EAST RUTHERFORD, N.J.--In its September 2013 research report “Managing Global Trade, Rising Importance but Lagging Execution”, SCM World, global community of senior supply chain professionals representing over 150 companies, partnered with RaptureWorld Ltd. to look at global trade management and the growing complexity of cross-border trade.
Amber Road sponsored the research and provided insights.
The report found that where globalization once meant low-cost country sourcing, “today it is clear that goods must move in all directions at once – east to west, north to south, rich country to poor country and back again.”
“Movement of product, whether as raw material input, finished goods or capital equipment, requires an approach to global trade management that is ever vigilant to regulations, taxes, transportation costs and more and one that is equally capable of facilitating inbound supply and outbound delivery to end customer markets,” it concluded.
The report, based on a survey to the SCM World community, suggested global trade management “has begun to outgrow most companies’ largely manual processes.”
Statistics about the companies surveyed reveal that global trade management is on the increase.
Three-quarters conduct trade across more than 10 countries, with almost half (48%) trading across more than 50 countries.
Over 41% of the companies surveyed import more than half of their products from international suppliers. More than 97% of respondents said that product cost savings are either “important” or “very important” business drivers of international sourcing.
More than a third (35%) of the companies realized more than half of their sales from customers located in foreign markets. Further, over the next five years, two-thirds expect their total share of international sales to grow by more than 10%, while more than a quarter (28%) expect growth of more than 25%.
But an inability to control global transportation costs and the lack of visibility of global shipments moving through the global supply chain are among their top 5 business challenges for almost half (48%) of respondents.
Over three-quarters (80%) agree that shipments delayed by customs or experiencing customs problems are impacting customer service in a material way, and nearly 90% say the same about unpredictable lead times on international shipments.
Over half (58%) agree that their inability to take advantage of preferential duty programmes or free trade agreements is costing them a material amount today and unless corrected will only increase.
More than 57% of respondents, meanwhile, agree that complying with global trade regulations is one of the top concerns they face as a global business.
And only 12% of respondents indicate that their collaborative execution with extended global trading partners is fully automated, while less than 4% of respondents say their import compliance is fully automated, said the survey.
“Among the most important overarching conclusions of this research is that loosely connected, ad hoc and manual processes and systems will almost certainly be inadequate as supply chains continue to expand their web of global trade. Anecdotal evidence from our interviewees confirmed repeatedly that visibility to and preparedness for changes in the rules and costs governing global trade will be vital as companies seek to expand sales in new growth markets and source more widely,” said the report.
Global trade, the report concluded, is a critical part of most companies’ business and supply chain strategies. It represents a way to grow profits and business value in terms of finding lower cost sources of product and new revenue markets.
But the challenges associated with managing these large networks affect costs and the ability to compete for new customers in new markets. Report data showed that despite the rewards of getting global trade right and the costs of getting it wrong, “most supply chains have yet to crack the problem systematically.”
The way companies handle trade management processes has a long way to go too, the report concluded.
Currently it’s managed through “some combination of manual work in spreadsheets, clunky homegrown systems and arm’s length relationships with third-party partners. For a key business problem whose main feature is unpredictable and often politically driven rule changes, such disconnected systems are sure to fail,” said the report.
The problem should be broken down into classic supply chain visibility problems and other issues that are about compliance.
“For visibility issues, the holy grail is some kind of ‘control tower’ type system capable of tracking shipments, orders, change notices, forecasts and any other supply/demand balancing information for all to see. The notion of collaborative execution2 offers big gains in efficiency and faster cycles of improvement,” said the report.
When it comes to compliance, it’s about keeping ahead of rules.
“Given that many companies participating in this research do business in dozens of countries, and that many of the most important for future growth are immature politically, it is nigh on impossible to get everything right every time. Specialists whose business includes constant updating of relevant rules may offer a subscription-based answer to this problem,” the report said.
Success in global trade management depends on getting visibility and compliance right. Where compliance is not up to date and accurate, there will still be money wasted, said the report.