From frazzled to efficient
Two shippers tell how global trade management software helped make their import/export operations more efficient, timely, and compliant.
By Bridget McCrea, Contributing Editor -- Logistics Management, 9/1/2006
In today’s global economy, international trade has become commonplace in most industries. Yet companies still find it challenging to make the right decisions and effectively manage their international operations.
That’s evident in the list of concerns cited by importers and exporters in a recent Aberdeen Group study. Respondents said they worry about such issues as a lack of visibility into supply chain processes and the diffi culty of managing growing global operations and distribution networks.
With so many concerns, importers and exporters must find the right systems for managing global trade. Some choose the manual route; others let computers handle some of the work while employees take care of the rest. Still others rely on global trade management (GTM) software—solutions that streamline and automate many of the trade-compliance, logistics, and documentation activities that come into play when doing business overseas.
Among the growing number of companies using GTM software are apparel retailer American Eagle Outfitters and software developer National Instruments. Both are realizing significant returns on their software investments, including the peace of mind that comes with knowing that they are complying with the complex rules and regulations of global trade. We asked for the lowdown on those implementations and subsequent use of their GTM systems. Here are their stories.
American Eagle Outfitters: It changed my life Managing imports for a growing company like American Eagle, a Warrendale, Pa.-based apparel manufacturer with 800 retail locations nationwide, is a challenge for Hank Shechtman, the company’s executive vice president of imports. His group is responsible for all inbound international freight, from the time a purchase order is issued until the orders clear customs and delivery orders are issued.Every import shipment requires nine different validation checks of such information as tariff number, ship date, number of units, and mode of transportation. Until 2004, Schechtman’s department relied largely on e-mail messages from overseas vendors and manual documentation checks.
"If a [ship] from Hong Kong came in with 30 purchase orders on it, then 270 validations had to be done manually," recalls Shechtman. That worked well enough when American Eagle was still a small player in the apparel market, but it became cumbersome and inefficient when the company began to grow. Today the retailer imports about 9,000 containers and more than 15 million pounds of air freight annually.
"We did an incredible amount of due diligence on the seven offerings, then came up with the one that met our needs," says Shechtman. He estimates that the project—from concept to completion—took about 16 months, including "hundreds of hours" of meetings with GT Nexus to go over minute details. "We wanted that slow, steady pace to make sure that everything was done right the fi rst time," he says.
American Eagle implemented its new trade management solution in phases that encompassed three main categories of import-related transactions: contract management, electronic auditing, and container utilization.
Instead of the spreadsheet it used to use, American Eagle now manages its entire contract-bidding process through the GT Nexus system, which produces bid templates and forwards them to existing and prospective suppliers.
This system also helps American Eagle comply with federal law regarding accurate reporting of corporate data. "Every bid and event related to it is recorded," says Shechtman. "We have a complete history, which goes a long way in complying with Sarbanes-Oxley. We can show anyone—from the board of directors to an outside auditor—what we did, why we did it, and how we came up with our decisions."
The second phase included electronic auditing, which replaced a manual system that reviewed just 65 percent of freight invoices. Through the GTM system, American Eagle now accepts electronic feeds from its carriers and freight forwarders, and then compares quoted prices to the amounts billed. Vendors are automatically notified of discrepancies by e-mail. That’s saving a significant amount of time and money: Previously, the importer had one full-time employee devoted just to checking freight invoices.As for containerized shipments, Shechtman and his team can now validate the nine different points much faster than before. The system also helps his group address any problems such as an unfeasible shipping date) much earlier in the process.
Moving from a largely manual to a completely automated system wasn’t easy for the import group, which wrestled with the issue of inaccurate data and the need to "scrub" information before it could be entered into the new system. "The data being run against the invoices had to be pure and true," Shechtman explains.
Another issue was having the capability to update purchase orders by transportation mode. "Sometimes we change from sea freight to air freight quickly, and the changing of the order wasn’t happening quickly enough," says Shechtman. "As a result, our overseas groups were searching for airfreight orders that were still showing up as sea freight. That’s since been corrected."
When asked to add up the benefits the GTM implementation, Shechtman says that time savings is the clear winner, followed by the ability to "think more clearly" when it comes to the growing company’s current and future logistics needs. The system has freed up staff to such an extent that he expects he won’t need to hire anyone for at least the next 18 months. Accuracy has also improved, and transit times have decreased by about 4 percent. "We’re hoping for even more as we learn how to maximize the system," he says.
In short, automating trade operations was a "godsend" for the company, the import team, and himself, Shechtman says. "It changed my life."
National Instruments: A 200% gain in efficiency National Instruments already had a global trade management system in place when Kelly O’Rourke decided it was time for a major overhaul. "The system worked, but it was cumbersome," says the IT section manager, global manufacturing and R&D.The Austin, Texas-based company designs and produces the hardware and software that scientists and engineers use to test everything from the performance of personal computers to cell-phone call volumes. The company ships its products via air express carrier from four distribution centers to 25,000 customers in 90 countries.
With that kind of shipment volume, National Instruments needed to manage orders very efficiently. But the company’s original software wasn’t capable of streamlining the many different steps involved in international trade. For example, when orders that contained possible matches to the federal government’s denied-party list were queued to trade-compliance analysts, the analysts had to review multiple screens in order to make a determination.
On top of that, time lags were common, thanks to such ineffi cient procedures as batch processing of commercial invoices, manually printing invoices, label printing, and locating packages for inclusion in specifi c shipments. "We knew we either had to upgrade or fi nd something better," says O’Rourke.
Buying a new solution won out, and as part of the software-selection process, O’Rourke and his team outlined both the "nice to have" and the "must have" capabilities that they wanted in a new GTM system. Among the "must haves" were less manual work, improved efficiency, and the ability to integrate with the company’s Oracle enterprise resource planning (ERP) system. Other key considerations included automation of international trade processes, including export compliance and documentation, and integration with the ERP system to eliminate duplicate efforts in data entry, storage, and reporting.
Working with Traffic Manager Dean Arnold, O’Rourke sent out a request for quotation to seven GTM software vendors, and then whittled the list down to the ones they felt were most in line with what they were looking for. In 2004, they purchased Kewill Systems’ Export Compliance and Export Document solutions.
The new export-compliance system is delivered over the Internet via an applications service provider (ASP) model. National Instruments uses one module to determine whether export licenses are required, whether the customer’s country is embargoed, and if the recipient is on a denied-party list.
Another module handles the back-end documentation, generates export paperwork, and allows the company to print the documents or send them via e-mail or fax to customers.
O’Rourke says the pilot segment of the program took eight weeks to complete, with much of that time allocated to mapping out everything that the company needed from the system’s compliance-checking capabilities. Once the decision was made to fully implement the solution, it took another four weeks to customize it and then integrate it into National Instruments’ production environment.
The biggest obstacle was integrating the export-compliance solution with the company’s Oracle-based workflow. "Getting that integration to work with the Oracle system was tough, and we spent more time on that than planned," says O’Rourke.
In return for that extra effort, the shipper came away with an automated system that takes just 10 seconds to process an export shipment, including performing an export-license determination, checking the denied-party and embargoed-country lists, creating export documents, and filing the Automated Export System (AES) report required by the Census Bureau.
The new software also eliminated the need for National Instruments maintain duplicate databases and ensure that they were in synch. As a result, Arnold says, the company was able to reassign four employees to other international trade responsibilities.
According to O’Rourke, the time savings made possible by the new GTM system translated into an impressive 200 percent gain in order-processing efficiency. With support from the new solution, moreover, employees can make the right decisions even if they’re not experts in international regulatory compliance.
"One of my goals was to make shipping an international package as easy shipping a domestic package," says Arnold. "Right now we’re about 90 percent there, with either type of shipment easily handled by one person."
Contributing Editor Bridget McCrea covers technologies for logistics and supply chain management.
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