Global Trade Management technology is poised to reshape the global logistics industry.

Heres a look at the vanguard of this revolution, how they are changing your future and why joining in may be a business imperative.
BY KEITH HIGGINBOTHAM

Survey data provided by

6 AMERICAN SHIPPER: OCTOBER 2007

recognize the benefits are all too often left watching the successful from the sidelines. This is even truer when technology shifts so rapidly that complacent business models cannot or will not adapt. Whatever the truth of evolution in the biological world, survival of
the fittest and natural selection are primary factors in the success of any business. that, barring the introduction of a further innovation, this shift in the industry is inevitable.

B
Innovation

usiness technology has the power to enrich those that recognize the benefits and take advantage of the opportunities presented. Those that do not

As long as there has been business, technology and its innovations have provided that extra evolutionary advantage that has allowed business leaders to succeed. From the invention of the abacus to the creation of modern telecommunications, technological innovation has been the primary tool of business evolution. Those that ride these waves of innovation surge forward; those that do not are left behind to play catch up. The logistics field has seen its own share of technology revolutions, and in each case, the early adopters have scored early business victories. One needs to look no further than the container revolution that began in the late 1950s. Vanguards of the technology such as Malcom McLean and Matson Navigation surged so far ahead in the industry that it took others years to catch up. Today, another revolution is taking place in the logistics industry. While not as visibly transformative as the shift from cargo nets to gantry cranes, this digital revolution promises to be as economically profound. Also unlike those technology shifts of the past, there are no cannon shots to mark this revolution no stormings of proverbial Bastilles. This is the quiet groundswell revolution of Global Trade Management technology, and its proponents are rallying beneath the tricolor banner of visibility, efficiency, and flexibility. Like other key technological revolutions, it is also becoming clear

A smaller world
No one can deny that the world is becoming a smaller place. Global communications and travel have brought the furthest corners of the habitable world within almost instantaneous reach. Inter-

John Fontanella vice president of research, AMR Research

The revolution is that companies are slowly and quietly drawing back responsibilities that they just would hand off to a third party before. It is clear that these firms realize they must have this kind of information to have integrity in their supply chain.

national logistics has matured accordingly, allowing goods to be moved over ever-increasing distances within an ever-decreasing amount of time. As the complexity of global goods movement has grown, however, the mechanisms for keeping it working smoothly have not kept up with the inherent philosophy of the logistics science itself namely efficiency. There is no arguing that the actual movement of goods today is more efficient than at anytime in history. However, for the most part, the philosophy of efficiency has not translated over into the processes behind the movements of those same goods. Only the whole system functions in the world of efficiency, while the parts seem to reside somewhere else. Consider this: Today, a cargo container can be moved from China to California in less time than it took Thomas Jefferson to travel the 250 miles from his home in Virginia to the First Continental Congress in Philadelphia circa 1770. And yet, the movement of this single container of goods may generate more paperwork than Jefferson himself created during his entire 16 month stay in Philadelphia, including the Declaration of Independence. Despite this tidal wave of data to move a single container, this data remains very passive. It is listed, collated and stored, but until recently rarely available on demand in real time. Without the technology to transform this passive data into active information, visibility remains an elusive goal of the industry. Lacking this visibility, it remains a challenge for logistics firms to maximize their responsiveness and flexibility to both customers and their own business.

Revolutionary
However, Global Trade Management technology namely GTM software and information systems is providing solutions to all of these problems. Global Trade Management technology seeks to streamline all aspects of a global supply chain, from orders to logistics to settlement activities to financials all in the name of improving operating efficiencies and cash flows. The promise is drastically lower cost supplies and operations, without a concomitant increase in costs. From a pure data management perspective, data only turns into information when
AMERICAN SHIPPER: OCTOBER 2007 7

LOGISTICS

you can do something with it, said John Fontanella, vice president of research for Boston-based AMR Research. Doing something with it, is the key behind GTM technology and the data revolution that it is fomenting throughout the logistics industry. If Thomas Jefferson was correct, and every generation needs a revolution, then by definition there must be an identifiable reason for this need. Fontanella and AMR recently partnered with American Shipper to conduct an extensive survey of the logistics industry to gain some insight into this reason, who the vanguard of this revolution is and how they are changing the future of the industry. Conducted late this summer, the survey confirms, possibly for the first time, that the logistics industry is waking to the realization that this data revolution is here and it is quietly reshaping the future of global trade. One of the key findings of the AMRAmerican Shipper survey is that logistics firms are slowly realizing the importance of controlling all of the data they generate, not just small segments of it. The revolution is that companies are slowly and quietly drawing back responsibilities that they just would hand off to a third party before, Fontanella said. It is clear that these firms realize they must have this kind of information to have integrity in their supply chain. What Fontanella, and the survey, point to is a shift in the control of logistics data. Instead of allowing an outside vendor to control all of their data and then just draw on that passive data, a growing number of logistics firms are realizing that they have to be in control of this data in order to manage and dictate how it is used. Using GTM tools, firms are beginning to transform this passive data into active information that is translating into greater visibility, greater efficiency and more flexibility.

C art 1

Companys primary business

High tech Consumer products 19% 11% 11% 11% 10% 6% 3% 3%

27%

19% 11%

Industrial products Retail Automotive Chemical Aerospace and defense Pharmaceuticals/Bio tech

3% 3%

6% 10%

11% 11%

Other 27% TOTAL 100%

Size of company by 2006 revenue

21% 50% 10% 6% 9% 5%
$1 billion + $500-999 million $200-499 million $100-199 million $50-99 million 50% 21% 10% 6% 5%

Less than $50 million 9% TOTAL 100%

Respondents job level

13% 20% 8% 5% 3% 49%
Manager Director Staff Analyst Executive (SVP, VP, GM) C-level (CEO, CIO, CFO, etc.) 49% 20% 13% 8% 5% 3%

Other 3% TOTAL 100%

Respondents job function

Logistics/supply chain distribution 46%

30%

Other

30% 18% 4% 1% 1%

18% 4% 1%

Other logistics/supply chain Procurement CIO Supply chain/logistics IT

46%

Two approaches
The AMR-American Shipper survey drew on the responses of more than 140 logistics companies, with a statistically healthy division of respondents across the high-tech, consumer products, industrial products, retail, and automotive sectors. The remaining responses also offered insight into the global trade management workings of chemical, aerospace and defense, pharmaceuticals, legal, compliance, trade management, and oil and gas firms. Global Trade Management technology varies from vendor to vendor, but there are two basic models system-in-a-box model
8 AMERICAN SHIPPER: OCTOBER 2007

Corporate or divisional IT 1% TOTAL 100%

Respondents involvement in companys decision to purchase technologies, services for Global Trade Management
32% 25%
Member of a group responsible for decisions 37% Leader of a group responsible for decisions 32% Provide advice to decision makers Solely responsible for decisions 25% 4%

37%

4% 2%

No involvement in decision making process 2% TOTAL 100%

Source: AMR Research.

SECOND TO NONE
Mediterranean Shipping Company (MSC) the second largest ocean container carrier in the world, grows by leaps and bounds with new vessels, new containers, expanded ports of call, terminal operations, inland depots, state-of-art information technology, combined with creative logistic planning and always competitive rates.

Standing tall and meeting the challenges of todays container shipping industry, MSC comes inSecond To None

MEDITERRANEAN SHIPPING COMPANY (USA) In

as agents for MSC Mediterranean Shipping Company S. A. (212) 764-4800, NEW YORK
www.mscgva.ch
ATLANTA 770 953 0037 LONG EACH 714 708 3584 MIAMI 305 477 9277 ALTIMORE 410 631 7567 NEW ORLEANS 504 837 9396 OSTON 617 241 3700 NOR OLK 757 625 0132 CHARLESTON 843 971 4100 CHARLOTTE 704 357 8000 CHICAGO 847 296 5151 CLEVELAND 440 871 6335 DETROIT 734 955 6350

WE BRING THE WORLD CLOSER

HOUSTON 713 681 8880 VANCOUVER CAN 604 685 0131

WILMINGTON N C 910 392 8200

AHAMAS REEPORT NASSAU 242 351 1158

MONTREAL CAN 514 844 3711

TORONTO CAN 416 231 6434

LOGISTICS
C art 2

Indicate your companys use of software applications or third party services to automate or manage each of the following functions
Denied party screening
Using packaged OR in-house developed software Using third party service Manual, not automated Not applicable

Customs clearance regs. for import, export

Product harmonization classif. for duties, taxes

19%

36%

29% 18%

35%

42% 27%

50%

17%

19% 4% 4%

Security clearance regulations

21% 11% 24% 45%

Electronic filing regulations

14%

Landed cost calculations (duties, taxes, logistics, etc.)

27% 17%

Letters of credit
13% 19% 37%

Trade financing
26% 48% 17% 10%

15% 22%

50% 11% 45% 32%

Electronic paperwork
23% 13% 31%

Invoice reconciliation and claims automation

14%

Currency conversion/ tax services

Insurance
14% 26% 22%

Supply chain visibility for global inventory, orders, shipments, shipment status
24% 45% 21% 10%

33%

30% 48% 23% 15% 31%

30% 9%

38%

Role-based Web portals for carriers, forwarders, suppliers, shippers, receivers

23% 26% 20% 31%

Event management (with milestones and automated notification)

22% 26% 23%

Transportation procurement and contract management

Multi-modal transportation planning and scheduling

21% 22% 16% 42%

Business intelligence applications for analyzing performance

20% 25% 12% 43%

60% 14% 19% 7%

29%

Source (for all c arts): AMR Research.

and software-on-demand. percent, by all firms invested in box The traditional software approach of model systems. buying software and installing it on an Electronic paperwork and currency coninternal computer system is the box model. version were additional uses that ranked While often backed up with customer and high with users of the box model, the technical service, the box model Keit Hi inbot am joined American is a one-time purchase. The Shipper as West Coast associate customer owns the software to editor in February, and is also editor of do with what they want. California Connection. He previously Often times, customers will served as communications specialist modify this software or even and multimedia manager for the Port have the software vendor deof Long Beach, and from 1999-2002 velop customized versions. was a reporter for the Long Beach Supply chain visibility ranked Press-Telegram. as the No. 1 use, at about 50
10 AMERICAN SHIPPER: OCTOBER 2007

AMR-American Shipper survey said. The on-demand model utilizes a third-party computer system to host the software, thus eliminating the need for large up-front costs and maintenance. With this model, the customer purchases access to the vendors software instead of purchasing the software itself. It works much like a subscription and the cost is typically much less than the more traditional box model. Access to the on-demand software is provided via an Internet Web site, and is one of the key

LOGISTICS

selling points to the model customers can access the software anywhere they can access the Internet. Another plus to the on-demand model is that potentially any customer of the particular vendor, because they are all sharing the same remote server system, can exchange information. Over the past several years, more and more firms have begun moving to the ondemand model. According to the survey, nearly half of the respondents utilize GTM systems from a third party vendor for electronic filing of regulations. On-demand systems were also used for electronic paperwork, customs clearance and denied party screening for 30 percent to 40 percent of the respondents. The survey also found that some firms utilize examples of both models, each for different specific functions. For example, two-thirds of respondents in the retail sector utilize on-demand systems for customs clearance and electronic filing. Nearly half of the same respondents utilize box model systems for management of landed costs and for invoice reconciliation. This is not to say one GTM model is better than the other, however, certain sectors seem to favor certain approaches. The survey indicates that at least in some functions, such as handling electronic paperwork or

C art 3

Satisfaction with software currently in use

(Top 2 box scores)
70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 65% 56% 47% 42% 38% 37% 36% 35% 34% 34% 31%

28% 27% 26% 25% 25%

22% 21%

1. Insurance 2. Letters of credit 3. Security clearance regulations 4. Transportation procurement and contract management 5. Denied party screening 6. Currency conversion/tax services 7. Trade financing 8. Product harmonization classification for duties, taxes 9. Invoice reconciliation and claims automation 10. Event management (with milestones and automated notification)

11. Business intelligence applications for analyzing performance 12. Electronic paperwork 13. Multi-modal transportation planning and scheduling 14. Customs clearance regulations for import and export 15. Supply chain visibility for global inventory, orders, shipments, and shipment status 16. Role-based Web portals for carriers, forwarders, suppliers, shippers, receivers 17. Landed cost calculations (duties, taxes, logistics, etc.) 18. Electronic filing regulations

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LOGISTICS

in transportation planning, neither model dominates with users. As for what is not being handled by GTM technology, the most clear-cut examples are in the trade financing, security clearance, letters of credit, transportation procurement, and contract management functions. Each of these functions were reported by at least 65 percent of respondents as being either not applicable to their business or as still being done manually.

C art 4

Satisfaction with third party service currently in use

60% 50% 40% 30% 20% 10% 0% 58% 56% 48% 48% 43% 40% 38% 37% 33% 33% 31% 31% 30% 28% 27%

(Top 2 box scores)

Current GTM functions

Functions being addressed by GTM technology within the surveyed firms often depends on the type of GTM system being used. The survey found that the largest usage by firms with in-house or on-demand GTM technology is for supply chain visibility. As one of the core functions of GTM technology, this is not surprising. Filing of electronic paperwork and currency conversion/tax services each scored about 30 percent, as these are functions obviously done well by regular off-the-shelf business software. More interesting is what is not done by GTM technology. Insurance, electronic filing of regulations, letters of credit, security clearance regulations, and trade financing all scored below 15 percent. Of the surveyed firms that utilize third party vendors for providing GTM service, denied party screening, customs clearance regulations, and electronic paperwork all came within 30 percent to 40 percent. Electronic filing of regulations ranked in the top slot for users of third party services, with half of the firms surveyed saying this is a use of their provided GTM service. Transportation procurement, contract management and product harmonization for duties, taxes, etc. ranked as a manually performed function by 50 percent to 60 percent of the respondents. Invoice reconciliation and security clearance regulations also scored above 45 percent, but worth noting was the number of respondents that still perform landed cost manually. Landed costs, those costs that include the per unit total transportation costs, remain a difficult area for GTM to crack into. Landed costs, and how they affect the per unit price of goods, can often make or break the profitability of an entire shipment. More than half of all firms surveyed said they do not perform landed cost calculations. Nearly half of these, the survey revealed, are likely to be either doing them manually in a rough back-of-the-envelope method, or simply not doing them.
12 AMERICAN SHIPPER: OCTOBER 2007

25% 18% 15%

10

11

12

13

14

15

16

17

18

1. Customs clearance regulations for import and export 2. Product harmonization classification for duties, taxes 3. Security clearance regulations 4. Trade financing 5. Electronic filing regulations 6. Denied party screening 7. Invoice reconciliation and claims automation 8. Electronic paperwork 9. Landed cost calculations (duties, taxes, logistics, etc.) 10. Insurance

11. Currency conversion/tax services 12. Letters of credit 13. Role-based Web portals for carriers, forwarders, suppliers, shippers, receivers 14. Event management (with milestones and automated notification) 15. Multi-modal transportation planning and scheduling 16. Business intelligence applications for analyzing performance 17. Supply chain visibility for global inventory, orders, shipments, and shipment status 18. Transportation procurement and contract management

Companies have a difficult time making precise allocations for landed costs, Fontanella explained. He added that without the visibility into the supply chain that GTM technologies offer, and the data provided by the same, it is virtually impossible for a firm to calculate accurate landed costs. For this reason, looking at a firms ability to perform landed cost calculations and how well they utilize this information is a good bellwether of the firms integration of GTM technologies. Without the data provided by GTM, firms face little more
C art 5

than a cursory or very average calculation. Due to this, many firms do not even attempt to perform the rough calculations. Inversely, firms that show a high degree of GTM automation are typically the same firms that perform very accurate landed cost calculation. Companies that depend on efficiencies in transportation to be profitable, like chemical, consumer goods, retail, know their landed costs and have become very good at understanding them over the past five years, Fontanella said. They have also become very good at assigning the

Which statement best describes views on the best way to manage global trade?
70% 0% 20% 40% 60% 14% 80% 70% 14% 7% 4% 7% 4% 4% 100%

Using a mix of processes, software, and 3PL/freight forwarders Internally, using best-of-breed software Internally, using our own home-grown systems Internally, using by ERP vendors GTM software

Externally, using a 3PL or freight forwarder 4% TOTAL 100% Source (for all c arts): AMR Research.

WITH A VIEW THIS CLOSE, GLOBAL TRADE CAN FEEL JUST LIKE LOCAL TRADE.

All of a sudden, Kuala Lumpur looks a lot like Cincinnati. With our on-demand global trade and logistics portal, you can achieve business mastery in any language. You get everything you need and nothing you dont. And you pay only for what you use. No one else has our technology or our network. Its no wonder 32 of the Fortune 500, and thousands of other global customers, count on us to make worldwide trade more efcient and cost-effective. Want to take a closer look? Thats easy. Go to www.gtnexus.com, and get activated.

LOGISTICS

C art 6

What is the biggest challenge your company faces with Global Trade Management?
Challenge of integrating data with other supply chain systems Limited budget other technology priorities 22% 22% 16% 9% 8% 6% 5% 4% 4%

22% 4% 4% 4% 5% 6% 8%

22%

Incorporating trade content into operations Difficult to assess ROI Challenge of integrating data with other enterprise Gaining access to trade rules, tariffs and taxes Cost to deploy software Complexity of application software Other

16% 9%

Cost of 3PL service 4% TOTAL 100%

landed costs to the business units that incurred them, so they can measure how well a particular unit is at managing their international trade.

Satisfaction
Whatever the system, satisfaction with GTM systems among retail and process manufacture users at least for some functions is fairly high. Retailers were 100 percent satisfied with the job that GTM software is doing for their firms regarding handling functions such as letters of credit, trade financing, and managing electronic paperwork. Process manufacturers firms ranked satisfaction with GTM software to handle security clearance regulations, product harmonization and electronic handling of regulations. The highest level of satisfaction that discrete manufacturers surveyed could offer up for GTM software was a 50 percent ranking for handling insurance needs and a 40 percent ranking for transportation procurement. A caveat to this would be that while discrete manufacturers rated at least a minimum of 17 percent satisfaction with every 18 functions surveyed for, process manufacturers and retailers found some functions of GTM badly failing. Process manufacturers rated the handling of electronic paperwork by GTM software at zero percent satisfaction, and retailers offered up the same rating for several distinct functions including security clearance regulations, denied party screening, event management, customs clearance regulations, and electronic filing regulations. One explanation of this lack of satisfaction in nearly 40 percent of the function categories could be that retailers have long had a very high degree of reliance on GTM automation, and as such have a
14 AMERICAN SHIPPER: OCTOBER 2007

very sophisticated palette when it comes to their needs. Looking at satisfaction with GTM services provided by third parties, the results change dramatically. Retailers only find a bottom-of-the-barrel rating for currency/ tax services and transportation procurement while offering a rating no higher than 80 percent for the handling of security clearance regulations for any of the 18 functions in the AMR-American Shipper survey.
C art 7

Process manufacturers found the analysis tools for GTM performance to be worthy of a 100 percent rating, and deemed no function worthy of lower than 25 percent, except landed cost calculations, which rated a 17 percent satisfaction rating. Discrete manufacturers, that group so seemingly unhappy with GTM software, struck a kinder note in regards to third party services, finding zero percent satisfaction only in the transportation procurement function.

Level of agreement for the following statements

Agree Disagree No response

My company has a good handle on total landed costs for all products.

My company finds it My company is/would consider challenging/difficult to obtain utilizing the services of a 3PL or secure credit/trade financing. for trade financing.

42%

39% 19%

78%

59% 17%

14% 8%

24%

C art 8

Will spending on Global Trade Management software and services increase, decrease or remain the same in the next 12 months?
1% 51% 0% 20% 40% 60%

Increase Decrease Remain the same

51% 1% 30%

Not sure at this time 18% TOTAL 100%

30% 80%

18% 100%

Source (for all c arts): AMR Research.

LOGISTICS

Best solutions
Survey respondents overwhelmingly agreed that the one-solution-fits-all idea of GTM technology is firmly dead. Seventy percent of firms believe that the best solution for GTM is using a mix of internal processes, software and third party services. Retailers were the most certain, with 80 percent voting for the mixed-use solution. Both manufacturing types, process and discrete, voted for the mixed-use solution by about a two-thirds margin. The nearest second choice, at an average of about 14 percent was keeping all services internal using the best-of-breed software Home grown systems, GTM systems by the firms ERP vendor, or solely by outsourcing GTM to a third party service provider all ranked in single digits.

reporting a planned increase, the average increase in investment in GTM software and services over the next 12 months would be 33 percent. Those that reported a planned decrease reported a much smaller amount, with the average planned decrease reported at 16 percent.

Endgame
The bottom line of GTM software and services is, well, the bottom line. The three core areas addressed by GTM technology, as mentioned above, are visibility, efficiency and flexibility. GTM systems provide a multitude of new viewing,

monitoring and collection points to firms that provide volumes of data on each shipment. The GTM systems allow this data to be converted into information that can be utilized to increase the overall efficiency of the supply chain. This information creates knowledge that increases flexibility by allowing firms to react better, quicker and more accurately. By its very nature GTM systems change a company over time, Fontanella said. Anytime you have more knowledge available, a firm is better able to become more flexible in the face of uncertainty.

Challenges
Respondents listed two main challenges facing their firms regarding GTM, one a technology challenge and one a financial problem. About one-fourth of those firms surveyed reported integrating their data with other supply chain systems as the single largest vexation. On the other side of this, that means that 75 percent of the firms did not find this a challenge, so it is unclear if this is a sweeping problem or one of those isolated problems with certain firms. The second challenge was limited technology budgets. About 22 percent of the firms reported that budget limitations within their firms are a problem in regards to GTM. Again this leaves 78 percent of the firms who dont feel this is a problem. At the other end of the spectrum, and good news for third-party service providers, was the fact that nearly all the firms surveyed agreed that the cost of 3PL service was not a challenge in any way.

Future spending
Abraham Maslow, the 20th century American philosopher, made the point that, it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail. At least half of the firms surveyed realize that their GTM solutions require more than just a hammer. Only 1 percent of the firms surveyed said they would be decreasing the amount spent on GTM software and services over the next 12 months. While 18 percent reported they were not sure and 30 percent said their spending would remain the same, 51 percent reported that their spending would increase. The survey also found that of those firms
AMERICAN SHIPPER: OCTOBER 2007 15

Southern comfort
Shippers, carriers settle into South Atlantic market.
Businesses are waking to the fact that the stereotypical sleepy South no longer applies. Shippers are flocking to the region with distribution infrastructure to serve the regions burgeoning population. Carriers, buoyed with the success of all-water services from Asia and the promise of a vastly expanded Panama Canal, are quickly expanding their networks to serve the shippers.

Photo 2006 Georgia Ports Authority/Russ Bryant

16

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