State of GTM: Adoption ticks up as trade complexity deepens

After growing at an annual pace of 2.2 percent between 2012 and 2013, followed by 3.1 percent last year, global trade is on track to pick up by 4 percent in 2015, according to the World Trade Organization. Accompanying this growth is an increased need for global trade management (GTM) software platforms that handle international trade compliance and data management in an effort to transport shipments across international borders without interruption.

“We’re definitely seeing more shippers interested in GTM,” says Shanton Wilcox, vice president of supply chain management for Capgemini Consulting. “Companies are trying to approach global trade from a strategic standpoint—rather than a tactical one—and are turning to software to help them achieve those goals.”

For example, Wilcox says contract manufacturing firms are moving away from the “compliance only” mindset and looking to incorporate GTM into the actual physical movement of the goods. To support these customer needs, software vendors are stepping up to the plate and developing functionalities around those requirements. “Vendors are going beyond just handling ‘denied party lists,’” says Wilcox, “and developing solutions that more fully support the actual function of global trade.”

Over the next few pages we’ll explore the growth in GTM, learn about the key market drivers and current/future functionalities, and hear from a shipper that’s reaping the rewards of its GTM investment.

Vendors expand their scope
Thanks to the increasing complexities introduced by global trade, shippers are getting more strategic in their importing and exporting approaches. This, in turn, is pushing GTM vendors to dig a little deeper when developing new software functionalities.

“As shippers go through the product development process, they’re identifying sales targets and then selecting manufacturing locations based on elements like preferential- or free-trade agreements,” says Wilcox.

As more companies adopt these and other strategic viewpoints, vendors are striving to keep pace with their customers’ growing demands for platforms that do more than just let them know which recipients they can and can’t ship to.

“Companies are now considering GTM as part of the strategic aspects of their decisions,” says Wilcox, noting that most global trade management platforms got their start as a basic product classification tool. “The software’s scope is getting broader from a true business operation and process perspective in terms of actually supporting the global trade function.”

Will McNeill, principal research analyst with Gartner, has picked up on similar trends in the market. “GTM vendors are going much deeper to build out their import and export capabilities,” says McNeill, who is also seeing vendors get into the sourcing and purchase order (PO) management business, both of which align logically with the physical movement of goods.

“The compliance process runs parallel to the physical movement process and the financial aspect of the transactions,” says McNeill. “As a result, some companies want all of these functions on a single platform, and we’re starting to see more of that.”

McNeill says he’s also seeing renewed interest in the trade content itself. “I’ve talked to a number of shippers lately that were adamant about getting the content itself from their software providers,” McNeill points out. “They don’t want to have to go to multiple sources for this information, and, as a result, we’re seeing a resurgence in the interest in getting the content delivered with the actual software.”

Propping up adoption rates
Additional software functionalities and upticks in global trade aside, GTM adoption remains fairly low in the broader scheme of supply chain software. According to LM’s 2014

Software Usage Study, just 7.3 percent of shippers are currently using GTM—the lowest percentage among all supply chain management applications, and down from 8 percent in 2013.

Blame the fact that a lot of shippers “get by” with manual processes—spreadsheets, research, and phone calls—with suppressing adoption rates for GTM. “A lot of manual approaches still exist in this arena,” says Wilcox, “where regional tools are often used over more global, enterprise-wide trade platforms.”

Of those logistics operations that are using GTM, product classification—which forms the basis for nearly every export/import control, tax, tariff, and fee imposed by customs and other governmental authorities worldwide—is a key functionality. Using it, shippers can determine specific product classifications for target countries and use the information to figure out the associated tariffs, regulations, or restrictions.

The software also screens for denied parties and alerts shippers when a potential conflict exists, thus supporting compliance and helping the company avoid potential fines, penalties, and shipping delays.

Global trade management software also keeps shippers abreast of changes in preferential- and free-trade agreements, says Wilcox, and updates tariff schedules, product classification tables, and other information related to trade agreement compliance.

As trade grows, Wilcox expects even more functionalities to be folded under the GTM umbrella. The growing focus on omni-channel retailing and consumer-direct shipping, for example, could drive more shippers to the platforms for help managing their import and export activities.

“I wouldn’t be surprised to see GTM playing a bigger role in the typical shipper’s operation in the near future,” says Wilcox, “in light of the complexities and requirements that companies are managing right now.”

GTM crystal ball
By their very nature, compliance departments aren’t very large. “It could just be a handful of people managing the entire process,” says McNeill. That can both help and hurt a company’s business case when it comes to investing in global trade management software.

On one hand, the shipper may need a technology shot in the arm to help manage its growing import and export functions; but on the other, the actual business case may not be compelling enough for the firm to actually act.

“Sometimes getting the investment can be difficult compared to, say, an investment in demand planning software,” says McNeill. “Telling the powers that be that you need software to support the firm’s compliance operation is a different situation altogether.”

Despite this key challenge, McNeill sees good things ahead for the GTM sector and the customers that it serves. He points to the fact that 25 percent to 30 percent of companies still use Excel spreadsheets to manage import and export compliance—or, they outsource the task to a third party—as proof of the need.

“If you consider the fact that a significant number of companies out there have not bought GTM software, the opportunity is clearly there,” says McNeill, who notes that growth in GTM sales tends to follow the supply chain software market as a whole. “If the overall supply chain market has a good year, and if it’s growing in the double digits, then GTM will likely follow that pattern as well.”