Software Speeds Border Crossings
International trade software improves data access, creates better audit trails, and flags shipment-stopping errors before they cause delays.
When your supply chain spans the world, distance is just the first challenge you face. The more borders you cross, the greater the chance your goods will languish for weeks, awaiting documents or data needed to clear customs. You must make sure not to run afoul of trade laws that vary from country to country; you must secure the necessary licenses and pay the correct duties and fees.
The demands of global trade logistics have grown even more complex since the terrorist attacks of Sept. 11, observes Michael Bittner, research director for supply chain strategies at AMR Research. Customs officials now examine more loads and their accompanying documents, he says.
"Enterprises need to be a lot more proactive about auditing their shipments and carriers, ensuring that whatever is on this particular bill of lading is what's on the truck, nothing more and nothing less," Bittner notes. In this era of tight security, he adds, screening to avoid trading partners on the government's list of restricted parties is especially crucial.
Since 1994, NextLinx, Rockville, Md., has been helping companies steer clear of the many pitfalls inherent in global trade. Starting with a system for managing exports, NextLinx has collaborated with customers such as Imation Corp., Sotheby's, and Panasonic to extend its capabilities, which now cover imports and trade agreements as well. NextLinx also serves members of numerous trading and logistics exchanges run by partners such as GT Nexus, Verticalnet, Descartes Systems Group, Celarix, and G-Log.
At the heart of NextLinx's system is a massive storehouse of trade information. "We have selected the best content that can, in real time, provide all the information for export, import, duty, VAT (value-added tax), excise, landed costs, and documentation for a shipment moving from one country to another," says Rajiv Uppal, the company's chief executive officer.
Imation Corp. started working with NextLinx in 1996. Best known for its data storage and imaging products, the Oakdale, Minn., firm is deeply familiar with the intricacies of global trade. At any given time, its network of suppliers and customers encompasses 40 to 50 countries. Although it manufactures all of its products domestically, Imation relies on overseas vendors for many of its materials. It is also a major exporter: about 50 percent of its $1.2 billion in annual revenues comes from customers outside the United States.
Imation was formed in 1996 as a spinoff of 3M Corp. It briefly continued using 3M's proprietary information technology to manage all aspects of its business, including international trade. But it soon made a transition to Oracle Corp.'s enterprise resource planning (ERP) system.
Like many ERPs, Oracle's system is not designed to accommodate the data needed for exports and imports, says Doug Hennessee, international trade specialist at Imation. The company needed a separate system that would integrate with Oracle to handle those transactions. Imation chose NextLinx partly because its system was Oracle-compatible and partly because of the relationship the vendor offered.
"We were impressed with their willingness to work with Imation on a collaborative implementation," he says, developing new functions to meet company's needs.
Imation wanted a system to manage both the import and export sides of its trade network. But implementing an ERP and the existing export application from NextLinx—a demanding project in itself—as well as working with NextLinx on an import system would have been too much of a strain, Hennessee says. Imation decided to focus first on the export side.
Among other things, NextLinx's export system receives orders from the ERP and adds the data needed for clearing customs and complying with other government regulations. It screens orders to make sure they're not bound to denied parties, creates necessary shipping documents, archives transactions for audit purposes, and creates a variety of reports.
About a year and a half after it implemented the export system, Imation was ready to focus on the other side of the global trade equation. "Imation said, 'We want an integrated export and import system,'" Uppal recalls. "They helped us design a single global product table that could be the central place for keeping information."
For each product the company ships, and for each country that product might enter or leave, this integrated database keeps information such as tariff numbers, customs ruling, and trade preferences, he says.
Imation was the first customer to work with NextLinx on imports, and Hennessee describes his company's version of the system as a prototype. Its main function is to provide data on completed transactions, rather than to manage imports in progress.
Imation's system takes information from an electronic invoice or customs entry and loads it into tables, Hennessee says. "You can look at individual import entries, or you can do aggregate reporting. You can look at your volume over time, from a given supplier, from a given country, and mix and match it any way you want."
NextLinx's system for imports and exports "has eliminated a lot of manual processes" at Imation, Hennessee says. "It has helped maintain audit trails and ensured that our data is valid." Although he is sure the system has improved Imation's international trade processes, Hennessee says the benefits are difficult to quantify. That's partly because Imation introduced the NextLinx and Oracle systems at the same time.
"There are many cost savings," he says. "But when you get to apportioning the cost savings between Oracle and NextLinx, that becomes difficult. Not only did our systems change, but our processes changed as well. That makes it extremely difficult to put any kind of number on the implementation."
It's hard to quantify the benefits of any system that automates regulatory compliance, Hennessee says, because when the system works correctly, the company incurs no penalties. Costs arise only when something fails. "Because there aren't hard benchmark targets you're trying to reach, return on investment can be very difficult to pinpoint," he says.
But, he adds, the NextLinx system has certainly made Imation's trade operations more efficient. "It's so much easier to get data. It's so much easier to report. It's easier to get your arms around what your business is doing. And that helps drive sourcing decisions and costs."
Since working with Imation, NextLinx has further developed its system to manage imports proactively. In the "Trade Collaborator" compliance and logistics solution it created with Panasonic, for example, NextLinx examines orders from the company's ERP to make sure it's not doing business with denied or restricted parties, Uppal says.
Also, as soon as Panasonic adds a line item to an order in its ERP, "we do a real-time validation to see if the product is importable to the United States," he says. The system checks to see that the tariff number attached to the item is correct and determines whether the product might raise concerns with any government agency, such as the Federal Communications Commission (FCC). If such concerns exist, it advises the user to complete the necessary certifications.
"In the real world, most companies don't do that at this stage," Uppal says. "Then when the shipment is actually shipped by the vendor, the broker finds out that the tariff number is missing, or that based on the tariff number there is an FCC concern. It will now take four weeks of paperwork before they get approved for that. So the inventory is waiting at the border."
The system also contains the sorts of checks that ensure a company will pass an audit by U.S. Customs, Uppal says. Receiving data from the ERP, it can compare figures from invoices, receiving records, and accounts payable transactions to make sure they all match—for example, "to make sure that the invoice says they're bringing in 10 of something, and in the boxes they actually had 10, not 11 or nine," he says. "We can flag many of these discrepancies that do occur before they get to the violation stage."
Imation has not yet determined whether it will further automate its import processes with more proactive functions. Hennessee points out that gaining maximum benefit from any system hinges on more than just the software.
"You're also depending on the capabilities of your broker. You're depending on the capabilities and the willingness of your overseas vendor to meet demands for data, so you can get all the pre-shipment information into your system. And you're depending on your own internal buyers to enforce that, through contracts, to make sure the data is flowing smoothly."
Vendors need to send this data on time, and it has to be accurate. "There are many challenges there," Hennessee says. "The software is just one of those challenges."