John Mascaritolo is Director of Global Logistics, Corporate Global Procurement for NCR Corporation. As such, he is responsible for corporate compliance with global transportation and logistics strategies and policies; further, he serves as resident adviser to company business units in developing their global logistics strategies. Mascaritolo has worked for 30 years with all aspects of transportation, warehousing, and global logistics, and has business experience in consumer goods, publishing, health-care, lighting/construction industry, food retail industry and third party logistics.

Mascaritolo took leave from his corporate career to work for the Atlanta Committee for the 1996 Olympic Games, for which he oversaw design, implementation and management of logistical functions associated with the storage and distribution of assets used in the 1996 Olympic Games and infrastructure activity at remote Olympic venues in four U.S. states.

Mascaritolo is active with the Council of Supply Chain Management Professionals (CSCMP), both locally and nationally, and was President of the Atlanta Roundtable from 1989 through 1994. He is an adjunct professor at DeVry University in Atlanta, where he teaches on logistics and supply chain management.

In this interview, NCR Director of Logistics John Mascaritolo tackles topics from the need to get a firm grasp on total cost of ownership, to the reasons why supply chain security must be an enterprise-wide concern to the problems and possibilities of operations in India.

WT: How do NCR’s current efforts with international sourcing differ from its own recent history?

Mascaritolo: NCR operated under a country-centric model for many years with major manufacturing in the U.S. and Scotland. Over time, we moved to a combination of regional manufacturing for Automated Teller Machines and outsourced OEM manufacturing for retail Point of Sale units. Within the past seven years, we moved further away from the country-centric models, with a combination of region manufacturing with both local and global sourcing.

WT: What prompted this shift?

Mascaritolo: There’s a constant need for change to remain competitive. Technology changes quickly as does the demands for better products by the customer. Cost take-out initiatives improve margins, and low-cost sourcing contributes to cost take-out initiatives.

WT: What, roughly, is the cost-benefit analysis of international sourcing?

Mascaritolo: International sourcing has its advantages and disadvantages. The advantages we see are mass production capabilities at higher quantities and lower costs, more competitive suppliers in low-cost regions, and good work ethic from different cultures. The disadvantage is that as the distance from product supply to point-of-need becomes greater, logistics costs are raised and product intervals lengthen.

WT: How big a piece of getting costs out comes from international sourcing?

Mascaritolo: Taking costs out is a constant push. You are never in a position to say, ‘Well, we’re there and it’s done.’ We constantly look at ways to make our deliveries quicker and less costly-it’s everything from going to the low-cost region, getting the best activity out of a supplier, getting your best carrier rates, getting the best mode of transportation, getting it streamlined all the way through the entire supply chain procurement process. And when you’ve done that, you say, ‘We’ve got it to this spot; now let’s try to get it better.’

WT: How does NCR identify and select its international partners?

Mascaritolo: We got through an extensive market search for suppliers capable of meeting our production needs. Our selection is based on a thorough Request of Information (RFI) and Request for Pricing (RFP) process that includes online bidding or reverse auctions. Because we are dealing internationally, we also go through a Total Cost of Ownership process to incorporate such supply chain costs as taxes and duties, customs fees and even warehousing.

WT: Doesn’t everybody cover that range?

Mascaritolo: No. I find in talking with colleagues in the industry that TCOs are commonly done by only comparing the purchase price of the product from the new source against the price from old source. It’s essential that all logistics cost be included in the study, especially duties and consumption taxes at point of import. A case in point: some electronic products are duty-free based upon various trade agreements between countries, but in place of “free duty,” countries are putting import taxes or consumption tax at levels as high as 30 percent. Your TCO has to recognize things like that.

WT: On total cost of ownership (TCO), did NCR develop its own model, or adapt/adopt one?

Mascaritolo: We adopted one, and modified it to fit our needs. Previously, we had an internal focus on total cost of ownership, but everybody was using a different version of a costing model. We found a model that was focused on the manufacturing side, and then enhanced it by incorporating transportation and logistics, customs clearance and duties to make a much better bundled tool.

WT: Was it difficult to implement TCO internally?

Mascaritolo: Yes, it was hard. It involved breaking into people’s comfort zones. It was hard making sure that everybody followed the right process: ‘here’s the new model; here’s the new template; here’s what everybody has to do…’ Lots of people said, ‘Well, you know, my current model does this…’ and we had to analyze that and say, ‘well, yours does it to a point, but this one does it four or five points later.’

WT: Did the new model show that some costs were much higher than had been thought?

Mascaritolo: That’s a good question. If everybody’s own mind at least, no one thought they were way off. What I found, however, was that not everybody thought beyond the manufacturing process. They were just making a product-cost to product-cost comparison, not realizing that the full cost figures were necessary.

WT: What internal relearning did international sourcing require?

Mascaritolo: The key relearning is to understand the relationship of time and distance. You need to realize that 24-hour delivery is not really 24 hours. People will say: ‘I can get on an airplane and be there in 14 hours.’ That’s true. A person can walk on an airplane and be there in 14 hours, but a box cannot. A box can’t, because of the import-export process that has been injected into the supply chain.

WT: With international sourcing, is it possible to project import taxes, customs charges, etc., accurately over time?

Mascaritolo: If you follow the trade agreements, you find that if an agreement has been in place, then that duty becomes consistent and doesn’t change. Taxes, as well, are pretty consistent in the developed countries. With emerging countries, you find that once a new country joins a trade agreement, something changes-the duty changes or the taxes change. But once it all settles, it stays constant. Generally, if a duty goes away, then the consumption tax changes. Or, if duty increases, the consumption tax drops-well actually, I haven’t really seen one drop yet. But long story short, once these are established they stay consistent.

WT: You mentioned that your TCO model factors in country politics? How do you do that?

Mascaritolo: For one thing, we ask: ‘is this is a friendly country?’ And by that, we mean is it a country that is easy to do business with logistically? If there is a free port, we know we can get into and out; no hassles. There are countries that are hard to do business with: We may be cleared to come out of Port A, but if we want to come out of Port B and then Port C, there may be three different sets of regulations. And then there will be different licenses to apply for and put into place before things can run smoothly.

WT: What, generally, does this require?

Mascaritolo: The fact is: you just have to pay more attention to current world events then you probably did when you were in school. In school, current events were just a project you did every Tuesday. Now, if you open a newspaper and you read something-an earthquake, say-you must immediately ask: what effect is this going to have on my people there? What suppliers do I have there? What business do I have there, going in or going out? So now you become much more sensitive to what is happening in the world, to world events.

WT: That raises the issue of supply chain resilience?

Mascaritolo: Resilience is just another way of saying: ‘What’s the plan if something happens?’ When we had a country-centric model, everything stayed within a given country; whatever happened stayed there and the people solved it there. Now that you are crossing borders problems are not contained within a given country. It has a bigger ripple effect.

WT: So what do you do?

Mascaritolo: We’re constantly thinking of possible disruptions and how we could circumvent them. Someone says: ‘Well, this may be an off-the-wall thought, guys, but what would we do if this happened? Who is our point of contact? How do we get information? If there is a disruption, immediately the plants are impacted. If there is a supply source breakdown: what is the ripple effect? How do we circumvent the problem?’ Asking those questions in advance lets us build our database, so we know how to communicate internally and externally. Ten years ago, you probably never gave it a thought; you reacted to what happened instead of thinking ahead about what could happen.

WT: Focusing down: do you do much sourcing to India?

Mascaritolo: We have facilities and operations in India, yes; and we use it as a source.

WT: How would you assess Indian’s infrastructure for supply chain?

Mascaritolo: India’s infrastructure, logistically, is improving, but limitations remain. India still has a lot of regulatory issues within the country that makes it cumbersome for transportation and logistics. Some individual Indian states charge entry taxes or require permits of entry to be filed before you can even put a shipment in motion. A considerable burden falls on the transportation carriers-as well as the customer-to make sure things are in place before a shipment can go from A to B without incident.

WT: That’s internal to India; what about import and export?

Mascaritolo: With exports, a lot of visual inspections are required before anything leaves the facility. You need to have original signatures on all your shipping documents. You need to have designated governmental agencies witness and sign documentation, so that exporting something requires the coordination of a lot of people.

WT: People often cite the difficulty of getting goods out of Asia, particularly into port at Los Angeles, as the biggest bottleneck in the global supply chain. What’s second to that?

Mascaritolo: What’s second-actually, it might be first-is security. Security is very important, particularly from the point of pickup. For example, when volume leaving China comes into the Port of Los Angeles, you have a massive surge trying to go out of the port and into a rail net that is already at capacity. Things back up. With those delays, your supply chain becomes more exposed, so security is paramount throughout the process.

WT: Protecting your shipments is half the task; what about validating your shipments?

Mascaritolo: Yes. You as a shipper are responsible for everything from C-TPAT to Homeland Security concerns. Eventually, every country is going to have some sort of C-TPAT equivalent and that will add another level of complexity. We’re hoping there will be some level of consistency; that other countries will copy what the U.S. has done. But if you have fifty countries saying: ‘here are my individual requirements,’ then you have fifty different platforms.

WT: How do you balance cost savings v. time-to-market?

Mascaritolo: That’s a good question, and one that is ongoing within the industry. At NCR, we measure our costs through scorecards from all our origin shipping locations. Sometimes, time-to-market outweighs the cost savings of using a slower mode of transport, like ground or surface. The mix of modes is reflected in our scorecards and we watch the cost per pound. At the end of the day, we still have to meet our cost-savings initiatives.

WT: What has surprised you in implementing global sourcing?

Mascaritolo: If I were to pick one surprise, it is that internally people did not realize how important a factor distance would be to the total delivery solution. Globalization causes more touch points and more interfacing with different country customs. International sourcing engages the import/export process which adds time to the delivery process.

WT: What lessons have you learned?

Mascaritolo: One lesson is that you need to do a complete costing analysis by source to know if international sourcing will provide net savings. Don’t just compare new source versus old source purchase price. Sometimes, once you’ve added logistics costs and import/export costs to your analysis, a higher unit price from an in-country supplier may prove to be better than a lower price from an international supplier.

A second lesson: the speed with which companies are ramping up production in low-cost regions is outpacing supply chain infrastructure. Often, we see demand that is more than supply can handle. Cargo capacity remains in shortfall, especially from China. The logistics industry is making huge efforts to close this gap, but for the next few years, the fight for cargo capacity will be every logistician’s concern.

WT: What tasks remain to be accomplished?

Mascaritolo: I need to make sure I have a strong global carrier network that is flexible and cost effective to meet the needs of a new sourcing location. A good logistics network is never completed; it is always evolving to better itself and to be ahead of the demand curve-whatever that demand may be.

Sidebar: An Overseas Pioneer

International sourcing is logical topic for NCR: the Dayton, Ohio-based computer firm has one of the longest overseas histories of any U.S. corporation. Established as National Cash Register in 1884, it promoted the cash register as the essential-indeed, the first-machine of business management. Within a decade, it was selling registers worldwide, with models that counted up the coins in marks, lira, pounds, kronen, francs, gulden and-in British India-rupees. By 1914, NCR had production on the ground in Berlin and one-third of its sales from outside the U.S.

Today, the $6 billion corporation focuses on the markets for ATMs, point-of-sale equipment and data warehousing and customer relationship management software. It remains international-in January, announcing the sale of 5,600 ATMs to four Chinese commercial banks.