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Op-Ed: Evolution of the Supply Chain Solution: Global Trade Management in 2016

Supply chains, and the tools for managing them, have evolved over at least the last 100 years. Following the great industrial age, the initial focus was to improve the relatively simple, but very labor-intensive processes. Today, supply chain engineering through technology and processes allows manufacturers to manage extraordinarily complex international networks.

Logistics innovation in the 1940s and ’50s turned to the improvement of material handling methods and equipment such as pallets, lifts, containers and vehicles to handle the transportation of products in bigger quantities. And, as globalization became more mainstream the industry required a means to ship goods en masse to be more cost effective. By the 1960s, rapid freight movement for time-sensitive products emerged, along with the first hints at automation through computer systems. The manually-intensive processes of earlier days became automated by the mid-1970s and ’80s with the introduction of behemoth computer systems.

The 1980s marked the beginning of a metamorphosis in the history of supply chain management. The emergence of personal computers in the early ’80s provided greater digital access to planners and a new graphical environment for planning. This spawned a flood of new technology like flexible spreadsheets and map-based interfaces, which enabled improvements in logistics planning and execution technology. Logistics management began to get tremendous recognition in the industry as being very expensive, very important and very complex.

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Recognition of the term “supply chain” was primarily a result of the globalization of manufacturing since the mid-1980s, particularly the growth of manufacturing in China. The birth of Global Trade Management (GTM) was established soon after in the early ’90s as a result of the monumental changes to procurement, production and shipment in new and diverse regions. Companies doing business needed to improve their efficiency, minimize risk and ensure on-time delivery as much as possible.

The scope and capabilities of GTM solutions have evolved significantly over the past two decades, from simple desktop applications focused on generating and printing export documents to cloud-based, enterprise-class solutions focused on a broad spectrum of import and export processes.

The latest definition of GTM solutions includes functionality to streamline and automate processes related to global logistics, inventory management, international customs and regulatory compliance, and preferential trade qualification. By doing so, GTM solutions facilitate the flow of information, money and goods in global supply chains that include buyers, sellers and intermediaries like customs agencies, banks and freight forwarders.

GTM functionality can be divided into two different categories:

  • Regulatory trade compliance: This includes the functionality for product classification, trade documentation and filings with government agencies regarding trade regulations, duties and tariffs, ensuring compliance with import and export controls, screening for restricted parties, calculating total landed cost and qualifying for duty minimization programs such as free trade agreements and foreign trade-zones.
  • International supply chain execution and visibility: Software and content to facilitate the execution of cross-border shipping and transportation, along with the capabilities to gain visibility into international trading partner processes and events, which involve transactions and agreements between commercial trade partners.

Global trade – Always changing and more complex

Defining GTM is only the first step, learning to manage the level of complexity and its continual growth requires the implementation of tools and processes. The intricacy of doing business globally is compounded by many factors and automating global trade requires managing numerous combinations of functional requirements across a trading partner network, with each partner potentially using varied enterprise software.

In 2016 and looking ahead, the following trends will have a dramatic effect on global trade.

  • Trans-Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (T-TIP), and the Proliferation of Free Trade Agreements: TPP is a proposed regional regulatory and investment treaty that would link 40 percent of the world’s economy. Twelve countries throughout the Asia-Pacific region have participated in negotiations on the TPP. These twelve countries are in the final stages of negotiating the TPP, which, if ratified, would be the largest free-trade agreement in history.

The Transatlantic Trade and Investment Partnership (T-TIP) is an ambitious, comprehensive, and high-standard trade and investment agreement being negotiated between the United States and the European Union (EU), the two largest economies in the world.

Besides these compacts, governments are entering into a myriad of multilateral free trade agreements to promote trade. There are more than 500 free and preferential trade agreements around the globe, each presenting a myriad of rules that governments modify continuously.

Complying with the requirements of each, any or all of these agreements, without automation, will be difficult, expensive and carry high risk.

  • Increasing border security and surveillance. As a reaction to growing terrorism around the world, additional border security regulations that affect global trade are commonplace in every major shipping port and crossing. These additional security and automation requirements are driving additional demand for GTM automation, specialized training and enforcement practices, and content to keep shippers advised of high risk areas and people.
  • Increasing government regulation. Government regulatory agencies have also issued additional regulations aimed at protecting its citizens. These laws have spurred economic growth, and are boosting government revenues from duties and taxes. Customs agencies around the world supervise cross-border trade by enforcing them. Of course, these laws governing global trade are numerous, highly complex and ever-changing.
  • CBP’s “Single Window.” As compared to domestic distribution management, global trade management introduces the complexities of multiple languages, time zones, currencies, and modes of transport. However, the U.S. Customs and Border Protection (CBP), aims to improve the movement of imports and exports into and out of the United States. In December 2016, the Automated Commercial Environment (ACE) will become the “single window” – the primary system through which the trade community will report imports and exports. This new system will improve the collecting, sharing, and processing of data submitted to CBP, and to 47 other U.S. government agencies that have jurisdictional approval for goods to enter the country. These new enhancements will also facilitate improved cargo security. The European Union and other countries are considering similar programs.

With this new portal, manual processes will be streamlined and automated, paper will be eliminated, and the international trade community will be able to more easily and efficiently comply with US laws and regulations.

As the benefits of GTM are becoming more recognized, more companies are initiating GTM projects. Executives are becoming more familiar with GTM and are realizing the positive impact it can have on cycle times and bottom lines.

Increased customs and compliance audits are forcing companies to establish controlled processes within the organization by implementing global customs and compliance solutions.

Multinational companies are requiring a scalable GTM solution which is fully integrated with sales, supply chain, HR and finance to reduce the high cost of heavily customized and locally optimized trade solutions that do not support real-time processes. Growth in non-traditional GTM industries, such as banking and insurance, is also anticipated to drive increased revenues for global trade solutions through enriched partner screening capabilities.

Recent analyst studies indicate that global trade management—as a holistic process far greater than domestic transportation or supply chain management alone—carries greater complexity. The current and future trends show new challenges are difficult to overcome without a GTM platform that combines sourcing and logistics operations, coupled with up-to-the-minute regulatory content that connects each supply chain party.

Many companies are now reevaluating their end-to-end processes. The synergies between traditional GTM and these newer areas are clear, as leaders work to fully integrate these new platforms, many of which rely heavily on cloud-based deployments.

Turn-by turn, and link-by-link in every supply chain can lead to potential risk. Supply chain leaders know they need to automate their processes, align their teams and unify and share the data across the enterprise in order to remain competitive.

By Gary Barraco, director of global product marketing, Amber Road