Media Coverage
Shippers Seek Compliance
William Hoffman
Traffic World
February 12, 2007
Shippers stretching their logistics reach in the global arena are looking for easier paths across borders and trade management, and compliance technology providers say that’s fueling a boom in their business.
“Definitely compliance is hot, visibility is hot, transportation management is hot,” said Management Dynamics CEO Jim Preuninger. Shipper inquiries about his company’s software-as-a-service global trade compliance modules tripled in just the past year, he said, as customer confidence grew and services matured.
“I don’t see regulatory or technical barriers,” he said. “This is something that’s happening and will accelerate just because it makes the most sense.”
Of course, globalization drives the need for increasingly comprehensive services to support longer supply chains, and Graham R.F. Napier, president and CEO of on-demand global trade services provider TradeBeam says the need has intensified as globalization itself evolved.
A couple decades ago, globalization meant a U.S. manufacturer sending a factory to Mexico and, later, suppliers to feed that factory and its product back to the United States. Today, Napier said, globalization might mean a Detroit manufacturer buying items for a factory in Europe that will be delivered from China.
In other words, globalization no longer serves just a point-to-point relationship, but a network among economies all over the world. That means trade compliance services need to reach multiple points of origin and destination and all the documents, forms and conditions necessary to move freight between them.
Shippers say the complexity of sourcing and shipping is driving the need for technology as goods cross borders.
Manufacturer Ingersoll Rand adopted Management Dynamics’ Global Trade Compliance suite to streamline importing and exporting from more 118 countries. “We needed a scalable solution that could easily handle our high-volume transactions and had the ability to support hundreds of users across multiple time zones,” said Michael Macrie, Ingersoll’s global director of back office technology.
Retailer Neiman Marcus Group reduced cycle times, duties due to misclassification of merchandise and inventory carrying costs using TradeBeam’s import systems. “The specialty retail fashion business of Neiman Marcus is heavily reliant upon the timely movement of merchandise through our supply chain,” said Neiman’s David Wortman, vice president of international operations and government compliance.
Napier and Preuninger say trade compliance vendors hope to provide global coverage of shippers’ compliance, visibility and finance needs, but that hasn’t necessarily been as easy as uploading software.
Visibility is prerequisite to providing compliance, Napier said, and compliance is a prerequisite to financial transaction support. “There’s a logical sequence of development if you’re trying to build an end-to-end solution,” he said.
Industrywide, vendors have made the most progress in visibility, then compliance, then finance support. He rated progress on coordination between the three areas from C to B+, with improvements coming all the time. “The people are getting better and better at defining what they want,” he added. “The earlier (requests for quote) were just a cry for help.”
Preuninger says a major booster of trade compliance services has been the shift in international financial arrangements away from letters of credit and toward open accounts.
Letters of Credit arranged by banks are a proven method of financing global trade, but fees make such letters costly. As shippers’ experience with global trade has deepened, many companies have become more comfortable asking for open accounts, the way most domestic trade has been conducted. This became possible as visibility increased, and more necessary demand for compliance and trade management automation grew.
Global trade management that coordinates both the physical and financial supply chains remains the goal, but it’s still far off, Preuninger and Napier said.
The information flows of the two supply chains overlap to a great degree, Preuninger said, but the corporate officers managing the two operations are frustratingly discrete, creating duplication of effort. Larger shippers are shopping for robust systems to replace the first-generation trade compliance software they adopted in the 1990s, he said.
Smaller and mid-size shippers seeing the results from their big competitors are now clamoring for modules and even suites that, now using online on-demand models, are more often affordable.
The next stage of trade compliance and management growth will likely come when logistics, finance and compliance chiefs of separate supply chains finally meet in the board room.
