Global Trade Management (GTM) Solutions Mitigate Uncertainty

I recently began the update of ARC Advisory Group’s research on the global trade management solutions market. At the outset, it was unclear to me how (or even if) the increased global trade uncertainty would impact the market for GTM solutions. In early 2017 there were two theses as to how the uncertainty from Brexit and Trump’s rhetoric on trade agreements would affect business activity. One view was that increased uncertainty would hinder trade volumes, put terms of agreements in flux, and cause companies to take a wait-and-see approach toward investments in supply chain software. The other view was that the increased uncertainty came in lock-step with increased media coverage, and therefore increased corporate awareness about the potential impact of changes to trade agreements. It is clear from my recent discussions with GTM suppliers that the latter has occurred. The changes, and potential changes, to trade agreements have catapulted trade management to the top of the list of topics addressed in corporate board meetings. This is occurring at the same time that digital technologies, enabled by the internet, are widely viewed as the catalyst for the next step change in productivity improvements. In fact, the World Trade Organization’s World Trade Report 2018 is titled The Future of World Trade: How Digital Technologies Are Transforming Global Commerce. GTM solutions reside at the nexus of these two trends. These factors have provided GTM solutions with greater consideration by C-level executives than possibly any time in the past.

Short-Term Savings Can’t Wait

It makes sense in retrospect. Multinational companies have made investment and operational decisions to sustain their competitive positions. Proactive organizations are going to evaluate the potential impact of tariff changes on their cost structure and evaluate numerous scenarios to minimize this impact. GTM solutions provide the structured information necessary for contingency planning to evaluate the numerous alternatives available such as increasing output to capture currently available preferential treatment before it expires, the use of foreign trade zones, or even the establishment of alternative supplier and production arrangements.

Digitization Is A Long-Term Investment

Digitization of global commerce is a secular trend that is likely to play out over a number of years as organizations gradually adopt the technologies and practice that will provide the next level of productivity improvements and incremental efficiencies to their operations. Admittedly, I was skeptical of the increase use of the “digitization” buzzword. And it is likely that the term is being overused. However, I do believe that incremental improvements are occurring on a widespread basis that are substantial in aggregate. In fact, I see similarities to the macroeconomic viewpoint that improvements in inventory management practices enabled by IT advances in the 1980s and 1990s have reduced the fluctuation in inventories and in turn stabilized economic growth and reduced the frequency of recessions.

Final Word

Although my research on the worldwide GTM market has just begun, it appears that 2017 and 2018 year-to-date have been strong years for GTM providers. The geopolitical environment has hindered some businesses (think Harley Davidson) but appears to have benefitted the GTM market.

Leave a Reply

Your email address will not be published. Required fields are marked *