Bridging Performance Gaps with GTM
Q: What is driving investment in global trade management systems?
A: From 2003 to 2013, the value of world merchandise trade nearly tripled, with companies from large to small aggressively pursuing emerging markets as a way to grow top-line revenues and reduce costs through low-cost country sourcing. According to a July 2013 SCM World survey, 48 percent of its member companies now do business in more than 50 countries, and 32 percent do business in more than 100 countries. That same survey showed that 35 percent of members now realize more than half of their total sales from customers located in foreign markets, and 41 percent now import more than half of their products/materials from foreign suppliers.
This globalization surge has put tremendous pressure on companies’ international supply chains and the cracks are beginning to show. What good is an optimal manufacturing schedule when the raw materials needed to make the finished goods get delayed in customs? How valuable is $10 saved on a domestic over-the-road move when you had to pay $400 to expedite the international shipment? While high-performing domestic supply chains are extremely valuable, companies are realizing their international supply chains aren’t up to snuff. It’s little wonder why. Over the past decade alone, companies have collectively spent over $100 billion on domestically focused supply chain solutions and a paltry $3 billion on internationally focused supply chain solutions. Consequently, companies are looking to global trade management systems to fill the performance gap.
Global trade management (GTM) systems automate and optimize the uniquely global aspects of international supply chains, just as traditional supply chain systems automate and optimize domestic supply chains.
Q: What are the critical pieces of a successful GTM system?
A: Global trade is complex, involving sourcing optimization, foreign supplier management, import/export compliance, global transportation management, duty minimization, and supply chain visibility. To complete a single global move, information must flow seamlessly across all these functions, and across all the extended trading partners involved in the transaction. This means a strategic, integrated approach whereby all these functions are orchestrated within a common suite. It’s analogous to a traditional supply chain management suite whose components—forecasting, inventory planning, manufacturing planning, transportation planning—work collaboratively to optimize the domestic supply chain. What makes the international supply chain more complex, however, is the dynamic nature of the country-specific rules and regulations that govern global trade. A GTM system must include these rules and regulations to execute global shipments accurately, cost-effectively, and compliantly. Any miscues with these regulations result in supply chain delays, lost savings opportunities, and potential fines and penalties.