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Why Do So Many Seem Averse to Employing GTM Technology Today?
Wayne Slossberg, QuestaWeb Inc., July 08, 2008
Many articles discuss the challenges of global
trade management (GTM). Experts speak to the myriad concerns manufacturers
confront doing business in a global marketplace, not to mention the recurring
topic of the complex supply chains extending thousands of miles beyond U.S.
borders.
The consensus seems to be that it is not easy to be compliant in importing and
exporting activities in this post-9/11 world, yet there are serious
ramifications at every stage of the supply chain for failure to adhere to
complicated regulations that seem to change daily.
There is little doubt that technology has an important role to play in
simplifying complexity by automating many of these tasks, and vendors stand
ready to tout the advantages their applications hold over their competitors’
offerings. Press releases daily extol the roll-out of the latest system
innovations and features. Case studies praise the supply chain efficiencies and
economies achieved through technology implementation. Feature articles highlight
the successes individual firms are achieving with logistics or so-called GTM
systems.
So exactly what type of technology can manage and automate global trade? Should
companies opt to buy it or rent it? What advantages does being Web-based offer,
if any? Is all the information available over the Web free for the taking? How
many pieces of information will need to be bought, and what is the cost of
integrating them all together? Such questions just scratch the surface of those
that can and must be posed by would-be purchasers.
Because GTM means something different to everyone, there is no one answer to any
of these questions. Each can be answered in many different ways, depending on
the perspective of the person asked. If there is one truism that does exist, it
is that few companies today possess a comprehensive Global Trade Management system; most own just
bits and pieces of a total solution. Part of the reason can be traced to the
functionality firms seek to acquire. Some companies want to focus solely on
logistics; others see compliance as the overarching reason to procure a software
solution. Some companies that seek to “see the overall picture” might throw
a supply chain visibility application into the mix. Because most firms start
with one business purpose in mind when they acquire technology — and almost
always expand to another business objective later — corporations should seek to
identify software solutions that offer as many integrated applications and
functions as possible when researching what GTM system to procure.
Yet, amidst all the claims and vendor hype, the real issue about GTM is always
lost. The simple reality is this: The international supply chains of many large
companies are at best only 50 percent automated, according to Aberdeen Group.
For every one firm that has implemented GTM technology solutions—partial or
otherwise—there are hundreds that have not.
This rather surprising fact brings us to the real issue about GTM technology:
Why do so many companies competing in today’s global environment have such an
aversion to investing in GTM technology?
Regardless of size, companies are sourcing, importing and exporting products. It
is the only way to stay competitive in today’s marketplace, according to
National Association of Manufacturers report. It warns that one in three small-
to medium-sized U.S. manufacturers could go out of business entirely unless they
enter the global marketplace.
Many firms, recognizing this fact, are spending thousands of dollars to amass
staffs of import/export professionals and compliance experts. Others have had
these resources in place for years. Regardless of where a company stands along
this continuum, the question remains: What is the point of securing the best
staffs available to oversee trade and compliance functions and then
short-circuit their capability to attain the desired results by not giving them
the technology tools they need to do their job effectively? It is just plain
counterintuitive.
Consider what staff could achieve if they had a GTM system that interfaced with
the company’s ERP system, allowing all the required documentation for
compliance and product movement from sales orders or purchase orders to
commercial invoices to transportation back to the distribution center to be
automatically generated and populated from systems data. Imagine the staff hours
that could be saved! Consider the time spent manually researching the individual
compliance regulations and the documents required by countries; ascertaining
product classifications; determining licensing requirements; updating
denied-parties lists and scanning against them; and much more. Contemplate the
power of a system automatically reconciling purchase orders and commercial
invoices and adjusting trade documentation automatically. Finally, envision a
world where the thousands of business orders your company transacts are managed
automatically and only require human intervention when an exception falls
outside the systems logic. This is what technology brings to the table. The
decision to invest in GTM technology approaches a “no-brainer.” Just ask
firms with GTM in place about the technology’s positive impact on their
bottom-line revenues.
Ask any firm that has undergone a Customs inspection—or a full-blown focused
assessment—if the efficacy of GTM still is not clear to you. There are
thousands of dollars in fines and demurrage costs, chargebacks, handling charges
and attorney fees, not to mention the cost of lost time to market and lost time
on the manufacturing floor.
What reasons do firms offer for their technology aversion? One excuse executives
frequently offer somewhat sheepishly is, “I didn’t know this type of
technology existed.” Software vendors crisscross the country to attend every
industry conference and meeting and display their wares, while every month the
supply chain trades feature articles, case studies and advertisements extolling
logistics and GTM systems’ benefits. How could GTM technology still fall below
executives’ radar?
Another consideration is the due diligence process. The average time to
investigate and select a GTM system is 12 to 24 months. Initially, the process
begins with the information technology staff or chief information officer
who, by virtue of education and experience, understands the value of GTM.
Vendors then find that, after months of dealing with knowledgeable individuals,
upper management enters the procurement cycle for the first time, posing the
proverbial questions, “What is this? Don’t our brokers and freight
forwarders already perform this function for us? We hired a compliance person
last year, can’t he take care of that?” The process to inform begins anew
and often breaks down before the technology is purchased.
If a vendor succeeds in jumping this hurdle and gets all levels of executives on
board, the budget battle becomes the next line of resistance. Even when a vendor
can demonstrate the ability to achieve a return on investment in 12 months’
time or less, there still is no guarantee of corporate approval. The
second-guessing continues, “We just bought this expensive ERP system, and they
said it does GTM too. Why do we need to buy more software?”
Overcome this obstacle and then the need for self-affirmation takes center
stage: “Who else in our business is using this GTM stuff?” No one
wants to be the first on the block to purchase technology. Everyone wants to
follow someone else’s lead, rather than forging their own GTM trail.
The inescapable point that firms seem to be missing is that investment in GTM
technology represents the “last frontier” where companies can recover
bottom-line revenue. The quest for corporate economies started years ago on the
production floor with technology designed to increase productivity and
efficiency. The focus then shifted to the warehouse and efforts to decrease
inventory levels and promote timely distribution with WMS. More recently, ERP,
PLM and CRM moved to the forefront. Today, the landscape has changed again.
Firms are global, and they must harness technology to control their import and
export business practices. The technology offerings are diverse and numerous.
Regardless of vendor chosen, benefits will accrue.
For companies that embrace GTM solutions in their business model, the result
will be greater flow and visibility across their supply chain. What methods or
services work and which ones do not will be obvious immediately. GTM will
provide a wealth of sourcing information, giving firms the ability to calculate
landed costs to within pennies in most instances. GTM will illuminate special
programs in foreign countries that can lower costs to market—opportunities
that even the most informed companies might miss due to trade’s dynamic
nature. GTM will maintain all the documentation needed to undergo focused
assessments in-house, verify compliance, reconcile purchase orders and
commercial invoices and manage letters of credit and other instruments in the
finance arena automatically. GTM will allow businesses to move products through
Customs quicker—with fewer inspections, fines and headaches—and much, much
more. GTM will free talented staff from mundane, labor-intensive tasks and allow
them to channel their talents in more creative pursuits that enable the firm to
maintain its competitive edge. Best of all, GTM will increase corporate profit
centers.
Controlling trade from the beginning is the next step, and GTM technology is the
best way to do it. Unanticipated gains will accrue to those who overcome their
aversion to GTM technology. Firms who leverage its use to their advantage and
reexamine their business processes in light of it will be the winners in global
trade.
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