Global Trade Solutions: Competition, Challenges, and User Recommendations

Competition

TradeBeam, one of the largest global trade management (GTM) solution providers in the market, provides an indisputably competitive product. Through a series of mergers and in-house, organic developments, TradeBeam has developed or is in the process of cultivating a holistic approach to global trade, encompassing import shipment visibility to trade compliance. However, the GTM market is characterized by early adopters and is rapidly evolving and a company of TradeBeam's current stature, with only several years of existence and an estimated (less than) $20 million (USD) in annual revenues, might not be able to maintain its competitive position. Despite TradeBeam's immaculate financial position and slew of marquee customers, TradeBeam may find itself struggling against current and potential competitors in the long term, especially against those with greater name recognition, and financial and other resources. The market is competitive, rapidly evolving, and highly fragmented, and one should expect only intense competition in the future. In-house development efforts, consulting companies, other software companies, financial institutions, logistic companies, customs brokers, forwarders, and third-party development efforts will strive to increase their market share.

In addition to the changing role of banks, third-party logistics (3PL) providers are also focusing predominantly on the management of the shipment booking through proof of delivery process and the management of logistics costs. As user companies continue to embrace the value of broader GTM solutions, logistics providers will be looked upon to provide leadership and to add more value to the entire order life cycle, including purchase order management, total landed cost modeling, insurance and claims, import/export compliance, and security regulations. 3PL providers will also be sought to seamlessly integrate invoice reconciliation and trade financing systems.

Like other involved parties in global trade, 3PL providers must still mitigate the risks of providing correct and timely documentation relative to transportation, customs, and settlement, including letters of credit (LC). They will need a corporate-wide solution to protect them from liability from trade compliance issues such as denied parties and anti-boycott. Thus, while TradeBeam would prefer to partner with banks, 3PL providers, or even some logistics management vendors like G-Log or Xporta (now defunct), these entities will likely decide to grab a "bigger slice" of the GTM pie for themselves via acquisitions la JPMorgan Chase and Vastera, or through in-house developments and competency building. For more information on the JPMorgan Chase acquisition of Vastera, see Merging Global Trade Management with Global Finance.

Recently, the number of standalone GTM vendors is quickly dwindling, as a result of mergers including SSA Global and Arzoon (see SSA Global Forms a Strategic Unit with an Extended-ERP Savvy); TradeBeam with Open Harbor, Qiva, etc.; and Kewill and TradePoint (which had previously acquired ClearCross). One should also expect GTM software technology and managed services to continue to merge. These acquisitions continue to indicate that more accelerated restructuring in the logistics services market is inevitable, because there is a plethora of point solution providers that specialize in narrow areas, from land cost calculation, visibility, collaboration, export compliance, trading document generation, hazardous material handling, to more complete transportation management capabilities.

There are, however, a number of remaining players in several niches—just enough to muddle the message and nibble at the potential revenues of full-fledged GTM players. For example, we could talk about the remaining ITL players like NextLinx, Precision Software, Intermart, Nistevo, MercuryGate, Xporta (now defunct), Tarrific.com, OCR Services, Importers Software Services, MSR Customs Corp., Questaweb, GT Nexus, and LOG-NET; global settlement players like Bolero.net, TradeCard and S1; and a number of others vendors that are, arguably, more specialized in supply chain electronic management (SCEM), and visibility and shipment tracking like Viwelocity, Descartes Systems, Management Dynamics (through recently acquired BridgePoint), Timogen, etc. However, none of these vendors handle all the requirements of automating global e-business. To provide more complete offerings, some of these vendors have apparently merged or have acquired other companies.

Still, companies that are comfortable with using freight forwarders to handle the details of cross-border movement and only want critical events like departed origin, estimated arrival date and time, arrived at customs, cleared customs, etc., to be visible, may be better served by supply chain management (SCM) vendors, and stand-alone SCEM and visibility solutions. Namely, supply chain planning (SCP) vendors like i2 Technologies, Manugistics or Logility, and SCE vendors like Manhattan Associates, RedPrairie, HighJump, and Provia offer visibility and trading partner collaboration components to provide transparency of inventory, orders, and shipments across the entire trading network. These systems do not typically have the capability of sharing demand forecasts with suppliers, but, in addition to products like TradeBeam's CIM Solution, there are others offered by the likes of OneNetwork, weSupply, RiverOne, or Valdero.

Furthermore, to build a complete and fully-functional GTM system, any user enterprise will have to integrate it with transportation management systems (TMS), enterprise resource planning (ERP), supplier relationship management (SRM), partner relationship management (PRM), and other adjacent enterprise applications. We may very well be talking about a full-fledged logistics resources management (LRM) system that would provide total "command and control" over the entire spectrum of global logistics activities, including transportation procurement contracting, shipment planning and optimization, load tendering, trade compliance, customs reporting, shipment and inventory visibility, warehousing, reverse logistics. Such a system would manage all of these events over the Internet, so that all internal managers and trading partners can access logistics information. This approach would still be limited in assisting all the critical elements of global trade including LC, foreign exchange, invoice management, and trade financing, but, at this stage, there is no such thing as a native LRM application that covers all these bases.

This is Part Five of a five-part note.

Part One discussed TradeBeam and GTM.

Part Two presented TradeBeam's background.

Part Three covered TradeBeam's tackling of the supply chain.

Part Four covered TradeBeam's GTM solution blueprint.

Shippers Balk at One System Fits All

Currently, TradeBeam is far from espousing an LRM system, as it is focusing on delivering intrinsic GTM capabilities, such as foreign exchange, transfer pricing, contract management, compliance audit, and inter-company orders. On the other hand, some point solutions might still have exceptional functional traits that appeal to customers who are still cutting-back on enterprise-wide software purchases. Due to weak economic developments, shippers currently favor purchasing specific pieces of a vendor's software lineup, as customers often want partial solutions, not the entire product line. Consequently, many are buying one piece at a time and are adding modules on an as-needed basis.

Some believe that there are too many silos of technology for any vendor to handle all aspects of global logistics. Many companies may decide to opt for separate packages for trade compliance, TMS, forecasting, and other tasks. Given logistics and manufacturing is frequently outsourced, companies need technology to work with the counterpart systems used by their carriers and 3PL providers. Trying to roll all of these diverse capabilities into a single application, based on a single set of universal data standards, is certainly daunting, if not the wrong approach. No doubt, trying to integrate disparate systems has always been a challenge; however, the emergence of Web services-based architectures may ease some of these integration issues, at least in a loose-coupled and hosted mode.

For instance, a freight forwarder and customs broker may first buy modules to help conduct denied-party screenings and put together landed-cost quotations, based on customers' requests for assistance on specific activities. The software typically steps in when automation can meet customers' requirements faster and more efficiently than existing, pedestrian capabilities. TradeBeam rightfully hopes that many of its seed applications, such as inventory replenishment, trade compliance, event management, LC management or trade financing, which are scattered, though widely used throughout its install base, will lead to up- and cross-sell opportunities within the broader TradeBeam 3.0 GTM platform. Trouble, however, might come from the many best-of-breed solutions featuring exceptional functional traits, which will give TradeBeam a "run for its money," so to speak.

For example, landed cost field providers like Vastera, Kewill, TradeBeam, and NextLinx are primarily subscription consultants and information brokers who provide up-to-date, nation-by-nation trade information on complex and changing terms; the rules and conditions that dictate duties; trade agreements; and transfer of ownership. However, Xporta (now defunct) brings something new to the table—a decision support engine that can combine total landed cost with the customer's sourcing inputs to deliver the total cost of ownership (TCO) rationale for multiple plant and supplier scenarios. The vendor has an optimization tool that could truly adjust a large number of variables and what-if scenarios to fully understand the user enterprise's best alternatives when considering TCO.

Possibly the most important things Xporta (now defunct) can contribute (beyond landed cost data) is the betterment of sourcing on inventory and cash flow, since the engine also allows the user to assign risk in its calculations. In turn, this may allow users to estimate required buffer stocks of inventory, or determine if it would be profitable to negotiate with the supplier to build a local distribution center. The risk does not only have to apply to a country. It might be the risk associated with a specific supplier, based on quality level and yield rate, such as the cost of switching new suppliers, in terms of the cost of evaluating their capability, or the cost of introducing new tooling for the supplier. These costs do not show up in the nominal unit price, but the customer will still incur them if and when the customer makes the switch. Xporta's (now defunct) TCO optimization solution may often be a complementary add-on to GTM or landed cost vendors, sourcing, or SRM/e-procurement platform vendors.

User Recommendations

The moves of major GTM players indicate the need of a software category that handles incomprehensible regulations, complex supply chains, and inevitable disruptions, due to the weather or geopolitical events, etc. As enterprises move production or continue to source from remote places to (supposedly) lower the costs of item, complexity will inevitably be introduced into the supply chain, which often results with bloated multi-echelon inventories or lower customer service levels. Companies that need to manage intricate details of the movement of their goods across borders, such as trade financing, regulatory compliance, accompanying detailed documents, HTS coding, multimodal carrier handling, brokers management, etc., might want to look for a full-fledged GTM system. A full-fledged ITL or GTM system is ideal to know the true total landed costs, ensure compliance with customs regulations and denied parties restrictions, and to properly record relationships between buyers and sellers, and the source of supply- and product-related restrictions, etc. The solution should be able to track all the activities and incremental costs as the shipment is processed from point of origin to final point of receipt.

However, while this technology (like most other IT tools, for that matter) can provide critical assistance, it will not replace import and export savvy, and will not eliminate the need for freight forwarders and customs brokers. Now that US laws has shifted responsibility and the related risk of customs compliance to the importer, human experience and expertise may become more important than ever to manage financial decisions or negotiate cultural issues. It is not just a matter of diligently inputting data. Everyone has to be preemptive in managing international trade.

Once the GTM or ITL software is fully implemented, a dedicated staff will have to meticulously update and manage the content and programs. More importantly, trade experts will be needed to interpret reports and respond appropriately. GTM software typically provides an indication whether there is going to be an issue, whereas users will have to follow up on those alerts by researching other sources, either electronically or in person. The software alone will never completely prevent logistics delays and disruptions either. Optimized processes, procedures and training are needed, but even then, many problems caused by factors beyond anyone's control may still arise.

In any case, manufacturers also need to make sure their outsourcing providers have the necessary global trade and logistics knowledge, skills, and technology. They might want to audit their outsourcers to ensure that documentation is being done properly. In order to thoroughly monitor customer transactions, new account openings, and relationships and timing between account transactions, large corporations must ensure scalable solutions are capable of handling high volumes of transactions.

Customs duties and tariffs, as well as associated rates of exchange and transportation costs should be available to accurately calculate the total cost of goods, which requires data models and integration at the product and item level, between different, pertinent systems such as the ITL system and ERP or order management, warehouse management, transportation. While integrated GTM features by ERP providers will have the logical advantage of unified data, there is usually a trade-off. The software will provide only the procedural framework, thus the user must build in business rules and regulatory content.

The complexity and specialization of the GTM space makes it hard for any aspiring vendor to handle all the requirements of automating global e-business, and all of these issues and requirements should be taken into account during an ITL or GTM system selection, whether a stand-alone solution or within a broader SCM framework. Therefore, owing to the still fragmented market, one should keep in mind that each GTM package will have its own unique combination of features and components, and will require varying degrees of data input and updating by users.