Confronting International Regulatory Compliance: Web-based GTM Solution

TradeBeam Background

Since its founding in 2000, TradeBeam has grown rapidly to become a major force in the GTM marketplace. Through a series of strategic acquisitions and the integration work of its management and product development teams, the company has embarked on a mission to bring to a hosted, eventually end-to-end GTM solution to market. This solution aims to link the physical and financial supply chains enabling companies to manage and execute global trade activities from within a single software platform. More than 3,000 enterprises worldwide currently leverage TradeBeam's GTM solution, including such industry giants as Neiman Marcus, Liz Claiborne, General Motors Holden, Delphi Automotive Solutions, and Stryker Instruments. In an effort to expand its product footprint, TradeBeam announced the acquisition of Open Harbor, a leading provider of international trade logistics (ITL) solutions. The terms of the 2004 deal were not disclosed.

Part Two of the TradeBeam Keeps on Rounding Out Its GTM Set series.

With a forecast for positive cash flow in 2005 and no current debt, TradeBeam has the funds to expand sales, marketing, and international operations to further establish its leadership within GTM. In addition to expanding its sales and channel development, the vendor plans to extend product functionality, to areas such as cargo insurance, foreign exchange, customs auditing, and transfer pricing. It also may use its capital resources to pursue additional acquisitions that support its strategy for long-term growth and leadership.

Currently, TradeBeam targets customers in cash sensitive industries. Organizations can quickly realize the value of automating the entire global transaction, from order through to payment. It also helps organizations benefit from moving beyond physical optimization towards improving operations. Improved visibility, security and regulatory compliance, contract compliance, vendor management, speed-to-market, quality of service and risk mitigation are some of the areas it targets. TradeBeam also helps companies achieve financial optimization in terms of accounts receivable reduction, inventory levels reduction, interest costs savings, and promises reduced penalties, write-offs, and overhead.

At the end of 2004, TradeBeam announced that it had successfully completed two deployments of its software in support of the DHS' OSC initiative. DHS is one of the largest international shippers and its OSC initiative is a collaborative effort between the federal government, the business sector, and the maritime industry to develop and share best practices for the safe and expeditious movement of cargo. Its goal is to protect the global supply chain while facilitating the flow of commerce. TradeBeam's solution was implemented in fewer than fifty days across two global trade lanes, and is now providing real-time tracking, monitoring, exception management, and reporting on dozens of physical and financial supply chain events and exception conditions. DHS uses TradeBeam's GTM platform to manage security from the foreign factory to port, for the ocean and land transportation of cargo shipping containers. It uses global trade event tracking for order, logistics, and payment management and the shipping system integrates radio frequency identification (RFID), global positioning system (GPS) fencing, and chemical and biological sensors.

TradeBeam was reportedly selected to be a key participant in DHS' OSC trade lane trials because of its ability to monitor, evaluate, and manage the physical and financial supply chains for inbound international shipments. Its software also detects and responds to potential security issues across an enterprise's global operations. TradeBeam's OSC solution ensures shipment visibility and compliance for import processes that touch multiple systems and supply chain partners. Time-consuming and error-prone manual processes are replaced by an automated collaborative solution that provides supply chain electronic management (SCEM), order management, party screening, risk management, trade documentation management, reconciliation, and RFID tracking.

This is Part Two of a five-part note.

Part One discussed TradeBeam and GTM.

Part Three will discuss tackling the supply chain.

Part Four will detail TradeBeam's GTM solution blueprints.

Part Five will cover competition, challenges, and make user recommendations.

TradeBeam Defines GTM

A major funding announcement (see part one) to expand its functional footprint, the deployment its solution for DHS, and the Open Harbor acquisition, further validates TradeBeam's definition of GTM. TradeBeam's aspirations of "managing the entire life cycle of a trade across domestic and international order, logistics, and settlement activities to improve operating efficiencies and working capital" appears to becoming into fruition. Considering the impact and applicability of global trade information across various functions, such as sourcing, network design, logistics, product development, etc., companies should view their entire enterprise platform as a GTM solution. In other words, in order to gain maximum value, companies must integrate GTM functionality across multiple business processes and applications.

TradeBeam also defines global trade as encompassing the life cycle of a global buy-sell transaction comprising of participants (sellers, buyers, freight forwarders, banks, etc.); tasks (compliance check, booking transportation, clearing customs, applying for letters of credit etc.); and documents (sales order, invoice, packing list, letter of credit, bill of lading, etc.). These global trade processes require the concurrent management of the flow of goods, funds, and information.

Therefore, some enterprise applications, such as ITL and GTM, simply to lend themselves well to the hosted model. Due to their widespread nature, they cannot efficiently work the other way. Namely, global import/export "procure-to-pay" or "order-to-cash" processes entail a number of activities, such as sourcing suppliers and customers; processing purchase and sales orders; insuring goods; and issuing and receiving letters of credits (LC). It also involves financing trade; arranging shipping; creating trade documents; ensuing customs compliance for export and import; sending and receiving goods; sending and receiving invoices; reconciliation; and initiating and receiving payment (see figure 1).

On a more granular level, these activities belong to the following sub-processes:

  • Order. Plans demand needs, manages bills of materials (BOM), manages product catalogs, checks inventory status, creates purchase orders, checks compliances, manages inventory, manages purchase orders, assesses supply chain management (SCM) risk, acknowledges order, classify goods, calculates landed costs, manages contract, insures goods, and obtains credit insurance

  • Finance. Applies and manages LC, manages documents collection, manages open account, requests financing pre- and post-shipment, checks compliance, assesses SCM risk, and arranges foreign exchange

  • Ship. Requests booking, books shipment, creates ship notification, creates shipping documents, manages shipping notification, manages shipping guarantee, tracks shipments, manages events, assesses SCM risk, manages customs, clears customs, receives goods, and manages returns

  • Settle. Creates and presents invoices, reconciles documents, manages disputes, prepares and presents documents, manages insurance claims, and receives remittance

Given the detail involved in each of these processes, plus the fact that they stretch over many jurisdictions, many of these can only be efficiently fulfilled through a Web-based hosted solution, which prices per transaction. To optimally complete the global trade cycle, a business must automate, track, and provide visibility to the entire GTM process to optimize its supply and distribution chains. Because Web-based services are steadily growing, TradeBeam's model seems to be ideal.

The average global trade cycle of order through settlement is 120 days, whereas a comprehensive hosted GTM solution like the from TradeBeam, can reduce this cycle by an average of 12 days, improving the users' cash flow by 10 percent or so. TradeBeam's ability to do this has been made possible by its acquisition of over twenty GTM/ITL-related application components during last few years. All have been rewritten to function in concert. Its recent acquisition of ITL specialist Open Harbor is also technologically compatibility with TradeBeam. Like its new parent, Open Harbor is an application service provider (ASP) built for on-demand Web services developed on an n-tier architecture. The architecture includes application servers, a storage area network (SAN), database servers, reporting servers and database clusters with the firewall and file transfer protocol (FTP), gateway servers, domain name system (DNS), simple mail transfer protocol (SMTP) servers, Web servers, and load balancers, and routers outside the firewall.

TradeBeam's solution was built on a platform that leverages many commonly accepted industry standards such as Java 2 Enterprise Edition (J2EE), extensible markup language (XML), or Java Messaging System (JMS). Additionally, by using collaborative workflow, business rules engine, security architecture, third-party integration via XML or electronic data interchange (EDI) transformation, the solution extracts relevant information from diverse enterprise resource planning (ERP), SCM, customer relationship management (CRM), supplier relationship management (SRM), and legacy systems. It provides a comprehensive suite of on-demand application services for order fulfillment across a multi-tier supply chain consisting of buyers, suppliers, distributors, forwarders, brokers, government, carriers, banks and insurance institutions. The system supports both online transaction processing (OLTP) and on-line analytical processing (OLAP) modes, BEA Systems' application server, Oracle Database, MicroStrategy's reporting and analytical solutions, and webMethods' Web servers. It provides stable performance for over 10,000 users, has high availability of 99.87 percent, and 24x7, around the clock operations.

Figure 1. Global order-to-cash and procure-to-pay cycle.

The Open Harbor acquisition also seems to be compatible because both vendors' have a recurring revenue model of transaction-based pricing. Such a model is often been beneficial to users, since buyers not only want to pay less for import/export, and GTM software, but also want to spread their payments out.

TradeBeam and the Internet

The number of users wanting solutions delivered over the Internet with monthly subscriptions or transaction-based fees has noticeably increased. Most new customers want a transaction-based model rather than a straight purchase with a big payment up front (see Trends in Delivery and Pricing Models for Enterprise Applications). Moreover, an enterprise-wide, on-premise approach to global trade and logistics might not be the best approach because of high costs and implementation difficulties. In fact, the products with the broadest appeal for global trade today might be hosted, Web-based solutions, which companies can tap into outside their firewall to deliver supply-chain visibility and event management, multimode logistics execution, import and export management, and trade security to enterprise shippers.

Such a Web-based tool is not just the obvious choice for connecting to far-flung carriers, forwarders, and other service providers, but is often a better approach than ERP-oriented solutions for trade compliance and documentation. Namely, ERP systems usually have only product marketing descriptions in their item master data, not the technical descriptions needed for regulatory compliance. So, for example, if Apple Computer is importing PowerBooks, the name and associated marketing description of the product would not be adequate for US Customs. Trade compliance applications take the marketing description from the purchase order and associate it with a commercially acceptable description and the correct HTS classification. The PowerBook would become listed as a laptop computer with certain features and specifications and the right HTS code number. All of this happens over the web. In the case of TradeBeam, it then complies with a twenty-four hour rule, and based on the importer's purchase order, and information about the customers' products, it creates shipping instructions for the forwarder and sends it to the carriers for their manifest.

This Web-based system, architected to connect to trading partners around the world, should be faster, easier, and better than taking an enterprise-based system and trying to turn it into a global logistics system, which are notoriously difficult to integrate with a large network of users. Also, hardly any company would want its ERP master data going directly to their vendors. It is far more secure to have a system that takes only absolutely necessary data from an ERP or back-office system, and sharing just what is needed with the supplier.

This concludes Part Two of a five-part note.

Part One discussed TradeBeam and GTM.

Part Three will discuss tackling the supply chain.

Part Four will detail TradeBeam's GTM solution blueprints.

Part Five will cover competition, challenges, and make user recommendations.

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