report will help supply chain partner’s identify areas of improvement

within their daily business practices, and focus on improving those areas. At MEC we are consistently

trying to improve operations, and would like to know from you as well, if there is anything we can do to

make the logistics process as efficient as possible!!

New to 2012….Benchmarking tools such as the Vendor Report

MEC 2012 Areas Of Focus

Supply Chain Communication

2

2

3

4

MEC would like to improve accuracy levels in commercial import documentation issues such as HS code, country of origin, and quantity issues

By going paperless in supply chain management, we keep time and money cost in monitoring compliance, to a minimum

As a co-operative looking towards the future, we want to know how to improve our operations, just as you do as well!

By establishing strong benchmarks and sharing this information, we have the ability to improve our business process, and help others do the same.

Reducing Non-Compliance Issues