Globalization has lost its novelty. For most goods-driven enterprises it has become a matter of fact, just to stay in the game. However, the level of complexity that doing business globally entails can be daunting for professionals in charge of overseeing the supply chain—especially when the business needs to be nimble to keep ahead. Nimble can be painfully complex, but it doesn’t have to be difficult. That’s where global trade management (GTM) comes in.
In this post I’ll discuss the major pain points of global trading and how they affect your operations. Then I’ll review the key features that GTM solutions offer specifically to overcome these hurdles and present some of the main players in the field.
From my experience, I’ve identified five main logistical pain points that large distributors and manufacturers commonly encounter when they undertake international trade:
- Supply chain visibility: Managing a complex network of partners, including suppliers, carriers, customs brokers, financial institutions, and other third parties, requires a high level of organization and detailed execution. You are required to coordinate and oversee each step of the trade process—ordering material, possible consolidation, brokering transportation, preparing the required documentation, negotiating letters of credit, and the list goes on. While working with a few overseas purchase orders is manageable, larger numbers of transactions put an exponential strain on your resources as more variables are involved in adjusting activities related to inventory, work in progress (WIP), in-transit management, warehousing, and cash flow. And the pressure is exacerbated in just-in-time environments where margins for errors are very limited and costly.
- Costing: It’s a significant challenge to control cost fluctuations beyond the purchase price. Too often, despite the contracts in place, prices meet with variances (due to, e.g., demurrage, missed pickup, overnight storage with insurance at the dock, etc.) that must afterwards be contested or absorbed. Either your staff takes the time to sort out the discrepancies, or you leave it alone and pay higher prices. In both cases, you will have undercut your profit margins. And that’s before factoring in any claims from your customers in the event that you can’t deliver on time.
- Trade regulations: The level of complexity in managing trade regulations depends primarily on the countries you transact with and your type of industry. With each new destination and industry added to your portfolio, new regulations and compliance requirements (e.g., restricted party list, item-specific trade data, and Customs-Trade Partnership Against Terrorism [C-TPAT] regulations) will have to be incorporated into your processes and maintained up to date. Inefficiencies mean delays or possible refusal at the border, which can only result in extra time and cost.
- Product classification: Determining the right harmonized system code (HS code) requires precision and experience with product categorization standards as, in some instances, it defines whether or not the product can enter or leave a country. While manageable for companies dealing with just a few types of products, this task can become cumbersome if you are dealing with several varied categories of goods. Additionally, a wrong categorization can instigate multiple problems, depending on the nature of the item, such as additional audits, fines, the product being held at customs, and retroactive duties.
- Document management: International trade means that you need to manage a significant number of documents—easily 5 to 10 different documents per shipment. Each of those documents must be exact in order to gain approval by customs brokers, government agencies, carriers, banks, customers, etc. Poor paperwork, from you or your supplier, can mean significant delays for your organization—losing a loading rotation due to poor documentation can cost you more than a few days.
This list is not exhaustive. You may also encounter difficulties with, for example, the management of empty containers, advance shipping notices (ASNs), and other points the mismanagement of which will have an impact on your specific business activities. However, manufacturers should focus on addressing the five fundamental challenges I’ve outlined above before concerning themselves with ancillary issues.
Global Trade Management
While you may have incorporated other collaboration tools within your organization, such as project portfolio management (PPM) or product lifecycle management (PLM), GTM solutions should grab your attention if your business has heavy international dealings.
- Event management and dashboards: Operationally, mature GTM solutions will give you more effective and actionable visibility into the movement of your goods and often into order status by means of dashboards and event management. While important for all businesses, this applies particularly to just-in-time environments, where each shipment needs to be heavily synchronized with your operations. Distributors can leverage this visibility to effect cross-docking changes with far more ease. And lastly, it plays a significant role in helping you rationalize your inventory buffer by removing a layer of uncertainty from an extended supply chain.
- Transaction management: Regarding financial aspects, GTM solutions allow visibility into and management of all applicable charges from all parties involved in a specific transaction. Invoices can also be posted and paid directly through the platform. But most importantly, you can get an aggregate landed cost for your goods in a significantly more streamlined manner, allowing you to quickly evaluate the end-sale margins for your products. Additionally, you will find solutions that support letter of credit processes or facilitate access to international financing at the export level (production at the supplier) or at the import level (buyer).
- Embedded trade regulations and HS code support: A good number of GTM solutions offer embedded trade regulations (e.g., restricted party lists, restricted materials, anti-boycott laws, free trade agreements, etc.) and HS code support (i.e., guided product classification) to prevent common entry errors and offer transactional validation. These databases are kept up to date primarily by the solution vendor, removing the burden from your shoulders. Keep in mind that not all countries are listed within a solution, even if not part of a restricted party list; the focus is on the more open trade nations, limiting the amount of data to be kept properly up to date. However, you often have the option to add regulations if needed.
- Collaborative platform: GTM solutions offer a unique collaborative platform, Web-accessible by all involved parties, including your carriers, customs brokers, suppliers, customers, banks, and, if required, government agencies. The strongest advantage of this type of platform is its centralized repository of information available to all parties according to their respective access levels. All your documentation can be filed here, whether created using customizable templates or scanned from paper documents (with the purpose of preventing the manual keying of information as much as possible). Another benefit is how easily you can make the necessary corrections should a mistake be spotted and how much time you save in alerting all concerned parties through an integrated communication platform.
Considering the scope of knowledge required to build a GTM solution, the number of players in the GTM sphere is more limited than what you would find for enterprise resource planning (ERP). Here are a few vendors with strong support for a mix of GTM capabilities.
- Blinco offers 3rdwave global commerce management (GCM) solutions, currently delivered on a hosted or licensed model. However, a SaaS version geared toward medium-size companies will be available by the end of 2011. This solution supports the full letter of credit and fund availability processes. Of note, this solution is also offered for multiple verticals, such as the food, fashion, retail, and distribution, to name a few.
- GT Nexus has a solution built around a cloud infrastructure, which was extended to build a community of business partners including logistics providers, financial institutions, and trading partners in order to leverage collaboration. This solution supports an open account approach for the financial aspect of GTM.
- Management Dynamics offers a solution strong in trade management and regulation compliance and supported by a dynamic knowledge base. However, it does not provide support for financial functions such as letters of credit or open account—these must be handled separately. The solution is offered in a hosted or licensed version. This vendor serves several verticals, including apparel, retail, high tech, manufacturing, logistics providers, and consumer goods.
- Oracle made Oracle Global Trade Management (GTM) available in January 2010, but it is a relatively evolved solution in terms of the regulation and compliance aspects of GTM. However, financial functionality is not embedded as with many other solutions, and workflow must be modified to accommodate it. This is a standalone solution, but it comes ready to integrate with Oracle’s e-Business suite.
- Tradebeam offers its solution as software as a service (SaaS). It supports substantial trade data from a large number of countries. The solution also features inventory collaboration, so your suppliers can keep track of your on-hand inventory and forecasts, which helps push just-in-time synchronization further. This solution offers support for letters of credit and open account management for both the exporter and importer.
While SaaS is no longer novel, it has yet to take solid hold in the GTM sphere; hosted and licensed delivery models remain the main options. However, considering the level of flexibility that SaaS can offer businesses for managing their supply chain, do expect more players to embrace it.
The End Game
There is no question that businesses that do international trade would benefit from leveraging collaborative GTM solutions of this caliber. With GTM solutions being offered on demand, scalability is no longer the sole privilege of large businesses.
Despite offering a centralized platform, collaborative capabilities are only as good as your business partners and do not guarantee a perfect sail every time. However, with the added visibility that a solid GTM solution gives you, you can respond far more quickly to any issues that arise, which plays an important role in mitigating extra cost and averting operational planning disasters.