Companies involved with global and transnational trade need management processes to navigate compliancy, regulations, and other trade issues specific to the countries they are trading with. This is a daunting task, not only because of the copious amounts of information and regulation but also because trading companies are held accountable for non-compliance. Typically supply chain management solutions (SCM) and enterprise resource planning solutions (ERP) lack strong international logistics and global trade management (GTM) capabilities. In light of this over sight, the merger between JPMorgan Chase Bank, N.A. (NYSE: JPM), a leading global financial services firm and Vastera (NASDAQ: VAST), a public global trade solutions provider, is looked upon with great interest. Supplementing JPMorgan Chase's financial services with Vastera's global trade management software will likely make JPMorgan Chase the first financial institution to offer a complete set of integrated cash, trade, and logistics solutions across the physical and financial supply chain.
Part two in the Merging Global Trade Management with Global Finance series.
Vastera provides global trade services that manage the flow of information throughout the global trade community to improve visibility of international product movement and more quickly move goods from country-to-country. To help companies fulfill global demand, forwarders, carriers, and brokers have joined financial institutions and customs agencies to form the global trade community. Improving near real-time collaboration between the members of the community has also become essential to maintaining control over the movement of goods.
Vastera's initial services began with application software designed to address logistics and country-specific regulations including taxation, duty, and licensing, etc. After acquiring Ford Motor Company's global custom import operations, it broadened its services to include trade management business process outsourcing (BPO) services. These trade services became the backbone of its Managed Services Provider (MSP) offering.
Managed Services Expanded
Managed Services is now Vastera's principal line of business. While the vendor has numerous Managed Services customers, its two largest customers, supplied 69 percent of Managed Services revenues in 2003. Specifically, its Managed Service agreement with Ford included the administration, automation, and management of Ford's global trade import operations in the US, which will be in effect until August 2005. This relationship has expanded to include the administration and management Ford's global trade import operations in Mexico, Canada, the UK, Spain, Belgium, and Germany. These agreements provide Vastera with a guaranteed, predictable, and recurring revenue stream worth about $25 million (USD) in annual revenues from the agreements with Ford US, Ford Mexico, Ford Canada, and Ford Europe in 2004.
In addition to the lucrative Ford agreement, in August 2001, Vastera entered into a five-year Managed Services agreement with Lucent Technologies to manage global trade operations in the US. This relationship also grew to encompass responsibility for administering and managing Lucent's global trade operations in other countries in North America, Europe, and in Brazil. From August 2001 through August 2004, the vendor generated approximately $25 million (USD) in aggregate revenues from this agreement. Then in June 2003, Vastera acquired GE's internal US customs import operations, and also entered into a Managed Services agreement which calls for the management of the US customs import operations for five of GE's divisions for a minimum term of three years.
As part of its strategy to expand its global presence and competitive position, Vastera acquired other entities providing GTM solutions in Mexico, Canada, and Brazil in the first quarter of 2002. Of these is Speedchain, a development stage supply chain event management (SCEM) and global e-logistics provider, which has failed to produce revenue since 1999. Nonetheless it was acquired by Vastera in March 2001 for approximately $18.8 million (USD).
As a result, Vastera now has three principal solution offerings for GTM, which are TradeSphere Solutions (a software offering); Trade Management Consulting (a business process consulting offering); and its Managed Services (a BPO offering) program. Clients may select elements of each of these product and service offerings to address their specific needs and opportunities, and this flexibility provides individually tailored solutions to automate and increase the efficiency of the global trade processes.
Vastera Global Trade Content
Vastera's solution offerings are based on a collection of proprietary processes, data, rules, and regulations. Called Vastera Global Trade Content, it is at the core of all other solutions. It is a rules-based application that provides comprehensive management of trade regulations and programs. This extensive base of electronic content serves as the repository for Vastera's entire suite of GTM solutions.
Global trade expertise and specialization is needed to required to acquire, interpret and update country-specific trade regulations, thus the vendor employs a full-time content team dedicated exclusively to tracking and managing trade regulations, trade content, and preferential programs. These experts include a former government compliance official, international trade lawyers, licensed customs brokers, and in-country data experts. Impressively, Georgetown University Law Center's Larry Christensen, a former senior official at the US government's Bureau of Export Administration, acts as Vastera's vice president for international trade content (where he manages the collection, interpretation and dissemination of critical trade rules and regulations to clients). George Weise, Vastera's vice president VP of global trade compliance, is a former commissioner of the US Customs Service.
Vastera offers various levels of content to its clients, from comprehensive content automation to document automation. To keep current with the latest country-specific trade regulations, the vendor updates solutions on a regular basis. Consequently, updates and postings are made electronically through TradePrism.com, its global trade exchange, and Vastera.Net, its private client exchange. Information provided in the Global Trade Content includes trade data, government denied party lists, regulation updates and notices, trade committee meeting information, requests for public comment on regulatory issues, and final rulings on proposed regulation.
TradeSphere is Vastera's set of software applications that streamlines and automates the information exchanges associated with the cross-border movement of goods. Its components facilitate specific global trade functions, strategically manage the information required to trade globally, and enhance the efficient exchange of information and goods among extended members of a client's global trade network.
Components of TradeSphere include restricted party screening and boycott/embargo screening, automated shipment documentation, export compliance, import compliance, and customs entry filing. Clients may use the TradeSphere components on a term license, perpetual license, or transaction fee basis.
The vendor has non-exclusive licenses to technology from several companies which is integrated into the TradeSphere product suite, including development tools and facilities from IBM (i.e., WebSphere and MQ Series) and Forte, which was acquired by Sun Microsystems.
In October 2004, Vastera, announced the launch of TradeSphere Exporter 7.5 and TradeSphere Importer 3.3, whereby these newly updated web-based software applications deliver enhanced international shipping and trade compliance functionality, further enabling exporters and importers to reap greater cost and time savings associated with the cross-border movement of goods. Highlights of the latest features available include
- TradeSphere Exporter 7.5 This module delivers enhanced export management and compliance capabilities. Support for AESDirect virtual private network (VPN) service gives exporters a secure and easy-to-implement method of directly filing export declarations, while the new document repository capability provides improved management of electronic images of shipping documents. Finally, Exporter 7.5 features enhanced Canadian export compliance capabilities, and improved processes for export declaration generation and encryption report submission.
- TradeSphere Importer 3.3 This module provides entry management capabilities to an importer before, during, and after the filing process. It also provides accurate information to a company's network of brokers through the consolidated rated invoice functionality. This release also adds significant functionality to manage reconciliation processing with customs. Finally, it provides out-of-the-box integration with TradeSphere Customs Manager US, for complete entry processing control, including Automated Broker Interface (ABI) filing to provide businesses with a strategic advantage in customs processing.
Vastera's strategy may be unique to the industry. It has leveraged the field expertise within its Trade Consulting and Managed Services Operations teams to continually tailor and improve the functionality. Over the last few years with the growth of its global trade know-how, consulting practice, and managed services division, it has gradually migrated towards services. Lately it acts more like a specialized third-party outsourcing agent than a software vendor. In fact, two-thirds or so of its revenue come from services.
Vastera Trade Management Consulting services leverage extensive global trade expertise and proprietary analytical methodologies. Services range from performing compliance assessments, to designing processes and procedures, to implementing client-specific processes and procedures. Each consulting engagement is based on specifically tailored objectives and deliverables. Vastera Trade Management Consultants provide extensive, hands-on experience gained from careers in a variety of industry sectors with specific areas of expertise including import and export operations and compliance, international transportation, logistics and distribution, trade finance, pricing, international marketing, training, and manufacturing.
Mid-2004, Vastera announced the expansion of its Trade Management Consulting practice to incorporate trade management assessments into its solutions-based sales process. The initial assessment is designed to help clients understand their GTM process and identify opportunities for compliance and efficiency optimization. From the assessment, Vastera and the client will strive to mutually identify if Vastera's technology, managed services, or additional consulting will best solve the client's specific needs.
The vendor believes that using trade expertise in a solution-based approach will further differentiate it and solidify its leadership position in the GTM market. In addition to changing its business development process to leverage Trade Management Consulting, Vastera will also expand the services to include international trade operations, risk and opportunity management, and international trade optimization analysis and assessment to help clients in understand how to optimize their global supply chain.
Vastera Managed Services
Vastera Managed Services offerings consist of BPO solutions that combine its Global Trade Content, TradeSphere solutions, proprietary global trade methodologies and processes, and trade expertise. The vendor offers services to manage all or a portion of its clients' global trade operations, ranging from specific global trade functions to providing a complete MSP engagement. The goal is to provide consistent levels of service while working with the clients to reduce their operating costs and to realize benefits such as enhancing regulatory compliance, capitalizing on preferential trade programs, increasing speed in their global supply chain and improving supplier sources. Vastera seeks to increase customer profitability by implementing its own process and technology into MSP engagements. Over time, the deployment of the technology should reduce the overall costs of the Managed Services Operations.
Vastera touts its trade experts to be the company's most valuable asset and they were certainly a key factor in JPMorgan Chase's decision to acquire it. Because companies want to understand the impact of changing regulations on their business strategy, network design, operations, and financial performance, there appears to be a strong global demand for trade consultants. To that end, the vendor sells its products and services through its offices in the US and through its subsidiaries and branch entities in the UK, Europe, Mexico, Canada, Brazil, and Japan. Similarly, Vastera's key strengths include comprehensive regulatory content, blue-chip clients, a strong presence in the automotive and high-tech industries, its ability to merge technology with managed services, and its in-depth expertise in Brazil, Canada and Mexico. Additionally, its next geographic target is China. As the only GTM vendor with dedicated personnel and facilities in nearly fifteen countries, Vastera continues to be recognized for its superior management systems and B2B best practices around the world. For its clients, the result emphasizes compliance, efficiency, and effectiveness.
Vastera has received ISO certification for fourteen Managed Services operations, including its sites in Southfield, Michigan and Ontario, Canada. The most recent additions were announced at the end of 2004, when eleven Managed Services operations in Mexico were certified in compliance with the International Organization for Standardization (ISO) 9001:2000 standard. Additionally, Vastera's Managed Services site in Bydgoszcz, Poland has also received ISO 9001:2001 certification. Founded in 1947, ISO works to facilitate the international coordination and unification of industrial standards, and the organization has a network of national standards institutes from 148 countries working in partnership with international organizations, governments, industry and consumer representatives. The ISO certification process includes a rigorous review of business processes, documents, work practices, data, and records by an independent third-party auditor. In addition to participating in such reviews, Vastera employees were interviewed and on-site observations were held at its Mexico and Poland facilities.
The new ISO certifications validate that Vastera's Mexico and Poland locations have an exemplary quality management system in place. ISO 9001:2000 and 9001:2001 certified organizations enhance customer satisfaction by not only meeting customer and regulatory requirements, but also by continually working to improve performance. In addition to being ISO 9001:2000 and ISO 9001:2001-certified, Vastera is
- C-TPAT certified, enabling expedited clearance through and reduced physical examinations at US Customs' checkpoints. The C-TPAT program was designed to ensure that proper security procedures are in place to protect the flow of global trade entering the US.
- PIP (Partners in Protection) certified in Canada, recognizing Vastera's dedication to enhanced border security in North America. Mid 2004, Vastera announced that it has been accepted as a member of the PIP program, a joint government-business initiative designed to enhance border security, combat terrorism and organized crime, increase awareness of compliance issues, and detect and prevent smuggling. Available to importers, carriers, brokers, warehouse operators and associations that work in international trade, the PIP program teams private industry with the Canadian Border Services Agency (CBSA). To be admitted to the program, eligible companies must complete a memorandum of understanding, conduct a thorough self-assessment of their supply-chain security procedures, and meet periodically with CBSA representatives to exchange information and participate in awareness sessions that help detect illegal activities. In working with the CBSA, Vastera is building a working relationship with the Canadian government in relation to protecting the health, safety and economic prosperity of Canadians. In return for acceptance into PIP, Vastera offers support to its own clients throughout the application process. Once approved under the PIP program, Vastera clients can then consider participation in the Free and Secure Trade Program (FAST), a joint US-Canada cross-border program under which pre-approved carriers, importers and drivers can leverage expedited clearance into either country, transforming the compliance obligation into an opportunity to streamline the supply-chain. Additionally, Vastera is a certified customs broker, and an approved software provider of the CSA EDI.
- SITPRO (Simpler Trade Procedures) certified in the UK, whereby Vastera is an approved document supplier to produce and supply SITPRO's nearly seventy standard documents for its customers operating in the UK and Europe.
- WSK (Wewntrzny System Kontroli) certified in Poland, recognizing Vastera's exemplary quality and compliance management systems. Vastera's Managed Services operations in Poland received an Internal Control System (WSK) certification from the Polish Center for Testing and Certification. The vendor is also IQNet certified in Poland recognizing that its Managed Services operations have implemented and are maintaining a Management System which fulfills the requirements of the ISO 9001:2001 standard.
At the end of January, Vastera announced that it is expanding its Trade Management Consulting practice to the European Union (EU), whose creation complements the software and outsourced trade management solutions already offered by Vastera in Europe. Among the Trade Management Consulting services being offered in the EU are import/export compliance program assessments, process design and implementation consulting, and consulting in areas such as global SCM and trade lane redesign. Vastera hopes to leverage its strong in-country presence as it pursues new consulting opportunities in Europe, where it currently provides trade management operational solutions and software to companies such as Dell, Ford, Logica, Lucent, Nestle, Nortel Networks, Schenectady International, and Seagate Technology.
This concludes Part Two of a three-part note.
Part One detailed the merger.
Part Three will discuss the merger rationale.