Statistics indicate that today, between 40% – 55% of the world’s total domestic product crosses international borders. This confirms that global trade has the potential to become a crucial as well as a growing part of most businesses. Following the trend towards globalization, business has created a relatively new terminology to define the opportunities and challenges unique to a globalized business environment – it is GTM – Global Trade Management. Put simply, GTM is the process of streamlining the entire global trade lifecycle across orders, settlement, and logistics activities while enhancing operating efficiencies.
GTM systems are designed to help manage data, communication, documentation, compliance and costs within the international supply chain. Only about 20% of the information required from cross border trade comes from the buyer. The remaining information comes from suppliers, carriers, and other entities and this is often where supply chains hit a snag. In this environment, changes are happening so quickly that they place great stress on supply chain teams
Information once created, should ideally be exchanged seamlessly between one party and another across the entire supply chain, this includes ERP’s and 3rd party portals. This eliminates duplication of effort and also the possibility of errors in input from the double and even triple keying of the same data. The alternative, which is still the norm in many businesses today, is a combination of multiple emails and individually maintained Excel spreadsheets. Wherever this is happening, there cannot be complete alignment of information across the entire supply chain.
When evaluating a potential Global Trade Management Software solution to address these concerns, there are three significant points to be considered:
- The multiple cash flow and other benefits to be gained from wisely managing your global trade operations
- The substantial potential for increased global trade volume
- The risks and complexity of global trade compared to domestic trade
The challenges of poorly managed GTM’s
Insufficient execution and planning as well as bad synchronization of logistical, regulatory and financial procedures can create some major business challenges, including but not limited to:
- High inventory holdings with associated costs of stock on hand
- Shipment delays
- Increased spending on logistics
- Potential lost sales
- Higher than expected volumes of Accounts Receivables and Outstanding Payments
- Potential penalties and fines
- Errors in compliance and documentation management etc.
Compliance issues in Global Trade Management
Having to comply with customs legislation in multiple countries can be overly complicated at best. Factors such as license requirements or documentation, can be vastly different from country to country. Further complications can arise re compliance and license issues based on the combinations of country of import and country of export.
Legal matters worthy of consideration
There are a variety of types of legislation that apply to goods shipped through the global trade process. As an example, a shipment from the United States to the EU may seem easy, but things such as a “restricted party” check will be conducted on each shipment. If it is a dual-use product, required export licenses will be applied, and product screening will be carried out.
Then there are the required shipping documents. Firstly, export and import declarations should be filed. Then HS codes and customs values need to be identified. If you fail to comply with any of these customs requirements, it can lead to delays, and the exporter may face export restrictions coupled with financial penalties. This is the same to and from most exporting and importing countries.
Remember that Global Trade Management and compliance are very complex and dynamic. Different economic and political factors make the process of moving goods across the world very challenging. From business ethics, new regulations, real-time visibility, changing degrees of quality control, and introduction of new technologies, all can significantly impact the ability to plan and meet global trade compliance requirements.
Some successful GTM strategies
GTM requires perfect integration of the financial supply chain with the existing supply chain, allowing businesses to achieve the following goals;
- Effectively comply with the necessary security mandates and governmental reporting
- Offer complete visibility into shipments at all points along the shipment route
- Increase top-line revenue and lower the costs of the supply chain
- Measure the performance and efficiency of different global trade policies, trading partners, and procedures.
What does BSM offer companies who want to take control of their GTM?
BSM is a consultancy-based technology business that for over 17 years has been specializing in providing GTM solutions to both importers and exporters. During that time, we’ve learned that the required solutions can be quite different from company to company and from one vertical market to another. A Dairy products manufacturer does business quite differently from a Meat processor. One size does not fit all and that’s why we don’t attempt to sell an off the shelf solution.
Our approach is to conduct a Business Review with each new client so we can delve into their “as is” environment. In that way we can identify what they are doing well as opposed to what areas need our focus. We then bring our expertise to the table to work with each client to add real value to their export processes. After all, we see our mission as providing solutions and solving problems, not selling software.