Challenges to achieveing Global Trade Management excellence
Stanford University professors Warren Hausman and Hau Lee and TradeBeam associates Graham Napier and Alex Thompson released, in October 2009, a detailed study on Global Trade Management (GTM) focusing on the complexity of the global trade environment. In the report they detail the >100 processes related to a global transaction and the value proposition for managing the processes efficiently and effectively. The report, “How Enterprises and Trading Partners Gain from Global Trade Management” is chock full or process flows, charts and formula that provide extensive insight into what is actually required to affect a global trade transaction. For any practitioner or student aspiring to excellence in the area of GTM, this document is a must read .
Their conclusions as to the benefits – translated into % savings in annual costs and % increases in annual profits for both importers and exporters – should be enough to make any senior executive involved in Global Trade Management take note, if not immediate action.
- Dollar savings amounting to 1.7% in Annual Sales for Exporters
- Dollar savings amounting to 0.6% in Annual Sales for Importers
- Benefits amounting to 28% increase in Annual Profit for Exporters (assuming profit = 6% of sales)
- Benefits amounting to 10% increase in Annual Profit for Importers (assuming profit = 6% of sales)
The downside of mismanaged global trade management exposes a company to direct costs (such as fines for non-compliance), and hidden costs (such as greater inventory safety stock, increased product obsolescence, lower productivity, higher customs fees, lost opportunity for duty-drawbacks and supplier/logistics claims.
To achieve the annual savings and benefits, requires IT-enabled solutions that streamline the processes required to execute complex, simultaneous global trade transaction. To streamline the import and export processes requires two (2) vital capabilities:
- The ability to seamlessly integrate processes across the internal organization and external partners, and
- The ability to seamlessly synchronize information between the required actors so that they can efficiently execute their work and insure that shipments move effectively through the multiple processes.
The challenge in optimizing the global trade management environment is primarily that of streamlining complex processes. With the myriad of cross-functional and cross-company interactions necessary to execute GTM streamling processes is virtually impossible without enterprise IT-eneabled GTM support. IT-enabled GTM support will enhance organizational effectiveness and efficiency by enabling:
- operators to execute their work efficiently with minimal reliance on outside resources for their supporting information (streamline process)
- partners to share critical information collaboratively in (near) real time – suppliers, customers, 3rd party logistics providers, warehouses, customs, and financial institutions
- seamless information sharing across internal silos,
- total visibility of product and financial transactions across the entire global supply chain,
- full total cost control,
- comprehensive compliance management – regulatory and business,
- user centric analytics and reports, and
- real-time collaborative capabilities.
Global Trade Management is a relatively new discipline. Over the passed several years several “GTM” solutions have matured and are deployed as a Software as a Service (SaaS) offering. However, these GTM solutions while supporting some GTM functionality, and in some instances extended GTM functionality, all are still somewhat specialized in their offerings and are dependent on larger ERP systems for the core business processes. In order to achieve GTM excellence requires an enterprise-wide approach. However, even with the interfacing of the current SaaS GTM offerings most of the ERP solutions do not have the robust functionality required to provide a comprehensive solution. The journey is most often difficult and costly and the results deliver less than promised or expected.
Because of the unique orientation of enterprise Global Trade Management, there are still very few IT-enabled solutions that provide ture enterprise capability. The enterprise level GTM solutions are provided mostly by small and mid-size solutions providers and not the large GTM “best of breed” or enterprise solutions. This simple reality presents the most fundamental challenge to a company achieving GTM excellence – dealing with a small or mid-size enterprise-capable GTM solution provider.