10 Ways to Reduce the Cost and Risk of Global Trade Management
In today’s uncertain times, one thing remains certain: There will always be changing global trade rules and technologies. The following are 10 of the top ways we believe companies can ensure they are being as efficient, safe and cost-conscious as possible in the short run while building a sound infrastructure for future needs.
With the goals to reduce cost and risk in the supply chain, automation and working closely with partners are the two most practical areas of opportunity.
1. Companies must validate more things.
Effective trade screening is not just about denied parties but also denied goods and territories. With 80-plus denied trade lists already published, more items and checks need to be included in the validation process. Plus, more country-specific rules are being applied. For many companies, effective screening using manual processes is often not possible. What takes several minutes per item can be reduced to a few seconds using appropriate trade screening software. It assures that the products have been properly screened and provides a best effort record that the company did what was expected to ensure the safety and compliance of its products. Using such automation software also frees up supply chain personnel to do more revenue-producing work.
2. Importers and exporters have more direct accountability.
With fees increasing and more policing occurring, importers and exporters are subject to massive penalties for noncompliance. Penalties can be substantial — in one recent case, a Singapore-based importer was subjected to a $25 million in fines. These fines, in effect, could put some smaller companies out of business, even if it was seemingly accidental noncompliance. In addition, personal civil penalties and jail time for individuals can be imposed for their participation (or lack thereof). Therefore, most companies cannot afford to be unaware of their trade compliance responsibility or of the specific activities conducted on their behalf by service providers and forwarders. The trading company must have knowledge and records of what has been done to their goods at all times.
3. Electronic submission is required.
With Importer Security Filing — “10+2” — now in effect in the U.S., companies must be prepared to deliver Customs paperwork electronically. There is no paper filing option for this new regulation. Not just a means of expediting trade across borders, electronic filing is now a requirement for the efficient reporting and archiving of all trade transactions, including third-party ones. This extends to the company and its service providers. Even if companies are using third-party forwarders or other organizations to assist in trade paperwork, the importer must have and maintain documentation to defend any future potential compliance claims. Transmitting and warehousing paper is costly, time-consuming and environmentally unfriendly. The need to automate compliance processes is urgent.
4. Savings opportunities can be realized by having proactive plans.
If your company imports or exports perishable products, you already appreciate the importance of knowing expedited clearance. With profit margins shrinking for all goods and with increased global competition, vendors of any type of product want their goods to be transported as efficiently as possible. To do this, a strategic and tactical plan for trade management helps to identify potential bottlenecks, issues and fees. Finding the best sourcing option can save companies significant time and money. For example, companies must consider various combinations of sourcing locations and destinations in relation to bilateral trade agreements. This should be done for all inputs and products to understand savings opportunities.
5. Enabling scalability so companies can expand their trade management capabilities gracefully.
Every importer and exporter has some restrictions on how much global trade management technology and support they can afford. As such, it is a tremendous advantage to obtain a GTM solution that is scalable and can be augmented easily as the company’s needs change and as it can afford to expand its GTM processes. For example, buying specific products for trade screening or foreign-trade-zone support can help an immediate issue, but as more individual targeted solutions are acquired, the lack of integration between products causes users to deal with multiple systems having disparate data and non-uniform input and output. Having all of the trade information in a single platform is paramount, but allowing the system to add more features without requiring users to be retrained also is highly beneficial. Ideally, the GTM system should be able to expand gracefully with minimal disruption to the organization and the existing trade systems and processes.
Involve partners and other third parties in trade planning
6. Build a virtual network of partners, vendors, agencies, etc.
Clearly, global trade involves numerous entities from government agencies, to consultants, trading partners and software vendors. Coordinating these groups involves having a unified platform for information as well as an easy and accurate way to gather information. The Internet provides a ubiquitous way of connecting parties but does not in itself solve issues such as data formatting and automatic updating. The newer Internet-based GTM systems do these things so that they free users of concerns about data being managed and provide on-demand, secure access any time, from any Web browser.
7. SaaS-based systems are cheaper and easier to work with.
Web-based systems don’t necessarily mean that they are cheaper or easier to manage. Web-based software-as-a-service (SaaS) systems, however, allow the GTM vendor to run and manage the system so users don’t have to worry about hardware or software maintenance. The vendor ensures that third-party data such as free-trade zones and Customs’ duty schedules are up to date. Company-specific data such as enterprise resource planning and accounting information also can be integrated for that company’s own view and use only. The GTM vendor worries about data backups and system availability. This frees up users to focus on their time and skills to improve the core business strengths such as manufacturing or marketing.
8. Supply chain security is critical.
Supply chain security is a required piece of today’s post-9/11, post-Mattel, post-Salmonella world. Any product manufacturer and their subsequent distributors (even purely domestic ones) must know where the goods have been as well as whom and what has interacted with them. The safety of countries and its people are at risk. The liabilities of remaining ignorant of your supply chain are beyond any monetary fine. Every importer and exporter must have the knowledge and records about its products, where they were sourced and how they were transported. This is a requirement of government agencies, trading partners and, ultimately, the consumer.
9. Keeping the entire trade picture in view.
To help gain supply chain security as well as a complete picture of the savings opportunities available when transporting goods across borders, entry visibility — a centralized global view of all the entry processing throughout your supply chain — is the latest buzz in global trade management. Once such a view is established, companies can centrally monitor their global import/export pictures for areas of possible compliance risk and for savings opportunities.
10. Part of corporate social responsibility reporting.
As more companies commit to and report on their corporate social responsibility, formal monitoring and measurement is being required for their global trade and supply chain practices. Companies want to ensure their goods are manufactured with appropriate testing and without the use of child labor or other unethical practices. Governments continue to increase their requirements for safety standards and compliance reporting. No company can afford the image impact or the cost of correction for a product recall or scandal. Therefore, supply chain visibility and accountability is becoming more important to the importers who in turn must defend their best efforts in ensuring safe and ethical trade. GTM systems can help to provide the data for such reporting.
Managing global trade will continue to be laden with complexities and changes from all sides of the puzzle: governments, trading partners, service providers and related partners, nongovernmental interest groups and consumers. As such, importers and exporters are challenged to provide global trade processes that incorporate all the collaborating parties, changing laws, new and historical data and accomplished work from the virtual network. Utilizing automation and partners is more necessary than ever to streamline processes while ensuring the highest levels of safety and compliance.