Customer Solution Case Study
/ Achieve remarkable results through the proof of origin system using BI in the era of FTA
Overview
Country or Region:Korea
Industry:Manufacturing
Customer Profile
LS Cable & System established in 1965 is the global player in the industrial electricity, electronics and material field, as the world’s 3rd largest firm by revenue of 2010. It has 1850 employees at four operations in 10 foreign branches.
Business Situation
A growing number of countries strike a deal with Korea, opening the possibility of having non-tariff benefits. However, the procedure for issuing a certificate of origin is time-consuming and intricate work, which caused the need of system automation.
Solution
It has built the FTA system for issuing automation of a certificate of origin with data lookup in ERP
Benefits
- Set the process for responding FTA
- Revenue growth through the non-tariff benefits
- Grow system with no extra costs
- Improve the exporting competitive advantage
Taehak Kim, Assistant Manager. LS Cable
LS Cable & System, the world’s 3rd largest cable company, opened the FTA system in 2011. The company has noticed the need of preparing FTA systematically as Korea-other country FTA is accelerated. It is necessary to know the accurate criteria for HS code related origin definition to get the non-tariff benefits through FTA. Understanding this specifically makes a certificate of origin based on the accurate information issued. In case of small number of products treated, it will be processed manually. Enterprises like LS Cable & System, which has about 100 thousand products, need the process systemization, because it is impossible to check each code per item. This thought cause the company to build the FTA system. Opened FTA system, LS Cable & System expects the tariff reduction of 0.34 billion for EU in the first half of 2011, and 1.1 billion for USA in 2011 through the simulation.
Situation
LS Cable & System is the world’s 3rd largest cable company by revenue. Its business agility attracts public attention in the industry as a global leader. Today’s topic as of 2011 is the preparation for FTA.
As a growing number of countries strike a deal with Korea, to get this situation changed into a new business opportunity has been hammered out by LS Cable & System. This is because it cannot obtain the benefits of FTA without a thorough preparation.Most people think once FTA was struck, exporters will have non-tariff benefits. However, it is not true. Companies have to read carefully the details of FTA and be ready to meet requirements of the Accord. In the same vein, last 2010, the National Tax Service checked the FTA preparation status for major domestic companies.
What the companies are frustrated in is to identify the HS code-related origin definition criteria. FTA has different criteria by country, even in the same Accord by code. To figure out this makes a certificate of origin issued correctly to get non-tariff benefits.The problem is that this cannot be processed in real time. It takes a few days to view HS code book to decide if it meets the requirements and submit the request for scrutiny to the National Tax Service. If these works are about a few products, it is not challenging at all, while it is very burdensome for processing about 100 thousand products. Therefore the preparation for FTA is so urgently needed for LS Cable & System.
It was early 2011 when LS Cable & System woke up to issuing automation of the certificate of origin. Regarding this, Taehak Kim, Assistant Manager, Purchase Planning Team, LS Cable & System, said, “We were submitted a request for the certificate of origin issuing automation system from Sales then.” “This staggered us to discuss which division would be in charge of its issuing out of Purchase and Sales and about the internal role and responsibility (R&R),” he said.
Sales had to issue a certificate of origin at that time, but it was not able to process it due to the lack of expertise related to calculating added value. And it also could not depend on only Purchase division because broad category of knowledge including inventory management was required to dedicate the proof of origin business. That’s why the sales team was looking forward a system development.
Solution
LS Cable & System has driven forward planning FTA system development project after knowing that it is the work melting expertise of a wide range of divisions into one place. The company created consensus on the necessity and functionality of FTA system through the close discussion with the related divisions including Architecture, Accounting, Purchase and Sales. And then, it set the criteria for introducing solution and entered into reviewing. This task was not easy. With the strike with Chile, Peru and EU realized and the strike with USA approaching, lots of related solutions came up to the market for recent years. Out of these, it is not easy to select the best for it.
Since the system requires the expertise in broad segments like accounting, customs, etc. by nature, it is important to figure out what level of expertise the solution provider has as well as functionality of the solution itself. This thought made the company choose solutions from Samil PricewaterhouseCoopers and Cheong Sol Customs & Trade Co., LTD after reviewing lots of solutions. Out of two solutions, it selected the OCS (Origin Compliance System) from Samil PWC finally.
Given that the task was the joint-project for LS group’s four affiliates such as LS Cable & System, LS Mtron, JS Cable and DSEC, every effort was made to help ensure the system performance and scalability. And as a part of this project, it introduced HP DL370G7 Fast Track server into the company. It is the single system, which server, storage and network are integrated into, with 4 AMD Opteron™ processors and total 17 TB storage.
Finished components configuration, LS Cable & System got the Samil PWC’s solution resided on SQL Server 2008. The solution is featured by origin simulation, role engine-based profiling, origin defining proactive alarming, origin information collecting workflow and best practice for calculating added value.
The highlight of this project was the connection between its affiliates’ ERP and FTA in addition to LS Cable & System’s SAP ERP. Since how fast and efficiently the system can import the data source from ERP to FTA system to analyze is directly related to the service quality and performance, they have put a lot of work into this task. LS Cable & System combined entire infrastructure within a single network, placing the dedicated line and then interface-dedicated system in the middle of ERP and FTA system for DSEC which doesn’t exist in the same datacenter and has no connection to the network due to the geographically remote area.
Microsoft also played a critical role in this project. Jinseop Moon, Manager of Information Strategy Team, LS Cable & System, said, “It was not easy to predict the accurate data throughput or increased data volume, however, the tuning service Microsoft had provided enabled us to prevent the compromising speed proactively.” He added, “We will be provided the tuning service again in the end of 2011 when the data would be accumulated somewhat after opening the system in July.”
Benefits
Set the process for responding FTA
July, 2011, when FTA system for four affiliates including LS Cable & System entered into running, the line-of-business users responded with a surprise that they could reduce the time spent closing by days to seconds. The FTA system made much of proof of origin business automated, settling the related process across the entire organization.
Taehak Kim, Assistant Manager, said, “It took 30 minutes only to view definition criteria, looking up Code book in the past. However, he said, “It now makes it possible for us to issue immediately the certificate through the FTA system when Sales requires a certificate of origin and respond to the request quickly through the FTA origin definition system when the scrutiny of National Tax Service is required.” If an item doesn’t meet the requirements of the proof of origin, Purchase division can ask the sourcing company to check and send the origin confirmation, which can be applied to the FTA system right away. This means that the FTA system is being stabilized under the collaboration among Sales, Logistics and Purchase.
Revenue growth
This system development enables LS Cable & System and its affiliates to take full advantage of the non-tariff benefits from FTA. And they expect tangible revenue growth through this. Mr. Kim said, “By transaction in the first half of 2010, it is analyzed that we will reduce tariffs up to 0.34 billion won in the first half of 2011. Furthermore, in the Korea-America FTA, it is predicted to be 1.1 billion won of immediate profits according to the simulation of 2011 by performance of 2010.” Given the total amount of four companies which are using the FTA system, it is expected that the reduction of tariffs will be increased. If the FTA expands from Peru in 2011 and America to China in the future, the effects of this system development will be increased proportionally.
Process big data volume
As a growing number of countries strike a deal with Korea, data throughput will be also growing. Therefore it is important to ensure FTA system performance in such a big data volume environment. In this case, SQL Server-based HP server gave them a little bit less concern about performance.
Jinseop Moon, Manager, said, “More than 100 thousand items are dealt with in the FTA system and transactions of four affiliates are all rushed into at the end of months.” He added, “We can get the origin information within seconds with a single click as usual even in the high peaks of the transaction volumes.” Mr. Moon pointed the I/O performance as one reason of such high system performance.
For the server introduced at this time, its each disk can be mounted on the folder through Multipath I/O (MPIO). That is, it has SAN structure with server and disk connected via the optical channel, but functions like DAS logistically, which makes data reading and writing I/O in disk array minimized. Mr. Moon said, “Fast Track server has an architecture designed to use disks efficiently. Its actual operation got us know that I/O load balancing is achieved efficiently.”
Grow system with no extra costs
FTA system is a kind of system with big data volume growth. 3-year use is expected to cause a need of extension. Mr. Moon said, “FTA system has the large volume of data, causing us to consider the future extension cost as well as initial investment. That’s why we selected Microsoft’s database instead of Oracle. It is expected to have more than 10 times cost reduction, given the future growth as well as initial cost.”
Improve the exporting competitive advantage
This opening of FTA system is expected to improve the brand value and exporting competitive advantage of LS Cable & System and its affiliates regarding TFA. In particular, LS Cable & System, which has been entitled as an Authorized Economic Operator from National Tax Service in March, 2011, is expected to have significant synergy.Mr. Kim said, “We will have more benefits of reducing customs procedure and time and comprehensive benefits in all aspects of customs procedure when certified as an AEO.” He added, “And then the opening of FTA system enables us to show our competitive advantage related to the importing/exporting infrastructure to the global market.”
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