How automation is redefining global trade management
If the technological change that occurred in the year 2000 is equal to X, then the 21st century will bring 20,000X of progress, according to inventor and futurist Ray Kurzweil, father of the Law of Accelerating Returns.
We can quibble over Kurzweil’s calculations and conjecture, but the essential point is irrefutable: technology advances ever faster. This affects every aspect of our increasingly automated and global economy, including the management of supply chains, the import and export of goods, and customs and trade compliance.
People responsible for global trade management (GTM) at multinational companies feel the speed of technological change every day as they work to keep their enterprises operating through disruptions, ranging from tariff wars to Brexit to the COVID-19 pandemic.
Technology and international trade
In a recent Deloitte survey of global trade compliance professionals, virtually all the respondents said their organizations had implemented, or intended to implement, an automated GTM software solution. Clearly, companies expect a return on their investment.
The top reason for GTM technology adoption, the survey found, is to gain greater visibility into business transactions and cross-border operations. GTM systems can collect and consolidate data from multiple regions and sources to provide a single consolidated view of global trade compliance and related supply chain activities.
Survey respondents cited additional objectives for automated GTM solutions:
- Greater efficiency in classifying products, processing imports and exports, and calculating trade transaction volume and value
- Greater accuracy and easier correction of errors—and an associated reduction in compliance failures and penalties
- Reduced customs and border delays
- Improved free trade agreement (FTA) and duty minimization strategies
- Savings derived from retiring legacy systems
Global trade is experiencing a digital transformation
Global trade compliance specialists understand that as technology accelerates the pace of change, staying ahead of the disruption requires, well, more technology.
Today, emerging technologies are eclipsing traditional data processing software and stand-alone solutions—and redefining how companies manage global trade activity and stay in compliance.
For example, application programming interfaces (APIs) enable companies to access real-time data needed to analyze global trade issues and make informed, time-critical decisions.
Big data delivers predictive analytics and “what-if” scenario planning to help trade professionals assess the impact of disruptions such as tariff increases, regulatory changes, and new or changing trade agreements.
The World Trade Organization, meanwhile, recently reported that blockchain technology can impact a diverse set of GTM-related applications “from finance, including trade finance, to customs and certification processes, transportation and logistics, insurance, distribution, intellectual property, and government procurement.”
The digital transformation of trade management is accelerating. Companies that fail to keep up risk falling behind.
Artificial intelligence is a game-changer for product classification
Artificial intelligence (AI) is particularly suited to make one of the most complex and time-consuming areas of trade compliance — product classification — faster, more efficient, and more accurate.
Many companies grapple with correct classifications, either relying on manual searches of the Harmonized Tariff Schedule (HTS) or struggling with disparate databases across geographies. Others use technology solutions that claim to fully automate the classification process, but yield results based mostly on probability and guesswork and produce unacceptably high error rates.
Classification assistance software rooted in the principles of AI can streamline the classification process, ensure accuracy, and generate a “customs-ready” audit trail. As a result, global trade professionals can avoid the accidental under- or over-payment of duties, work more efficiently, and improve compliance performance.
AI-powered product classifications are available in software tools like Smart HS, part of the ONESOURCE Global Classification solution. Smart HS uses natural language processing that enables users to classify products while using common, everyday vernacular rather than requiring them to precisely match a specific phrase in a database. It understands phrases such as “airbag inflator for cars” and brand names like iPad and Gatorade. It also can interpret product attributes such as a cylinder capacity, circuit breaker voltage, and textile composition and distinguish between wholes, parts, and sets—distinctions that affect classification.
This is a game-changer in a world where baby food is classified as “homogenized composite food preparation” and trade professionals may not know whether rayon is classified as an “artificial” or a “synthetic” fiber.
How to develop a business case for global trade management software
If new or additional budget is required for GTM software, senior management will likely require a business case analysis that articulates the return on investment (ROI). Here are four steps to take when calculating ROI and building a business case.
1. Describe the pain points that GTM software can address
To start, describe the gap between your current operation and the desired state.
At a high level, the goal is to automate the entire lifecycle of the global trade function across the supply chain in order to maintain compliance, reduce overall duty spend, and avoid violations and penalties, while improving operating efficiencies and gross margin.
What’s standing in the way? Trade compliance departments often are saddled with time-consuming, error-prone manual processes — including import and export documentation, origin determination for preference programs, and classification processes — that can lead to shipping delays, compliance violations, and poor visibility into cross-border operations.
Companies relying on manual processes and spreadsheets or disparate solutions that only handle one task — such as HTS classification or FTA qualification — lack checks and balances, are unable to make timely decisions based on reliable reporting and analytics, and risk costly regulatory errors.
2. Tie the software benefits to corporate strategic objectives
In most organizations, GTM touches nearly all strategic operations including sourcing and procurement, manufacturing and inventory, product development, sales and order management, customs and clearance, regulatory compliance, and finance.
It can impact delivery times for essential raw materials and finished products, landed costs, market expansion opportunities, mergers and acquisitions, sales strategy, and much more. Which benefits do you pursue and which do you highlight in your business case? Whichever help the company’s leadership achieve their strategic priorities — that’s the primary selling point for GTM automation.
So, before approaching your senior management team with a request to implement a GTM software solution, it’s important to understand the benefits inside and out and align them with the strategic priorities set by your C-level leadership and board of directors.
3. Benchmark competitors
Many senior executives will want to review third-party benchmark data that describes how companies are implementing global trade technology and how it is benefiting them.
This is a key component of your business case — describing the competitive landscape and accurately depicting the risk of falling behind.
Sources of benchmarking information include reports from analysts such as Aberdeen, consultants including Deloitte and KPMG, trade associations, presentations at industry conferences, guides published by trade media outlets, and your professional network.
4. Showcase ROI
Ultimately, your business case is all about return on investment. Solution design workshops are the first steps to begin quantifying savings specific to your company.
Here’s how they work:
- Existing process review: Review existing or generate new process maps for key global trade processes.
- Future state process review: Generate new process maps for key global trade processes, leveraging the functionality and capabilities of global trade management software.
- Quantify costs: Quantify costs of manual, non-automated process vs. processes using trade automation. Account for costs associated with software licenses, implementation, and ongoing operation.
- Quantify benefits: Identify and quantify financial benefit from automation across all areas of the global trade function within the supply chain.
- Agree upon the relevant use cases: These illustrate the ways GTM automation will advance strategic objectives.
In your formal business case, provide an executive summary focused on the strategic priorities to be supported along with detailed metrics, forecasted growth and benchmark data, and the ROI analysis.
Simplify your entire global trade management process with trade compliance information and facilitation tools that automate routine tasks, give you compliance confidence, and save time.