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.