GTM Archives

Taking Bytes of Logistics

Global Trade | By Gary M. Barraco • 05/18/2017

Modern logistics is data-driven, and this concept is becoming essential to success in 2017. Take a look at the increasing geographic, political and price barriers to shipping in different parts of the world and the U.S., and you will notice an increased data-collecting presence

For manufacturers, this means having more detailed, accurate forecasting models ready in real time. Consequently, for shippers the task of tracking product and information data across global supply chains, while balancing rising costs with trying to grow revenue, can feel like a death-defying feat. And it’s not getting less anxiety-inducing anytime soon. A logistics team’s ability to push cost-saving strategies while unlocking higher revenues is nearly impossible without some added supply chain investments

As global trade regulations are experiencing major upheavals today — the most obvious in the U.S. but happening elsewhere too — logistics executives are nursing bigger headaches from increasing complexities of navigating the maze of import and export regulations, product restrictions, hidden costs and high shipping fees.

It’s more apparent than ever that traceability is critical at every level of the supply chain. The importance of using technology and deep supply chain data to identify shipments in detail, alert customers, and re-route goods should not be underestimated. Inconsistent data creates obstacles to automation across supply chain processes. Effective supply chains can no longer view these processes as system independent – they are all linked by common data.

So how does a company accomplish this today? As big data continues to grow in importance, 3PLs and shippers must leverage the data they already have to drive more insights and improve supply chain visibility. There are some steps logistic networks can implement to take advantage of their data to facilitate better, timely visibility and collaboration across the supply chain.

Logistics Networks: Only as Good as the Data

Gone are the days of managing separate teams for each aspect of the supply chain and the reams of paper too, as global trade management (GTM) software makes deeper inroads with global companies of all sizes. While embracing GTM can create more resiliency, responsiveness and better control of a logistics network, a completely integrated ecosystem for better logistics visibility requires proper data.

The key to ensuring good data is to better automate with technology in the following areas:

Clearly define data requirements — The traditional tasks of simply managing conveyance level information and billing data are gone. Today, they should be replaced by gathering data from multiple sources and essential events that are most consistent and timely.
Ensure proper data certification — Develop a logistics network project flow of data certification across all aspects of logistics from POs to shipments to classification and packaging data to develop data consistency.
Monitor data in production — Even certified data must be monitored post go-live, so set up initial data quality reports and then monitor the system for syntactical errors, then work with trading partners through to resolution. Regularly review reports using application tools to analyze data quality concerns, advise trading partners of any issues, and review data quality concerns/metrics.
Capture and communicate metrics — Set up message latency and log notice alerts along with data quality portlets and scheduled reports. Then regularly run standard data quality reports to watch for and address undesired trends, including tracking issues with inconsistency or latency.

Bigger, Better Bytes

To automate logistics to the highest levels requires information and data that is not always contained in an ERP system; consider seeking a third-party service that can provide reliable trade content from government agencies and transportation providers. These third-party vendors can collect a library containing millions of records and transform that information into the language of global trade to answer questions and speed up automation.

There are several ways that GTM software solutions can support better data for an effective logistics network:

Product catalog management for a superior online shopping experience
Proper classification of goods based on descriptions from the product catalog, the country of export, and each consumer’s desired country of import in real-time for cross-border orders
Accurate landed costs calculation and total cost calculations that include taxes and duties, to prevent underbilling or surprise customs bills for the consumer at the point of sale
Comprehensive database of global trade regulations; including restricted party screening and prohibited goods
Instant shipping updates for the shipper and consumer combined with real-time shipment tracking
Documentation requirements for any regulatory agencies that have jurisdiction over the product throughout the export and import process, including Certificates of Origin and/or Certificates of Compliance to prove traceability

Improving efficiency throughout the supply chain requires total visibility in these areas, and managing them manually is a non-starter in today’s fast-paced world. GTM software that can instantly determine the appropriate product classification is essential, as supply chain operators point to an increased need to accelerate time to market, eliminate waste and errors, and reduce operational and product costs. All of this must be delivered with lower prices to attract and keep consumers with waning brand loyalty.

2017 will not be a bed of roses for logistics providers, nor will the coming year be filled with thorns in the sides of major supply chain entities. By understanding how the industry will evolve throughout 2017, you can prepare your organization for the challenges and opportunities to come.

Gary Barraco, Director of Global Product Marketing, is responsible for developing strategic product marketing direction and presenting the Amber Road brand and solutions worldwide. As the platform evangelist, Gary develops and launches customer insights, go-to-market plans, product messaging and content, and field marketing tactics which establish Amber Road’s solutions as a standard in the Global Trade Management space. Previously, Gary was VP, Industry Development for ecVision for 9 years prior to its acquisition by Amber Road. He has 20 years of active military service where his primary specialty was providing marketing support to Army National Guard recruiting and retention operations in New Jersey. Gary received a BS from the State University of New York and is currently pursuing a Master’s degree at Moravian College.

Global Trade Management in Today’s Contentious Political Environment

Global Trade | By Clint Reiser • 05/10/2017

The political environment and public policy decisions are central determinants of global trade patterns. But political risk seems especially heightened in today’s international business environment. From the Brexit vote, to Trump’s trade renegotiation rhetoric, to Marine Le Pen’s promise of intelligent protectionism, there has been an undeniable trend of political intent to reexamine trade policies and free trade agreements.

I am in the process of updating ARC’s Global Trade Management (GTM) market study and have engaged in several discussions about today’s political environment and its impact on global trade and GTM solutions. Of course, political rhetoric accounts for much of what has already occurred. But the recent election results in the UK and US reinforce the view that substantive change may be forthcoming. And the political rhetoric also seems to have a way of feeding on itself. Executives understand that public policy, especially trade policy, can have substantial impact on their supply chains. Although existing trade policies have not yet changed from these political events, corporate executives want to be informed about the impact potential changes will have on their business, and prepared to quickly adapt their supply chains to function optimally in the new trade environment. From my discussions with GTM suppliers, I see corporations focusing their preparations on two main areas, namely:

External Corporate Environment: The specific political changes and the potential trade impact of these changes on the supply chain.

Internal Corporate Environment: The company’s internal processes and its ability to adjust to the changing trade environment.

External Corporate Environment

The proliferation of free trade agreements over the last couple decades has increased the degree to which preferential treatment of certain goods has shaped supply chains. Ty Bordner of Amber Road puts the number of trade agreements currently in effect across the world at about 600. And the effect of these agreements on supply chain decisions should not be overlooked, as duties and tariffs are substantial enough to redirect sourcing and even production decisions. Rainer Roll of MIC Customs Solutions explained a case to me where a manufacturer estimated that roughly half the cost of a production facility upgrade was going to be financed by duties savings made possible by a free trade agreement. In fact, many companies incorporate duties and tax costs right down through the bill of materials when analyzing various production and sourcing decisions. And it’s not just the GTM vendors stating the relevance of duties in strategic decision making. Toby Brzoznowski of Llamasoft, a leading provider and supply chain design solutions, confirmed in his post Leveraging Supply Chain Design to Thrive in Uncertain Times that taxes and duties are critical inputs into supply chain network design by impacting overall costs, sourcing decisions and manufacturing strategies.

In contrast, the more recent political environment has created uncertainty about existing trade policies, especially free trade agreements. Voters in many nations believe that trade agreements are detrimental to their economic well-being. They often focus on the displacement of a subset of workers, rather than the widespread efficiencies brought about from increased competition and specialization. Linda McKee from SAP’s Global Trade Services team told me that the sudden change in public perception about free trade agreements has caused some executives to become more cautious about the long-term stability of the agreements. Long-term stability may not be a prerequisite for transactional sourcing decisions, but it is essential for supply chain partnerships and capital investment decisions.

The Brexit vote has occurred, but there is still a lot of uncertainty about the specifics regarding the unwinding of the UK in the European Union (EU), including the terms of trade. Although there is still much uncertainty, companies are beginning to evaluate their exposure to trade agreement changes from UK’s planned withdrawal from the EU. Rainer Roll of MIC Customs Solutions stated that companies are analyzing various scenarios to determine the potential effects on their business, both the risks and opportunities. For example, what are the effects of moving production from continental Europe to the UK to support UK demand – and vice versa, the effect of moving production currently in the UK to continental Europe? Companies are analyzing country of origin information and conducting total landed cost analysis so that they are well informed and ready to act when the trade environment does change. In North America, concerns about changes in NAFTA aren’t as acute, but corporate executives are beginning to ask questions about the potential impacts of changes to NAFTA. Chris Jones of Descartes informed me that corporate boards are looking to understand the cost implications of changes to NAFTA and the feasibility of nearshoring operations that are currently in Mexico or Canada. Similarly, Patrick Maley of BluJay Solutions noted interest in determining what the Trump administration can do through regulation and what changes would need Congressional approval.

My overall takeaway is that companies are mostly evaluating these political scenarios from a risk analysis and contingency planning perspective. However, they are doing so with an eye on being prepared and able to act intelligently, competitively, and quickly once the changes do go into effect.

Internal Corporate Environment

Evaluating internal processes and capabilities is part of what companies are doing to make sure they are prepared to act in an uncertain, fluid environment. Companies are evaluating their ability to analyze the numerous potential scenarios and want to make sure they have the required information to determine the duties and rules associated with country of origin for raw and intermediate materials and the necessary data to conduct a total landed cost analysis. This environment reinforces the need for the data and a structured, systematic way of analyzing the cost drivers and supply chain contingencies if the environment does change. At the same time, companies want to make sure that their GTM software providers can handle upcoming changes. For example, there is concern about the existing UK customs system (CHIEF) being retired and replaced with a new system in tandem with the UK’s withdrawal from the EU. Descartes and SAP both mentioned that companies are concerned about the concurrent system and regulatory changes. But the GTM vendors can easily handle these changes. The concern is more with the fluidity of the rules surrounding imports and exports from the UK and whether there will be sufficient notice before implementation of the new rules and the replacement customs system.

Overall, the global trade environment is expected to become more complex. The UK will have to renegotiate trade terms with countries outside of the EU and with those countries within the EU. The Trump administration is looking to establish numerous bilateral agreements instead of one multilateral agreement with Transpacific nations, and other elections such as last weekend’s election in France provoke additional uncertainty about international trade. GTM vendors believe that the increased complexity is stimulating additional demand for their products, as companies look to more formally manage their planning and execution of international trade and customs compliance.

Global Trade Management Software –Execution, Visibility, Compliance …and that Darn Tax Wedge

Global Trade | By Clint Reiser • 03/29/2017

Global trade and free trade agreements – they’re hot topics today and they are responsible for tectonic shifts in various industries and the economic welfare of many. But they’re also topics that require ongoing management by today’s multinational companies and their trading, logistics, and finance partners. Luckily, there is a software application for that.

A quick primer as I embark on the update to ARC’s Global Trade Management Market Research Study

Trade Compliance

That darn tax wedge. I consider trade tariffs to be a form of taxes, and in this context they can have the same detrimental economic effects on the supply and demand of internationally traded goods. Namely, they increase costs that discourage supply (exports to a given country) and demand (imports by a given country). Not only are tariffs an additional cost imposed on internationally traded goods, but staying compliant with the regulations, duties, and tariffs burdens importers and exporters with additional overhead costs. Global trade management (GTM) software solutions help companies manage trade compliance costs like duties and tariffs, and regulations such as restricted party screening that are overhead costs and pose risks for regulatory fines by government entities. The management of these processes, requirements, and transactions is the role of what ARC categorizes as the Trade Compliance functionality of GTM solutions. Typically, large companies engaged in substantial volumes of international trade will make investments in a GTM solution for trade compliance issues. The tariff and clerical burdens, along with non-compliance risks, are substantial enough to deliver a meaningful ROI from the implementation and use of GTM software. Meanwhile, smaller companies will either adopt a SaaS subscription to the GTM functionality they require, or often they will outsource much of the compliance responsibility to customs brokers or other 3PLs that are set-up to handle import/export processes for clients. And establishing a robust GTM system is a significant part of what the customs brokers do to set-up their trade compliance capabilities. This is a reason why ARC estimates that logistics service providers are such a large market segment for GTM sales (see ARC’s Global Trade Management Market Study).

Trade regulation complexity and tariff and duty burdens are an important contributor to GTM software sales. But there are several additional factors, including trade volume, that contribute to GTM software adoption. An increase in volume leads to an increase in clerical burdens and trade tariffs, all else equal. Increased trade volumes also contribute to demand for GTM solutions that provide what ARC categorizes as International Trade Visibility and Trade Execution functionality.

International Trade Visibility and Execution

International trade is complex and involves multiple parties. The lead times and large number of parties involved from purchase to delivery make these trade flows difficult to monitor and manage. Trade visibility solutions provide geographically dispersed trading partners with the ability to collaborate, monitor, and manage the steps within the procurement, production, and delivery processes and to make timely adjustments that are required to meet their business plans. The software functionality is typically (always?) delivered through a SaaS model and these solutions are often referred to as supply chain networks or global trade platforms. Adoption of these solutions is driven not only by trade volumes, but also by supply chain and product complexity, heterogeneity of materials and parts, and the degree of outsourcing within the supply chain. Event management capabilities that alert interested parties of key events in the supply chain is central to the value offered. These events include production volumes or lot completions, stages of production, delivery status, product location, and payment and billing status. For example, automotive supply chains are heavy users of these solutions due to the heterogeneity and cost of the parts and the complexity of the supply chains. Trade visibility solutions are among the best enterprise software applications for the cloud, as the connectivity delivered and network effect from increasing numbers of users is a primary determinant of the solution’s ability to deliver value. Although most enterprise software markets are experiencing consolidation, I believe that trade visibility solutions are especially well-suited for consolidation because the value of the solution increases with the number of users and degree of standardization.

Standardization is also a desired characteristic of International Trade Execution solutions. INTTRA, backed by a consortium of the largest ocean carriers, is a prime example of a trade execution solution for ocean freight shipping. Similarly, Champ Cargosystems provides an execution platform for the air cargo community. I believe that trade volumes are a primary contributing factor in the changing demand for International Trade Execution systems. These systems are closely linked to transaction volumes and the facilitation of those transactions.

Next on my GTM research to-do list:

Conduct a review and analysis of the WTO trade trends and forecasts and other publicly available information on global trade volumes
Review growth rates of publicly traded GTM software providers
Speak with public and privately-held GTM software providers
Learn about how GTM end-users perceive the relative value of the numerous features and functions offered by GTM solutions and the reasons for their recent buying decisions.

**If your company recently purchased or subscribed to global trade management software, please let me know (creiser@arcweb.com) about the factors that motivated your investment decision. Your input will be used only as context for our analysis of the market.

Can You Rely on Freight Forwarders for Trade Compliance?

Global Trade | By Steve Banker • 09/09/2013

Can you rely on freight forwarders for trade compliance?

To answer that question ARC interviewed trade professionals from 12 shipping companies. All of them agreed that you cannot put your fate into the hands of freight forwarders when it comes to compliance. If goods are misclassified, or if shipments go to restricted parties, the shipper is considered the Importer of Record, not the freight forwarder. And it is the Importer of Record that pays the fines and penalties imposed by a governmental authority. The exception is some Latin American countries where there is joint liability between the shipper and the forwarder. For egregious offenders, those penalties can run into the millions of dollars, as was the case for one of the companies we interviewed.

A director of trade compliance at a High Tech company provided the best explanation of why companies need to retain control. He believed that compliance is not high on the list of what forwarders care about, even though they say it is. The forwarders his company works with care about what percent of goods get delivered in a particular time window, because their pay is linked to that metric. He has seen many shipment declarations that he knew contained multiple products with different classifications, but the forwarder declared just one.

How do shippers that work with freight forwarders retain control? In a posting last month, I wrote about how Leggett & Platt’s GTM solution completely automates the information flowing between suppliers, freight forwarders, customs authorities and various internal departments. All the data elements necessary for an Importer Security Filings (ISFs) automatically propagate into the document without the need for rekeying. The solution is so automated that the company has all the information it needs to do self-filings if it wants. Leggett & Platt, however, still prefers to have freight forwarders as a layer between itself and customs. The forwarders provide a second set of eyes for compliance, and if there is a mistake, they provide local representation with foreign customs agencies. John Wainwright, the Vice President of Customs Compliance at Leggett & Platt, thinks the ability for freight forwarders to provide these services makes them worth the money.

But how do shippers without a GTM system control the process? Hu Huang, Director of International Logistics & Customs Compliance at Kichler Lighting, told me she sends their freight forwarder a CD that lists all their items and HTS codes on a quarterly basis. Therefore, any mistakes made at filing are likely due to Kichler, not its partner. Kichler also sends purchase orders to its forwarder via EDI and those POs have unit prices on them. The forwarder verifies the code, quantity, and shipping windows. Thus, Kichler’s partner serves as an important check in the process.

Another company used a process similar to Kichler’s, except it used a portal. Internal folks classify the products and brokers can access this data by entering SKU data into the compliance database on a portal. The system provides the trade classification for the broker. If a product has not been classified, the brokers can contact the company’s trade people and get a classification. Every few months, the company pulls data out of the broker system and checks trade classification and country of origin data. It puts this data in a pivot table and audits the work. The analysis shows that the partner’s work is 99.7 percent accurate. If there are any problems, the company contacts customs and submits a revision. (Customs compliance ownership belongs to the shipper — i.e., the Importer of the Record. This is a responsibility issue, not an automation or system issue. In any event, Customs only looks for the Importer of Record, not the freight forwarder.)

Some of the shippers interviewed believed they could use freight forwarders to help classify goods and still retain a large degree of control. One shipper retained an internal trade staff, yet used two forwarders to augment their staff. They worked with only the largest and most reputable of brokers; they audited a sample of their broker’s classifications, depending on the product category, either every two weeks or monthly; they engaged in extensive co-training exercises when the forwarders were hired; and they continue to bring the two trade staffs together to examine processes and issues on an annual basis. They described this as a two way street where the company and the forwarders learn from each other. In certain areas, the shipper has become better at compliance by interacting with its partners.

In short, the answer to “Can you rely on freight forwarders for trade compliance?” is no, but the methods used by shippers to retain control are very different.

Leggett & Platt’s Approach to Global Trade Management

Global Trade Management Solutions | By Steve Banker • 08/05/2013

A report from American Shipper shows that trade policy is driven largely by either the supply chain or compliance group. I assumed when I read this that the supply chain folks mentioned would be mostly logistics personnel. However, I had a conversation with John Wainwright, Vice President of Customs Compliance at Leggett & Platt, a company that makes a variety of components used in various industrial and consumer finished products. At Leggett & Platt, trade compliance reports up through procurement, and John makes a compelling case for why this makes sense.

Leggett & Platt bought a Global Trade Management (GTM) system 10 years ago from a software vendor now known as Amber Road. The solution was implemented at the same time as an ERP solution from PeopleSoft (now Oracle). The GTM solution and the ERP were tightly integrated to support an end-to-end international procurement process. The company designed the procure-to-pay process first, then bought and implemented the two systems simultaneously. The end-to-end process for both domestic and international procurement is the same, although customs processes generated by the GTM are, of course, not necessary for domestic procurement.

Leggett & Platt’s process includes developing supplier relationships and managing those suppliers on an ongoing basis. This procure-to-pay process includes: placing purchase orders (POs) with suppliers, having the supplier strictly limited to working within the existing process, and having any substantial changes outside the boundaries of the original PO be implemented only with changes to the actual PO on the procurement side (e.g., “you asked for 1000, we can only make 950 by that due date”). The PO-centric environment internally creates the commercial invoice, as well as various other customs documents. Then the various documents, reports and alerts flow from the system to the appropriate supply chain parties (suppliers, customs brokers, LSPs, the company’s procurement and supply chain planning departments, customs authorities, etc.) as needed at the correct point in time.

This process is designed to dramatically improve data integrity across the extended international supply chain. Data in one document automatically populates other documents without having to be rekeyed. Suppliers access their data through a secure portal. The supplier needs to add relatively little data to the PO screen they are using — the Stock Keeping Unit and terms of purchase are already auto-populated. The supplier just adds that it will ship this number of items on this particular date.

Legget & Platt International Supply Chain Solution

Leggett & Platt’s International Supply Chain Solution
This technology and process creates the essential data elements – importer security filings and routing instructions – that in turn need to be passed on to other key players in the supply chain. This also means that the company has all the information it needs to do self-filings. However, Leggett & Platt still prefers to use customs brokers as an additional compliance resource for its interactions with customs. In the company’s view, freight forwarders/customs brokers provide a second set of eyes for compliance, and if there is a mistake, they provide valuable local representation with foreign customs agencies. The company believes a forwarder’s ability to provide such services make them worth the money, even though compliance control is ultimately Leggett & Platt’s responsibility.

So what were the benefits for Leggett & Platt? Because there is no supplier paperwork –- everything is filled online through a secure portal — the whole process of invoicing and issuing payments is much cleaner and faster, and it is supported by many times fewer people. And, of course, with more accurate data comes Days Payables Outstanding (DPO) reductions. The portal generates the pack list, so the warehouse receiving process is much more accurate.

Further, as the government came out with new regulations for importer security filings (ISFs) and conflict minerals, the company found it easy to comply. For ISF, the only thing Leggett & Platt needed to do was get a correct bill of lading in a timely fashion. For ongoing conflict minerals needs, it already has much of the required data available for its suppliers in place.

Leggett & Platt’s solution has made it a better partner to its suppliers. The company has almost completely eliminated expensive Letters of Credit among suppliers. Letters of Credit are driven by fear of late payments or the need for financing. Because invoicing disputes virtually disappear, suppliers don’t need to worry about late payments. For suppliers that need financing, the visibility provided by this solution makes them a better banking risk and enables Leggett & Platt to help them work with some of its financial partners.

John tells me it is impossible to put an exact payback number on all this. But it is a better and cleaner procurement process, and there is big money in doing procurement better.

In conclusion, the American Shipper article argued that “best practice” would be to have trade compliance reside in the compliance department. Leggett & Platt’s experience shows that there is a very strong argument for having it report up through procurement.

Global Supply Chains a Rarity

Global Trade | By Steve Banker • 07/29/2013

At ARC, we are doing a study on Global Trade Management (GTM) systems. Consequently, I and some of my colleagues have been researching trade. One of the most striking things is how concentrated it is.

The U.S. Census Bureau issued a press release in April with the latest statistics. They identified about 200,000 companies that exported, about 100,000 that imported, and about 85,000 that did both. This compares to about 5.3 million businesses in the U.S. So companies that import and export are a relative rarity.

Out of those trading companies, 2.2 percent had 500 or more employees and they were responsible for two thirds of the export value and 69 percent of the import value! This was even truer among manufacturers. “Large companies dominated manufacturers’ exports, with 3.3 percent of manufacturing exporters (2,453 of 73,861) accounting for 81.1 percent of manufacturing export value ($639 billion of $788 billion).” Our research shows this is true globally, not just in the U.S.

This means that companies with global supply chains are very rare, and that solutions designed to optimize and manage global supply chains apply to a small population of companies. This is even truer when you consider that many of the trading companies reported in U.S. Census data are subsidiaries — Toyota US, Sony US, etc. — rather than the global parent company.

But large companies can have very big problems when it comes to trade. In April, for example, Raytheon Co. agreed to pay $8 million in civil penalties to resolve hundreds of alleged violations of U.S. export control laws.

A couple years ago, I talked to a company that had been fined over $10 million by the U.S. government. By implementing GTM, and thus proving it now had proper controls in place, the company was able to greatly reduce that fine.

Global trade and transportation management solutions provide granular visibility to global supply chains. Better visibility and event management equates to a leaner supply chain with a higher number of inventory turns. This end-to-end visibility can also lead to reduced trade finance costs. Banks are more willing to offer lower cost alternatives to Letters of Credit when dependable visibility is in place. And the solutions are necessary for an accurate calculation of Total Landed Costs.

A complete analysis of logistics trends, technologies, and services