Logistics Technology: GTM Smooth sailing?
Credit 10+2 for driving the Global Trade Management (GTM) growth that many analysts are predicting for 2009. And while many savvy global shippers are turning to it to manage import compliance, a surprising number still aren't sure how they're going to handle the new data demands.
By Bridget McCrea, Contributing Editor -- Logistics Management, 3/1/2009
Adrian Gonzalez opens a slew of e-mail messages every week from software vendors like Log-Net and TradeCard, all of which claim to have developed the best solution for managing the U.S. Department of Homeland Security's new Importer Security Filing (ISF) or "10+2" rule. As director of ARC Advisory Group's Logistics Executive Council in Boston, Gonzalez expects more e-mails ahead, along with white papers, webcasts, and other marketing blitzes, promoting solutions related to this regulation.
In many cases, those 10+2 solutions are being delivered as part of the more comprehensive Global Trade Management (GTM) software packages, which ARC segments into four specific areas: customs and regulatory compliance; trade financing and financial settlement; ocean/air procurement and contract management; and global trade visibility. "If there's going to be a bright spot in IT spending this year, GTM will probably be it," says Gonzalez.
Credit the new 10+2 regulation, first announced in January 2008, with driving much of that growth. The rule requires importers or their agents to submit 10 data elements to customs 24 hours prior to vessel departure, and ocean carriers to submit two additional data elements. The new rules have thrown some shippers into a tailspin, namely because existing regulations do not require importers to file some of this information at all, or they allow shippers to file within 15 calendar days after the shipment has arrived in the U.S.
The good news is that software vendors have mobilized to help shippers deal with these and other regulations that would be virtually unmanageable using manual processes. Here's a look at how GTM and ERP vendors are filling the void, as well as some steps shippers can take to deal with the increasingly complex global business environment.
We're not Ready Yet!
According to Viktoriya Sadlovska, research analyst with Boston-based Aberdeen Group, a recent survey of 349 companies (including 171 U.S. importers) found that 49.1 percent of respondents reported that they don't know how they'll handle the 10+2 requirement, while 21.6 percent are currently working to gain the required visibility to comply with the rule. Another 14.6 percent aren't preparing at all for 10+2, Aberdeen reports, while an equal number say they're indeed ready to deal with the new compliance.
"Right now, many companies are reconsidering the way they think about their global supply chains," says Sadlovska. "In the past, a company's supply chain partners (including carriers and 3PLs) handled many of the compliance processes. Now the actual data filing responsibility will fall on the company itself, thus increasing shippers' awareness of supply chain visibility and the need for GTM software."
Calling GTM an "emerging area" within the supply chain software sector, Sadlovska says the solutions are being delivered by a variety of vendors and come in both purchase-and-install and on-demand varieties. Much like it already has within the Transportation Management Systems (TMS) space, the latter is gaining ground due to the fact that it can be up and running quickly and at a lower upfront cost.
"The economic trends over the last year have pushed companies to become extremely cost-conscious," says Sadlovska. "The value of an on-demand GTM has been emphasized in these circumstances."
Gonzalez concurs, and says GTM is a good fit with on-demand thanks to GTM's reliance on trade content that must be updated regularly to ensure that shippers have the most accurate compliance information available. "Trade content is continuously changing," says Gonzalez, "and lends itself well to a subscription-based, central management system."
The Enterprise Resource Planning (ERP) sector is also gaining ground within the GTM sector according to Gonzalez, who singles out SAP as the market leader. The company launched its global solution several years ago and already has strong traction in the marketplace, he says. "SAP is able to present its clients with a broader value proposition," says Gonzalez, "namely because it has incorporated GTM as part of its larger, ERP offering."
Gonzalez says that Oracle plans to release its first GTM sometime in 2009, having announced its entry into the marketplace last year. "We expect similar success for Oracle's GTM," he adds, "based on the fact that there's a lot of pent-up demand from the ERP's current client base."
An Eye on Compliance
From her vantage point as president of Princeton, N.J.-based international trade advisory firm Customs & Trade Solutions, Inc., Suzanne Richer says shippers are beginning to understand the gravity of the new 10+2 rule, and are tapping solutions to help deal it. She gives credit to the U.S. Department of Homeland Security (cbp.gov) for posting the important compliance information on the Web, and for offering outreach programs in cities nationwide.
Richer says she sees 2009's "flexible enforcement period" as another plus for shippers that have yet to come up with a viable way to handle 10+2, and sees GTM playing a key role in getting those companies on track for the solid deadline in 2010. "Companies that start implementing compliance programs now will eventually be able to hit the target," says Richer. "On the other hand, those that are doing nothing are going to run into huge problems at the end of the year." (See Richer's feature, "Upgrading your compliance programs," on page 36).
Epson Portland, Inc., is a company that hopes to avoid those "huge problems" when 2009 wraps up and shippers are forced to comply with 10+2 or risk fines and penalties. Based in Portland, Ore., the company manufactures ink cartridges for Epson computer printers, imports from various international locations, and ships to sister companies worldwide. Already using a GTM from Integration Point, the company was beta testing the vendor's on-demand 10+2 solution at press time.
The solution takes electronic data from any supply chain partner able to send it, maps it to the requested data elements, and then provides the filer with a tool to fill in the blanks, if there are any. Using the solution, Epson Portland—which is ultimately responsible for the filing—can either handle the process itself or trust a third-party filer with the task.
The company's logistics supervisor says she's using the system to link item master details (for the security filing) with the item master detail that's already populated via the firm's GTM. Using shipment-specific Importer Security Filings (ISFs), she says she can import part classifications and origins into the forms to develop comprehensive item master details, which are then used for the 10+2 compliance.
One of the most attractive aspects of the Web-based solution for Epson Portland, says the logistics supervisor, is its ability to integrate with other Integration Point compliance solutions that are built on the same single, Web-based platform. "All of the item master detail is already in our foreign trade zone software," she says. "Rather than recreate an entire database that already exists, our GTM will allow us to use a 'link' function to input a part number and pull up the detail in order to comply with the 10+2 rule."
Unlike many companies that are still grappling with how they will comply with 10+2, Epson Portland is well on its way to being able to meet the end-of-year mandate for compliance. The best part, says the logistics supervisor, is that it will be done without having to hire any additional staff. "We're still going to have to input and manage data, and that will take some time," she says, "but I'm hoping that our GTM will help us do that as painlessly as possible."
Not A Cure-all
Look for more shippers to turn to GTM solutions as the 10+2 deadline looms. Also expect on-demand GTM solutions to gain ground, says Greg Aimi, research director at Boston-based AMR Research. "Trade regulations are changing all the time," says Aimi, "and luckily these GTM vendors are digitizing the books of rules and regulations for shippers to use."
And while GTM will play an important role in 10+2 and other regulatory compliance, Gonzalez warns that it's not a cure-all for every shipper. "You can put a GTM solution in place, but it won't solve the problem of how you're going to get the information you need from your freight forwarders, carriers, and overseas manufacturers," says Gonzalez, "nor is it guaranteed that the data is timely, accurate, complete, and presented in the right format for customs."
So while GTM goes a long way in serving as the systems that consolidate the required information, says Gonzalez, "changing business processes and using elements like EDI and Web portals must be considered when it comes to getting information from the various entities."
The good news is that GTM can provide significant benefits for companies, particularly in terms of preventing delays at customs. "If there are any errors or exceptions, shipments can be delayed for days or longer," says Gonzalez. There's also the possibility of fines and legal actions—neither of which help a shipper's bottom line—that can be avoided with a robust GTM system. Finally, from a financial standpoint, Gonzalez says the increased supply chain visibility afforded by GTMs translates into lower total costs of shipping across borders.
Add up those benefits and you get a recipe for growth within the GTM sector in 2009. "I can't tell you how many messages I get a week about 10+2," says Gonzalez. "It's the hottest topic out there right now, and that creates real demand from companies looking to use technology to solve the problem."
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