A NEW ELECTRONIC DATA ALLIANCE

Freight forwarders have an intense interest in the international communication of documentary data. But the problems of export automation go well beyond the much-publicized issue of standards for electronic interchange of shipping manifests and customs documentation. The problems begin much earlier.

To start with, exporters must be automated before it becomes useful to talk about electronic data interchange. Most exporters have simply not automated their export operations. Among those that have, many are not automated beyond basic order entry and invoicing. Others are using basically domestic systems with a few export functions added. The emphasis has been on internal accounting, not on automating trade documentation.Nor is the situation improving. Companies do not appear to be targeting a lot of money at automating export operations. The export department, and in particular the export distribution department, remains a low management priority in many American companies. To the extent managers consider electronic data interchange to fall into the category of "bells and whistles," there is even less money available.

Part of the problem may very well be that no company handles nearly so many export shipments as major companies handle domestically. I recently met a specialist in domestic electronic data systems whose company receives 55 million purchase orders a year. It generates several million purchase orders annually itself. The firm employs 3,000 people doing nothing but entering orders. It has no alternative but to automate.

Although each export transaction generates much more paper than each domestic transaction, no exporter's total paper flow is nearly so large. An exporter making 10,000 shipments a year is a large exporter. Indeed, according to a recent article in The Exporter, only about 100 U.S. exporters make 5,000 or more shipments per year. One hundred thousand make fewer than 5,000.

Often, there is no one on the other side to receive the data the exporter might wish to send electronically. Not yet anyway. Electronic data interchange requires programs. If they do not exist, and apparently they do not, they have to be written. That takes money. If the recipient doesn't have the capability of receiving electronic data interchange transmissions because he does not have the necessary software, then it doesn't do the exporter any good to be able to generate an electronic file.

There are other complexities. An electronic invoice, even one that complies with international standards, is useless by itself. At minimum, an air or sea waybill also is needed to clear shipments or to collect on a letter of credit or documentary draft. Often, other documents are needed as well.

Finally, we reach the problem of standards. While it appears that importers and exporters will be using the United Nations-backed EDIFACT message formats, domestic companies have already adopted alternative standards. Those standards satisfy the bulk of their domestic corporate needs. Those companies will be reluctant to switch.

Some big companies are using their own proprietary message formats. Those that are big enough exporters may not need any format: If they work with a forwarder, they may simply install their terminals in the forwarder's office and make believe they are using electronic data interchange.

Of course, that refusal to use a standard format is not electronic data interchange. Companies that use their own formats are precluded from moving data to other parties internationally. If they wish to do so, the issue of message formats still must be addressed.

With all of these difficulties, there is still an amazing consensus that international electronic data interchange will happen. No one really doubts it. It is as inevitable as the sun rising.

Internationally, it is going to be foreign freight forwarders that will make it possible. The new role of the forwarder will be to receive data from exporters, to generate the other electronic data files necessary to complete export transactions and to forward these electronically to the carriers, banks, customs brokers, government agencies and consignees who need them.

Given the complexity and diversity of shipper needs and the trading system, it is difficult to see it happening any other way. Forwarders will become the "value added" focal point of international electronic data communication just as they are currently the focal point of paper copies of trade documentation.

This will require a new alliance, not simply between shippers and forwarders, but also among forwarders, software houses, carriers, networks, banks and other parties to international transactions.

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