With its origins traced to the late 1990s, the term Global Trade Management (GTM) was coined out of the large, end-to-end supply chain optimization projects that had become increasingly popular during that time.
By creating visibility to, and linking, each of the key activities associated with an international order — such as order management, procurement, production planning, logistics, and order settlement — previously siloed activities were now seamlessly connected, giving stakeholders unprecedented visibility and control. Companies could now proactively identify and address issues before they became problems, thus promoting enhanced customer confidence while optimizing efficiencies and cash flow.
However, as a trade consultant during this time, I witnessed something curious. With areas such as inventory management and supply chain optimization getting most of the focus, in many of these projects, trade compliance was being largely, if not completely, omitted. Inevitably, as those redesigned processes and supporting systems were turned on, international shipments were indeed speeding very efficiently into foreign ports of entry, but only to hit a brick wall called “Customs” due to a missing admissibility document or unplanned regulatory requirement, thus negating the earlier gains.
Fast forward to today and that original GTM model has now become almost singularly synonymous with trade compliance alone, and for obvious reasons. But as important as regulatory compliance is, I would also offer another.
Once the low-hanging savings associated with areas such as inventory management and supply chain optimization had largely been realized, companies turned to other areas for savings, eventually discovering trade compliance operations as a largely untapped resource. By including trade considerations in business planning decisions, companies began to maximize savings associated with strategies that allow the lawful avoidance, reduction, and/or recovery of import duties and taxes, with programs such as “Tariff Engineering,” Free Trade Agreements (FTA), Foreign Trade Zones (FTZ) and Duty Drawback.
When trade-related disruptions do occur — such as the special Section 301 tariffs on certain goods from China — these companies also tend to be the best prepared to identify and develop contingency plans, thus giving themselves a competitive advantage in the market. If you’re in the market for a GTM system, here are six tips from personal experience to help ensure a successful project:
1. As previously discussed, while trade compliance should always be a top driver for justifying a GTM system, risk management alone can be a difficult sell. Include trade optimization benefits as a key selling point using estimates of the savings that GTM could contribute to the company’s bottom line. (Note: If you plan to include headcount reductions as a savings, consider that you may easily find yourself with new capabilities that may require those resources).
2. Evangelize the benefits of what a true integrated GTM system could provide with other business operations and stakeholders. Aligning with other departments would increase corporate buy-in, strengthen the overall business case, and distribute the cost across participating departments.
3. If other supporting systems will be required (e.g., order management, transportation planning, freight bill audit and pay), start with exploring GTM companies that may also offer these solutions. A single, seamless platform would ease integration as well as reduced time, cost, and complexity associated with building multiple interfaces.
4. Getting your corporate IT department on board is a must. In addition to point three above, be sure to raise all of the benefits associated with installing your GTM solution to a cloud environment. Direct benefits to IT would include the ability to rapidly deploy, scale, and extend without sacrificing security and dependability; a simplified implementation; and the ability to free up IT resources.
5. Don’t simply “pave the cow path.” Instead, use this opportunity to evaluate the effectiveness of all processes that impact your operation. By creating a new future state, based on industry best practices and the optimized support of your GTM system, you will help to ensure maximum effectiveness and return on your investment.
6. Finally, as human beings, we seem intrinsically hard coded to oppose change, even when the result of that change is positive. A change management plan will help ensure that all impacted personnel and department managers have been included in the planning, thus helping to ensure a smooth implementation and launch.
The temporary tariffs on China are serving as a textbook reminder to C-level executives of the critical need for proactive trade planning and execution. For trade-dependent companies searching for a competitive advantage, a new or upgraded GTM system should be the first place to look.
Jerry Peck can be reached at email@example.com.