Companies that do business overseas are under pressure to better manage regulatory compliance and increasingly complex supply chains. That’s why many of them are turning to technology for help.

For a long time, basic import/export software products met their needs. In recent years, though, “global trade management” (GTM) software has gained currency. These integrated solutions help importers and exporters manage most aspects of international trade operations.

Because GTM applications touch so many aspects of today’s global business environment, supply chain software vendors are looking to fold such functionality into their existing systems. As a result, a sort of feeding frenzy has erupted in this market segment, with software vendors snapping up GTM and related products as quickly as they can.

Consolidation: Round Two
Consolidation has been the hallmark of the international trade software market. An early round of acquisitions involved such companies as Capstan Systems (bought by Qiva, which in turn was bought by TradeBeam); ClearCross (bought by TradePoint); and From2Global Solutions (bought by Arzoon).

In the past couple of years, consolidation has targeted some of the bigger fish in this market: Open Harbor was bought by TradeBeam; Arzoon was acquired by SSA Global; TradePoint was bought by Kewill Solutions; NextLinx was purchased by Management Dynamics; and Vastera was bought by JPMorgan Chase.

These acquisitions are helping vendors expand their focus from specific import/export processes to comprehensive GTM solutions, which ARC Advisory Group defines as solutions that streamline and automate processes related to customs and regulatory compliance, trade financing and financial settlement, ocean/air transportation procurement and contract management, and visibility into trade activities and events. These applications also facilitate the flow of information, money, and goods among buyers, sellers, and intermediaries that may include customs authorities, banks, customs brokers, and freight forwarders.

“There has also been a shift from software-only solutions to software bundled with managed services,” notes Bryce Blegen, president of software provider MIC Customs Solutions. That is, some GTM vendors, such as JPMorgan Chase Vastera, are using their products to manage trade operations for their clients.

Tools for Compliance
The most popular GTM function, customs and regulatory compliance, automates such activities as product classification, restricted-party screenings and embargo checks, creating and filing trade documents, determining total landed costs, applying for export and import licenses, communicating with regulatory agencies, and determining eligibility for preferential trade treatment, among others.

Unable to effectively handle these tasks manually, companies are investing in automation as a way to not only streamline their operations but also to avoid the fines associated with non-compliance. Jim Preuninger, CEO of software provider Management Dynamics Inc., says GTM users can expect such benefits as minimized duties, improved sourcing decisions and regulatory compliance, reduced risk of fines and border delays, lower brokerage costs and inventory levels, and greater efficiency.

GTM solutions are also proving themselves valuable in the struggle to comply with Sarbanes-Oxley (SOX) requirements. Achieving compliance with SOX is dependent on having access to timely, accurate, and complete information, as well as establishing process controls ?the same success factors required for more secure and efficient global trade operations, notes Adrian Gonzalez, director of ARC’s Logistics Executive Council. “GTM solutions can help companies better understand some of the risks that could impact financial performance, such as shipments that are held up at the border or the unexpected costs that could arise due to changes in a country’s monetary status,” he observes.

Room for Growth
No single solution on the market today can adequately address every aspect of global trade management, Gonzalez says. That’s one reason ARC is forecasting additional acquisitions or partnerships like the recent agreement between RedPrairie and Precision Software. In particular, providers of transportation management systems (TMS) and enterprise resource planning (ERP) systems will experience increased demand for GTM capabilities from their customers, he says.

That demand is forecast to spur sales from $222 million last year to an estimated $405 million by 2010, representing a compound annual growth rate (CAGR) of 12.8 percent. Factors that will fuel sales, analysts say, include the continuing growth of global trade; the increasing focus on trade security, risk management, and Sarbanes-Oxley compliance; the increasing complexity of global trade processes; customs modernization programs; and the availability of products that are more affordable and easier to deploy.

The sheer number of shippers that have yet to embrace GTM solutions, moreover, leaves plenty of room for growth. “A lot of small to mid-sized companies are just getting started with global trade, and they are going to need these types of solutions,” Gonzalez says.

Working on the front lines with some of those companies, Misty Rutter, a Boston-based regulatory consultant, agrees that demand for GTM solutions is quickly growing.

“More and more companies that I work with that don’t already have [GTM software] are clearly looking for it,” says Rutter, who sees value in these applications as tools for freeing up internal resources and avoiding fines associated with non-compliance. “Enforcement has picked up dramatically, as has the size of the fines. These trends are driving companies to take a second look at their compliance programs and to turn to automation as a way to shore them up.”

Tips for Evaluationg GTM Software
How can you be sure to choose the right global trade management software? Beth Enslow, vice president of enterprise research at Aberdeen Group, suggests that buyers first be able to distinguish between the four vendor options outlined in the accompanying chart.

Next, Enslow says, consider the sources of vendors’ trade content and how often it will be updated; evaluate the products’ trade-agreement support; and explore deployment options, including license-and-install, on-demand, and managed services. Look at the short- and long-term costs of those options, and ask yourself: What other functionality or services could we use now or in the future? What would be the added benefit of a portfolio of services from one vendor?

It?s important to understand that not all vendors “cover” all countries, nor are their solutions all-encompassing for every operation, Enslow says. ?The key is to match your business requirements to the vendor’s strengths,? she explains.

Two shippers who believe they’ve made the right choice are Wah Chang, an Albany, Ore., exporter of specialty metals and chemicals, and food importer Liberty Richter, based in Saddlebrook, N.J.

Pat Skeahan, Wah Chang’s export administrator, wanted a product that would ensure regulatory compliance. Her criteria included ease of use, good support, the ability to do third-party screening, product classification, license determination, and “everything else that you need in order to be in compliance with U.S. export regulations.”

Management Dynamics’ Trade Export (formerly offered by NextLinx) fit the bill. The software screens domestic and foreign orders, helping Wah Chang avoid fines and sanctions. With 57 percent of its business shipped internationally, the software has become indispensable. Says Skeahan: “If we were ever banned from exporting, it would shut us down.”

Liberty Richter used to rely on manufacturing-oriented software, but CFO John McLennan wanted a solution that was tailored for importers and could handle foreign currency, track inbound containers, and improve import planning.

He found all that and more in Blinco Systems’ 3rdwave software, which includes a graphical-based system and an executive “dashboard.” McLennan credits the system with improving management of working capital; cutting inventory by 25 percent; and increasing annual inventory turns from four to six. Now, he says, “We can look at the global data from many different angles and analyze it accordingly, whereas before we could only see one line of data or one key point.”

Source: Logistics Management by Bridget McCrea

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