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Wednesday, May 12, 2010
Wednesday, February 24, 2010
Segmenting the Current Content Management Market
There is a wide variety of vendors in the market that have content management (CM) solutions. At first, it may be overwhelming to compare and categorize vendors with each other. A lot of vendors have a CM solution that does not fall in the category of ECM, because they are missing certain components of an ECM vendor. Several vendors, like Tridion, Vignette, Percussion, and Fatwire, focus more on web content management (WCM).
Enterprise Content Management: It Is More Than Just Web Content Management
Enterprise content management (ECM) systems are increasingly becoming full blown enterprise, integrated solutions. They are developing suites of products to fulfill the current needs and demands of user organizations.
There are two significant developments in this market. First, large vendors, such as Microsoft and Xythos, have introduced a scaled down version of ECM suites, focusing on ease of use, fast return on investment (ROI), and limited functionality. Such solutions are emerging in the current market providing improved productivity to organizations.
There are two significant developments in this market. First, large vendors, such as Microsoft and Xythos, have introduced a scaled down version of ECM suites, focusing on ease of use, fast return on investment (ROI), and limited functionality. Such solutions are emerging in the current market providing improved productivity to organizations.
Outsourcing in Asset Management
Outsourcing has become one of the catch-cries of those offering solutions and regimes aimed at lowering direct costs. In some areas this may be relevant. Within the area of physical assets there are some major considerations that first need to be taken into account.
Regardless of who has been delegated the responsibility for maintaining the asset base, there is still only one asset owner. That is the corporation that operates and owns the assets. So while it remains possible to delegate responsibility, it is still not possible to delegate the legal ramifications of these responsibilities. This has been shown dramatically in the recent events, previously mentioned, in the United Kingdom.
Regardless of who has been delegated the responsibility for maintaining the asset base, there is still only one asset owner. That is the corporation that operates and owns the assets. So while it remains possible to delegate responsibility, it is still not possible to delegate the legal ramifications of these responsibilities. This has been shown dramatically in the recent events, previously mentioned, in the United Kingdom.
Squeeze Play in the Supply Chain Management Market
Since ERP spending has subsided within major corporations, the large vendors are looking to increase their value by solving the more complex business issues faced by organizations. A few areas where SCM and ERP vendors can add value is in advanced integration, and in the ability to handle very complex workflows that some of the tier two vendors may not be able to address. This is a necessary requirement, as companies are examining their supply chains to see if they can improve bottom-line results.
37 Essential Tips for Evaluating and Purchasing New Accounting Software
The first step to implementing a new accounting system is evaluating your company"s readiness for change. Before you begin looking at new features and setting fast-track time lines, take time to set realistic goals and build momentum. Pre-production planning is the key to success.
Making the Move What to Do When you've Outgrown QuickBooks
QuickBooks provided the basic bookkeeping capabilities you needed to start your company. But things have changed. You have more customers. More employees. More complexity. In short, your small business isn"t so small anymore.
So how do you make the move to a more powerful accounting solution? First things first: It"s critical to gather all the facts before you make a decision. The new system can impact nearly everyone in your company, so each decision is critical. It pays to be meticulous.
So how do you make the move to a more powerful accounting solution? First things first: It"s critical to gather all the facts before you make a decision. The new system can impact nearly everyone in your company, so each decision is critical. It pays to be meticulous.
Different Views on DM and DAM
Even though there is a variety of acronyms for DAM, and there are slight differences in functionality for each category. This article, however, will focus mainly on regular DAM functionality, including rich media files and types.
Magan Arthur of Arthur Consulting Group, explains that organizations can take three different approaches when contrasting DM and DAM:
* Tools and processes
* File and content types
* Business use
Magan Arthur of Arthur Consulting Group, explains that organizations can take three different approaches when contrasting DM and DAM:
* Tools and processes
* File and content types
* Business use
Document Management
Organizations use document management to assist with the management, creation, workflow, and the storage of documents within different departments. A DM solution uses databases for storage, and workflow engines to design and support workflows, including business rules and metadata.
Document management systems are often used in industries where there are high volumes of documents, such as in the insurance, health care and government industries. Increasingly DM solutions are evolving into Web content management (CM) systems.
Digital Asset Management
Digital asset management (DAM) solutions are also referred to as media asset management (MAM), entertainment media asset management (EMAM), brand resource management (BRM), marketing content management (MCM), and asset management (AM). DAM focuses on organizations specifically with digital assets, such as the entertainment or advertising industry, and is used in situations where asset reproduction is important. Often organizations combine a DAM solution with a CM solution to maintain their web site. Consequently, DAM and CM vendors acquire one or the other to combine their solutions into an integrated solution.
Document Management and Digital Asset Management Is There a Difference and What Might It Be
Everywhere you look within organizations, there is content. All this content needs to be managed. At first it was static information, and documents published on the Internet needed management solutions. As a result document management (DM) emerged as the mechanism or process to create, capture, manage, store, and deliver these documents to the right departments and individuals.
Digital Assets
Today, electronic media is more then just on-line text. Organizations are using images, video, and audio files and other digital formats within organizations that need to be managed as well. Digital assets are often time consuming to create, but they are valuable to organizations because digital assets attract the attention of clients, whether internal or external to the organization.
Digital assets require a format and management process that enables re-use. When looking for a solution, one question that faces organizations is whether a DM system is capable of supporting their needs or if a digital asset management (DAM) solution it more appropriate.
To determine this answer, an organization must understand the difference between the two solutions. This is a difficult task because there is confusion in the market between DM and DAM solutions. This article will investigate what is unique to a DAM solution and why organizations need a DAM to manage other types of data instead of just text documents.
Digital Assets
Today, electronic media is more then just on-line text. Organizations are using images, video, and audio files and other digital formats within organizations that need to be managed as well. Digital assets are often time consuming to create, but they are valuable to organizations because digital assets attract the attention of clients, whether internal or external to the organization.
Digital assets require a format and management process that enables re-use. When looking for a solution, one question that faces organizations is whether a DM system is capable of supporting their needs or if a digital asset management (DAM) solution it more appropriate.
To determine this answer, an organization must understand the difference between the two solutions. This is a difficult task because there is confusion in the market between DM and DAM solutions. This article will investigate what is unique to a DAM solution and why organizations need a DAM to manage other types of data instead of just text documents.
CDI and Data Integration
CDI represents a consolidated view of customer data. Aside from MDM, which looks at the whole organization, data integration generally focuses on specific initiatives, and is the type of software used to perform data transfers, consolidations, etc. Thus, when an organization is looking to implement a CDI initiative, its focus should involve identifying the data integration vendors that specialize in CRM or that focus specifically on validating and consolidating customer data.
Data integration is defined as the act of bringing together or moving data from one or multiple locations to a centralized or replicated data store. The development of a data warehouse and the consolidation of information across the organization is an example of how data integration is applied in organizations. Sub-sets of data from disparate locations within the organization are loaded into the centralized structure of a data warehouse or dedicated database. This centralized structure creates a specified view of data to measure an organization's performance, to generate reports, to provide analytics, and so forth.
Not all data integration is equal when it comes to CDI. Different forms of data integration are used within different industries and for diverse initiatives. For example, when implementing a business intelligence (BI) solution, data mapping, data cleansing, and hourly data loads are likely the most important factors to consider. Also, different vendors within the data integration space may specialize in sub-categories such as data quality, and may partner with larger industry- or solution-specific vendors to have their solutions embedded within larger software packages. This gives organizations the ability to mix and match solutions based on their needs.
Data integration is defined as the act of bringing together or moving data from one or multiple locations to a centralized or replicated data store. The development of a data warehouse and the consolidation of information across the organization is an example of how data integration is applied in organizations. Sub-sets of data from disparate locations within the organization are loaded into the centralized structure of a data warehouse or dedicated database. This centralized structure creates a specified view of data to measure an organization's performance, to generate reports, to provide analytics, and so forth.
Not all data integration is equal when it comes to CDI. Different forms of data integration are used within different industries and for diverse initiatives. For example, when implementing a business intelligence (BI) solution, data mapping, data cleansing, and hourly data loads are likely the most important factors to consider. Also, different vendors within the data integration space may specialize in sub-categories such as data quality, and may partner with larger industry- or solution-specific vendors to have their solutions embedded within larger software packages. This gives organizations the ability to mix and match solutions based on their needs.
Customer Data Integration: A Primer
Implementing a customer data management system can be the difference between success and failure in terms of leveraging an organization's customer relationship management (CRM) system. Since customers drive profitability, organizations need a way to provide their employees with a single view of the customer and to provide that customer with above-average customer service. Unfortunately, this is not always the case. Disparate applications such as billing and call center systems do not always feed into one another, and even when they do, lack of data cleansing and management can cause employees to see only a portion of a customer's history, interactions, or profiles. A widely used example is that of an organization sending multiple marketing brochures to one customer because of inaccuracies and lack of customer data synchronization. A more alarming example is having more than one customer record for a specific customer, with the collections department calling that customer to collect on an account that is actually current.
Why do CRM initiatives fail? Because implementing a system to manage customers does not guarantee that CRM applications will work successfully within the organization. The old adage—"garbage in, garbage out,"—definitely applies to the realm of CRM. If organizations do not have clean, reliable, centralized data, their customer view will not be complete or accurate, and their business goals will not be achieved. Consequently, customer data integration (CDI) has become an essential component of an organization's management of data, along with any CRM initiative.
This article will provide an overview of CDI within CRM, and see how it differentiates itself from the general data integration industry. Additionally, the components of CDI will be explored, to identify the important areas that should be considered when implementing master data management (MDM) for CRM within the organization. Finally, key vendors in the industry and their key product features will be identified.
Defining Customer Data Integration
Within CRM, CDI is the management and consolidation of customer information from across the organization. This includes, but is not limited to, information stored in call centers, sales and marketing departments, and accounts receivables and payables. CDI ensures that each department requiring customer contact has access to timely data, to provide employees with a complete view of customer profiles or histories. This creates a standardized view of each customer and promotes positive customer interactions.
Most enterprise organizations have built or acquired their computer applications over an extended period of time, creating a series of complex systems that work independently or that interoperate with one another. Even if these systems have high interoperability, many times the business rules and data structures of each application and business unit have not been taken into account, as they were developed independently of one another. This means that data may be captured in different ways. For example, customer address information and name may be recorded in different formats within different business units. When data is pulled from one system to another, this particular customer information may not be synchronized.
Why do CRM initiatives fail? Because implementing a system to manage customers does not guarantee that CRM applications will work successfully within the organization. The old adage—"garbage in, garbage out,"—definitely applies to the realm of CRM. If organizations do not have clean, reliable, centralized data, their customer view will not be complete or accurate, and their business goals will not be achieved. Consequently, customer data integration (CDI) has become an essential component of an organization's management of data, along with any CRM initiative.
This article will provide an overview of CDI within CRM, and see how it differentiates itself from the general data integration industry. Additionally, the components of CDI will be explored, to identify the important areas that should be considered when implementing master data management (MDM) for CRM within the organization. Finally, key vendors in the industry and their key product features will be identified.
Defining Customer Data Integration
Within CRM, CDI is the management and consolidation of customer information from across the organization. This includes, but is not limited to, information stored in call centers, sales and marketing departments, and accounts receivables and payables. CDI ensures that each department requiring customer contact has access to timely data, to provide employees with a complete view of customer profiles or histories. This creates a standardized view of each customer and promotes positive customer interactions.
Most enterprise organizations have built or acquired their computer applications over an extended period of time, creating a series of complex systems that work independently or that interoperate with one another. Even if these systems have high interoperability, many times the business rules and data structures of each application and business unit have not been taken into account, as they were developed independently of one another. This means that data may be captured in different ways. For example, customer address information and name may be recorded in different formats within different business units. When data is pulled from one system to another, this particular customer information may not be synchronized.
Inspire commitment to the vision.
This step is the last piece to the puzzle. What needs to be done to achieve commitment from your employees? By this time, if you have applied the ideas in the previous steps, your employees are seeing a lot of new behaviors and actions, and they are well aware that something is happening. The challenge is to ensure that they see the opportunity in this change for themselves and, as a result, become committed to the vision.
According to Gartner, every organization going through change experiences a stratification of its employee base, represented by those who will be a) early adopters of the vision, b) an early majority of followers, c) a late majority of followers, and finally, d) laggards who may or may not buy in to the vision at all. However, with attention to a commitment strategy, leaders can skew these groupings to achieve a greater number of early adopters and early majority of followers. As such, organizations must understand what needs to be done to build commitment to the CRM vision. Here are a few points to consider:
1. Build a path toward achieving competency.
Employees need to know how to achieve the vision. They need to understand their role in the relationships with the client and the organization as described in the vision. They need to know how they, personally, will be adding value to the organization by embracing the vision, and they need clarity on the goals they must achieve if the vision is to be attained.
2. Build a sense of comfort into the employee group by ensuring this is pursued as a team vision.
That means everyone in the organization has a part to play in achieving the vision. If the CRM program becomes "just a sales program," it will create a great deal of tension and discomfort in the organization, because it will be seen as another management "flavor of the month" (popular but quickly passing) project. If this is the case, it will be communicated back to your customers as such.
Employees need to feel that the vision is attainable. Ensure that the leadership team constantly talks about the possibilities and continually displays the appropriate behaviors and actions. Celebrate successes in the team as they are achieved.
3. Create an environment of stability.
Employees need to know that leaders are confident in the vision yet empathetic to employee and customer issues. Leaders need to stop negativity, particularly within their own ranks. Negativity that is observed in employee ranks needs to be addressed with understanding, as people typically are fearful of change. Reaffirm the vision—why the relationship between customers, employees, and the organization is important; what the expected outcomes are; and why the vision will be good on a personal level for everyone involved. Take the vision out of the clouds and make it real for the employees. Do this as often as needed.
4. Build and deploy a solid communication strategy.
Ensure that employees receive valuable information frequently. Each one is part of the team, and should not be surprised by changes or issues.
Employees need to see managers and leaders as trustworthy and candid. Ensure that formal messages fit with informal dialogue from team and organizational leadership.
Make certain that employees have the opportunity to meet with managers and CRM leaders frequently. Employees will need to be a part of the vision and the solution. That means communications must go beyond e-mail. Remember: it's all about people, and people need relationships in order to be committed to actions. Leaders and managers should pursue all opportunities to meet employees in small groups to engage in conversation and address whatever issues may be of concern.
According to Gartner, every organization going through change experiences a stratification of its employee base, represented by those who will be a) early adopters of the vision, b) an early majority of followers, c) a late majority of followers, and finally, d) laggards who may or may not buy in to the vision at all. However, with attention to a commitment strategy, leaders can skew these groupings to achieve a greater number of early adopters and early majority of followers. As such, organizations must understand what needs to be done to build commitment to the CRM vision. Here are a few points to consider:
1. Build a path toward achieving competency.
Employees need to know how to achieve the vision. They need to understand their role in the relationships with the client and the organization as described in the vision. They need to know how they, personally, will be adding value to the organization by embracing the vision, and they need clarity on the goals they must achieve if the vision is to be attained.
2. Build a sense of comfort into the employee group by ensuring this is pursued as a team vision.
That means everyone in the organization has a part to play in achieving the vision. If the CRM program becomes "just a sales program," it will create a great deal of tension and discomfort in the organization, because it will be seen as another management "flavor of the month" (popular but quickly passing) project. If this is the case, it will be communicated back to your customers as such.
Employees need to feel that the vision is attainable. Ensure that the leadership team constantly talks about the possibilities and continually displays the appropriate behaviors and actions. Celebrate successes in the team as they are achieved.
3. Create an environment of stability.
Employees need to know that leaders are confident in the vision yet empathetic to employee and customer issues. Leaders need to stop negativity, particularly within their own ranks. Negativity that is observed in employee ranks needs to be addressed with understanding, as people typically are fearful of change. Reaffirm the vision—why the relationship between customers, employees, and the organization is important; what the expected outcomes are; and why the vision will be good on a personal level for everyone involved. Take the vision out of the clouds and make it real for the employees. Do this as often as needed.
4. Build and deploy a solid communication strategy.
Ensure that employees receive valuable information frequently. Each one is part of the team, and should not be surprised by changes or issues.
Employees need to see managers and leaders as trustworthy and candid. Ensure that formal messages fit with informal dialogue from team and organizational leadership.
Make certain that employees have the opportunity to meet with managers and CRM leaders frequently. Employees will need to be a part of the vision and the solution. That means communications must go beyond e-mail. Remember: it's all about people, and people need relationships in order to be committed to actions. Leaders and managers should pursue all opportunities to meet employees in small groups to engage in conversation and address whatever issues may be of concern.
Role-model relationship-building behaviors.
We've all heard the old saying "You need to walk the talk." Well, it's true. When it comes to the leaders supporting the CRM vision, behaviors must reflect the importance placed on relationships. If you are looking for commitment from your people, nothing speaks louder than your actions. Reflect upon the following questions, and use these as discussion items within the CRM leadership team:
1. What are our values as a leadership team in terms of how we develop and maintain relationships with our customers and employees?
2. How do our values translate into behaviors and actions? What does the leadership team need to model?
3. How will we prioritize business decisions based on these values?
4. Are we willing to be held accountable to our customers and to our employees regarding our display of these values? How will this accountability manifest?
5. Are we willing to admit that we make mistakes? Are we open to receiving feedback from customers and employees regarding our behavior and our actions in the building and sustaining of relationships?
Here's an example of a company that I believe takes the list above to heart.
1. What are our values as a leadership team in terms of how we develop and maintain relationships with our customers and employees?
2. How do our values translate into behaviors and actions? What does the leadership team need to model?
3. How will we prioritize business decisions based on these values?
4. Are we willing to be held accountable to our customers and to our employees regarding our display of these values? How will this accountability manifest?
5. Are we willing to admit that we make mistakes? Are we open to receiving feedback from customers and employees regarding our behavior and our actions in the building and sustaining of relationships?
Here's an example of a company that I believe takes the list above to heart.
Support the vision with a culture of CRM possibility.
If the relationship-based vision is to be achieved, it is essential that the team—the company's employees, managers, and executives—are on board to develop and sustain the relationships described in the vision. Again, technology, strategic plans, marketing, and sales goals are all important, but the emotional commitment of the people involved is what determines whether the organization will be successful in attaining the CRM vision.
Too often, clients are presented with marketing material promoting a company's new "customer-friendly vision," only to be treated like intruders once they step inside the organization. Many companies make huge investments in creating a CRM vision, goal statements, policies, and procedures, along with subsequent new technology, only to have frontline staff, call center personnel, and sales professionals demonstrate little enthusiasm for customers.
The culture of the organization must support the concept that relationships are important and that they actually form the CRM vision. Look at what your organization is doing to move in this direction. Don't fall into the trap of thinking this factor is too "soft" to be a critical business strategy. Think about the relationship: why should customers buy from you when they can buy virtually the same product or service from someone else? Why should employees care about your customer if they don't have some type of enhanced relationship with the company to motivate them to do so.
Too often, clients are presented with marketing material promoting a company's new "customer-friendly vision," only to be treated like intruders once they step inside the organization. Many companies make huge investments in creating a CRM vision, goal statements, policies, and procedures, along with subsequent new technology, only to have frontline staff, call center personnel, and sales professionals demonstrate little enthusiasm for customers.
The culture of the organization must support the concept that relationships are important and that they actually form the CRM vision. Look at what your organization is doing to move in this direction. Don't fall into the trap of thinking this factor is too "soft" to be a critical business strategy. Think about the relationship: why should customers buy from you when they can buy virtually the same product or service from someone else? Why should employees care about your customer if they don't have some type of enhanced relationship with the company to motivate them to do so.
The Customer Relationship Management Vision: It Starts with Relationships
When it comes to the creation of a customer relationship management (CRM) vision that truly serves to enhance the customer experience, so many organizational leaders are trapped within their own understanding of what that vision entails. Consider the following statistic: of all CRM programs initiated, roughly 70 percent involve a great solution but a bad implementation plan, resulting in poor return on capital employed (ROCE) and, equally important, a negative CRM experience for all parties involved.
What does this mean?
Companies have a fundamental lack of understanding of what makes for a true CRM vision. The vision that drives the CRM program must embrace the picture of a new, enhanced customer experience—that is, a new relationship.
Therefore, the vision is not about the technology being used or the quantitative measurement of the number of customer transactions occurring. Sure, these elements are important, but they should be viewed as supporting factors or consequences of the vision, not the vision itself.
As a result of these misguided notions and subsequent CRM visions, the "new" customer experience is flat, or even unnoticeable. Further, the value derived by the company becomes mediocre at best, and CRM is given the undeserved bad reputation of not being able to deliver.
Following are four steps to develop an effective and attainable CRM vision.
Step 1: Start with the relationship.
Where does the vision of the CRM-focused organization begin? It starts with an understanding of what the relationship needs to be. That is, the relationship between the organization, its employees, and the customer. This is a triangulated, inter-dynamic relationship, and one that will be tested with every transaction, inquiry, and corporate decision. The vision starts with a picture of the relationship taken from a behavioral standpoint. Consider the following questions:
* What does the future relationship look like—to customers, employees, management, and executives? Can you describe this relationship from each of these stakeholders' point of view?
* What is the desired customer behavior in the new relationship? What would the customer's ideal behavior look like? Is it different for different customer groups?
* What critical behaviors must the company, including executives, managers, and employees, demonstrate in order to promote and sustain the desired customer behaviors? How can current behaviors provide a catalyst for desired customer behaviors? Where is the gap between the two?
Those who are leading the CRM program and who are responsible for the creation of the vision must describe the vision in terms of people and possibilities. Leaders must refrain from focusing the vision on numbers or the type of technology that will be employed, as these are but the results and the tactics that stem from the vision.
To illustrate what I mean, consider the following experience I had working with an executive team from a major technology company.
The team was in the midst of creating a new corporate-wide, customer-centric vision for the transformation of the company's consulting practice. The goal was to create a new vision that would build greater customer reach and ultimately lead to activities that drive more consulting engagements. My job was to facilitate the process and provide coaching as needed.
What does this mean?
Companies have a fundamental lack of understanding of what makes for a true CRM vision. The vision that drives the CRM program must embrace the picture of a new, enhanced customer experience—that is, a new relationship.
Therefore, the vision is not about the technology being used or the quantitative measurement of the number of customer transactions occurring. Sure, these elements are important, but they should be viewed as supporting factors or consequences of the vision, not the vision itself.
As a result of these misguided notions and subsequent CRM visions, the "new" customer experience is flat, or even unnoticeable. Further, the value derived by the company becomes mediocre at best, and CRM is given the undeserved bad reputation of not being able to deliver.
Following are four steps to develop an effective and attainable CRM vision.
Step 1: Start with the relationship.
Where does the vision of the CRM-focused organization begin? It starts with an understanding of what the relationship needs to be. That is, the relationship between the organization, its employees, and the customer. This is a triangulated, inter-dynamic relationship, and one that will be tested with every transaction, inquiry, and corporate decision. The vision starts with a picture of the relationship taken from a behavioral standpoint. Consider the following questions:
* What does the future relationship look like—to customers, employees, management, and executives? Can you describe this relationship from each of these stakeholders' point of view?
* What is the desired customer behavior in the new relationship? What would the customer's ideal behavior look like? Is it different for different customer groups?
* What critical behaviors must the company, including executives, managers, and employees, demonstrate in order to promote and sustain the desired customer behaviors? How can current behaviors provide a catalyst for desired customer behaviors? Where is the gap between the two?
Those who are leading the CRM program and who are responsible for the creation of the vision must describe the vision in terms of people and possibilities. Leaders must refrain from focusing the vision on numbers or the type of technology that will be employed, as these are but the results and the tactics that stem from the vision.
To illustrate what I mean, consider the following experience I had working with an executive team from a major technology company.
The team was in the midst of creating a new corporate-wide, customer-centric vision for the transformation of the company's consulting practice. The goal was to create a new vision that would build greater customer reach and ultimately lead to activities that drive more consulting engagements. My job was to facilitate the process and provide coaching as needed.
CUSTOMERS GET WEB ACCESS
SPATCO runs their mySAP All-in-One solution on the IBM AS/400 platform, OS/400 operating system, and IBM DB2 database. Approximately 130 users access the system across 11 locations, connected by a wide-area frame relay network. SPATCO customers have access, too.
Were using SAP Internet Transaction Server to allow customers to enter service calls over the Internet, Force says. Customers can view service-call history information online to check status. They can also place sales orders and view the status of these orders online.
SPATCO plans to implement mySAP Customer Relationship Management (mySAP CRM) to enable service technicians to update and close orders on site, instead of calling in the information for follow-up paperwork. The company also wants to use the solution to support its mobile sales force and to provide an interaction center for customers.
Our number-one issue is exceptional customer service, Tew says. Everything that we do within this company starts with the customer. mySAP All-in-One offers us complete information concerning all aspects of the business relationship to better serve the customer. SAP gives us a competitive advantage that we could not get anywhere else.
Were using SAP Internet Transaction Server to allow customers to enter service calls over the Internet, Force says. Customers can view service-call history information online to check status. They can also place sales orders and view the status of these orders online.
SPATCO plans to implement mySAP Customer Relationship Management (mySAP CRM) to enable service technicians to update and close orders on site, instead of calling in the information for follow-up paperwork. The company also wants to use the solution to support its mobile sales force and to provide an interaction center for customers.
Our number-one issue is exceptional customer service, Tew says. Everything that we do within this company starts with the customer. mySAP All-in-One offers us complete information concerning all aspects of the business relationship to better serve the customer. SAP gives us a competitive advantage that we could not get anywhere else.
Southern Pump & Tank Company (SPATCO)
SPATCO uses SAP Service Management to track equipment at its customers sites, receive incoming service calls, dispatch and complete work, and track labor and materials for billing. Using mySAP All-in-One, SPATCO lowered inventory by 28%, and reduced slow and nonmoving items by 70%; reduced the days from job completion to invoice generation from 8 to 3; and compressed the financial close from 20-plus days to 5.
Southern Pump & Tank Company (SPATCO) , headquartered in Charlotte, N.C., is a $60 million value-added distributor specializing in liquid handling equipment for the petroleum and industrial marketplaces. The company implemented a mySAP All-in-One solution quickly, in only 16 weeks, to support a customer-driven culture at the company.
Our main business is distribution buying from manufacturers and reselling to end users but we also install and service all the equipment we sell, says Charlie Tew, CEO of SPATCO. If their equipment is down, customers are not generating revenue. The biggest difference between us and our competitors is the service that we give our customers. We use mySAP All-in-One to take care of our customers at a higher level of service than our competitors do.
As a small and midsize business (SMB), SPATCO licensed the solution from SAP business partner Osprey, the SAP division of NIIT Technologies. Osprey drove the solution rollout, leveraging a rapid implementation methodology and its SMB solutions expertise to achieve the 16-week implementation.
It was very important to be able to license mySAP All-in-One, and get implementation assistance, from a company focused on our size business, Tew says. We have all the same business processes as a large corporation, but we dont have the same resources. The Osprey implementation team had breadth of knowledge about mySAP All-in-One and was able to implement quickly. This allowed us to limit the internal business and IT resources we had to dedicate to the project.
That meant SPATCO could get applications like SAP Service Management up and running quickly, to keep it ahead of the competition. SPATCO uses SAP Service Management to track equipment at the customer site, receive incoming service calls, dispatch and complete jobs, and track labor and materials for billing. SPATCO also uses SAP Service Management to review site and equipment histories, as well as track the profitability of individual service vans.
mySAP All-in-One closed any holes that we had from a serviceissue perspective, Tew says. We have always been customer-driven, but this has given us the tools we need to improve.
Charlie Tew, CEO of SPATCO
That improvement extends to overall operations, where SPATCO uses their mySAP All-in-One solution to integrate equipmentinstallation project quoting and sales through component purchasing, installation execution, progress and final billing, and follow-on equipment tracking for 5,000 customers across seven states, placing 4,500 orders per month.
We lowered inventory by 28%, and reduced slow and nonmoving items by 70%, says John Force, vice president of technology at SPATCO. On the service side, we reduced the days from job completion to invoice generation from 8 to 3, increasing cash flow. And we compressed the monthly financial close from 20- plus days to 5.
Southern Pump & Tank Company (SPATCO) , headquartered in Charlotte, N.C., is a $60 million value-added distributor specializing in liquid handling equipment for the petroleum and industrial marketplaces. The company implemented a mySAP All-in-One solution quickly, in only 16 weeks, to support a customer-driven culture at the company.
Our main business is distribution buying from manufacturers and reselling to end users but we also install and service all the equipment we sell, says Charlie Tew, CEO of SPATCO. If their equipment is down, customers are not generating revenue. The biggest difference between us and our competitors is the service that we give our customers. We use mySAP All-in-One to take care of our customers at a higher level of service than our competitors do.
As a small and midsize business (SMB), SPATCO licensed the solution from SAP business partner Osprey, the SAP division of NIIT Technologies. Osprey drove the solution rollout, leveraging a rapid implementation methodology and its SMB solutions expertise to achieve the 16-week implementation.
It was very important to be able to license mySAP All-in-One, and get implementation assistance, from a company focused on our size business, Tew says. We have all the same business processes as a large corporation, but we dont have the same resources. The Osprey implementation team had breadth of knowledge about mySAP All-in-One and was able to implement quickly. This allowed us to limit the internal business and IT resources we had to dedicate to the project.
That meant SPATCO could get applications like SAP Service Management up and running quickly, to keep it ahead of the competition. SPATCO uses SAP Service Management to track equipment at the customer site, receive incoming service calls, dispatch and complete jobs, and track labor and materials for billing. SPATCO also uses SAP Service Management to review site and equipment histories, as well as track the profitability of individual service vans.
mySAP All-in-One closed any holes that we had from a serviceissue perspective, Tew says. We have always been customer-driven, but this has given us the tools we need to improve.
Charlie Tew, CEO of SPATCO
That improvement extends to overall operations, where SPATCO uses their mySAP All-in-One solution to integrate equipmentinstallation project quoting and sales through component purchasing, installation execution, progress and final billing, and follow-on equipment tracking for 5,000 customers across seven states, placing 4,500 orders per month.
We lowered inventory by 28%, and reduced slow and nonmoving items by 70%, says John Force, vice president of technology at SPATCO. On the service side, we reduced the days from job completion to invoice generation from 8 to 3, increasing cash flow. And we compressed the monthly financial close from 20- plus days to 5.
Gigabit Transceivers ~ the Next Generation
The Broadcom BCM5401 1000Base-T Transceiver will have a significant market impact because Ethernet switching vendors will not have to change the device form factor they are currently manufacturing. This will allow them to keep engineering costs to a minimum in the area of design and manufacturing, with the best example of this being the Data Closet stackable market.
This transceiver will allow companies to leverage the technology built into the chip set by having a mixture of 10, 100, and 1000Base-T clients residing on the same piece of hardware using existing Category 5 cabling. Before development of this chip set, the only way to deliver Gigabit speeds was to run fiber optic cabling to the area or desktop where this type of performance was desired. This product will allow companies to receive a 10 times performance increase to their existing network without having to upgrade their infrastructure to either category 5E cabling or fiber optic.
The deployment of this technology will depend on both successful vendor testing and which vendors will receive this chip set for testing. If the top three vendors in the Ethernet switching and adapter market receive this chip set you could see Gigabit Ethernet to the desktop over standard Category 5 cabling by either late third quarter or early fourth quarter.
This transceiver will allow companies to leverage the technology built into the chip set by having a mixture of 10, 100, and 1000Base-T clients residing on the same piece of hardware using existing Category 5 cabling. Before development of this chip set, the only way to deliver Gigabit speeds was to run fiber optic cabling to the area or desktop where this type of performance was desired. This product will allow companies to receive a 10 times performance increase to their existing network without having to upgrade their infrastructure to either category 5E cabling or fiber optic.
The deployment of this technology will depend on both successful vendor testing and which vendors will receive this chip set for testing. If the top three vendors in the Ethernet switching and adapter market receive this chip set you could see Gigabit Ethernet to the desktop over standard Category 5 cabling by either late third quarter or early fourth quarter.
Product Information and Strategy
ILike a firewall, StormWatch works through the configuration of a rule-set. Unlike traditional intrusion detection systems, StormWatch works at the application level, not the network level. Each application that StormWatch locks-down has a rule, or set of rules, associated with it. StormWatch does come bundled with a default set of rules, however, more rules can be added at any time for no additional cost.
StormWatch's rules are in essence, behavior rules that understand how the application they are safeguarding behaves. If an application typically writes new data to a particular file, a corresponding StormWatch rule will make sure that the data isn't written to other files, owned by other users or other applications. Hackers often use strategies which involve manipulating processes into writing data to incorrect files.
StormWatch works by installing intelligent agents on the systems targeted for application protection. A correlation engine that lives within the installed agents, makes decisions on whether the instruction an application receives is within standard behavioral guidelines or not. This is one of the elements of the product's INCORE (an acronym for Intercept, Correlate, Rules Engine) architecture, and is fundamental to the pro-active technique that StormWatch uses to protect applications from being lead astray.
If the proposed action is suspiciously unusual, for example, instructing the application to write to non-standard files, the rules that govern the application's behavior will prevent the unacceptable action from executing. In response to unacceptable behavior patterns, the StormWatch agent will begin a dialogue with a central management console that will begin further analysis of the offending file. The management console records the unacceptable activity, and if it finds similar reports of this unacceptable activity, it will update the other intelligent agents on the network of the impending threat.
The agents are able to prevent unauthorized modifications of the registry from taking place by intercepting system calls. The management console communicates with the agents through a secure encrypted SSL link making sure that the rules on the agent systems are always up to date. If a new rule is written, distributing it to other agent systems is for the most part automated. A test mode exists which allows administrators to test out new rules in action, before installing them on production systems.
The default rules that ship with StormWatch prevent inadvertent actions to your system caused by trojans, worms, viruses, buffer overflows, syn floods, and port scans. Writing a rule for a new or custom application requires knowledge of the application's files, executables, directories accessed, and ports accessed, which does require some knowledge and expertise. However, this process is not much different than the learning curve required in writing firewall rules.
StormWatch's rules are in essence, behavior rules that understand how the application they are safeguarding behaves. If an application typically writes new data to a particular file, a corresponding StormWatch rule will make sure that the data isn't written to other files, owned by other users or other applications. Hackers often use strategies which involve manipulating processes into writing data to incorrect files.
StormWatch works by installing intelligent agents on the systems targeted for application protection. A correlation engine that lives within the installed agents, makes decisions on whether the instruction an application receives is within standard behavioral guidelines or not. This is one of the elements of the product's INCORE (an acronym for Intercept, Correlate, Rules Engine) architecture, and is fundamental to the pro-active technique that StormWatch uses to protect applications from being lead astray.
If the proposed action is suspiciously unusual, for example, instructing the application to write to non-standard files, the rules that govern the application's behavior will prevent the unacceptable action from executing. In response to unacceptable behavior patterns, the StormWatch agent will begin a dialogue with a central management console that will begin further analysis of the offending file. The management console records the unacceptable activity, and if it finds similar reports of this unacceptable activity, it will update the other intelligent agents on the network of the impending threat.
The agents are able to prevent unauthorized modifications of the registry from taking place by intercepting system calls. The management console communicates with the agents through a secure encrypted SSL link making sure that the rules on the agent systems are always up to date. If a new rule is written, distributing it to other agent systems is for the most part automated. A test mode exists which allows administrators to test out new rules in action, before installing them on production systems.
The default rules that ship with StormWatch prevent inadvertent actions to your system caused by trojans, worms, viruses, buffer overflows, syn floods, and port scans. Writing a rule for a new or custom application requires knowledge of the application's files, executables, directories accessed, and ports accessed, which does require some knowledge and expertise. However, this process is not much different than the learning curve required in writing firewall rules.
| Product Information | |
| Product Names | Storm Watch |
| Platforms Supported | Windows NT/2000 |
| Product Scope | Financial Services Government agencies of all sizes Online businesses Organizations |
| Industry Focus | Internet Security Information Security Application Security Network security System security |
| Key Features | Central Management Console Server & Desktop agents |
OKENA Pioneers Next-Generation Intrusion Prevention
Intrusion prevention has evolved as a smarter alternative to intrusion detection. Pioneer OKENA has mapped application behaviors into rules, and is using these behavior rules to prevent intrusions up front. This second-generation approach offers substantial bottom line savings, and frees up IT resources for other tasks.
Detecting an intrusion is useful. Preventing an intrusion is far more useful. OKENA's StormWatch intrusion prevention technology offers break-through capabilities previously unseen by traditional intrusion detection companies.
This is not surprising news for anyone who knows OKENA's founder Shaun McConnon. Mr. McConnon founded Raptor Systems in 1994, and at Raptor introduced the first firewall built for NT. In an already competitive market, and defying security critics who downplayed the marketability of an NT firewall, Mr. McConnon lead Raptor to become one of the most respected names in firewall engineering, and later sold it to AXENT. (Just last year AXENT was sold to Symantec, and has since introduced a souped up Raptor based firewall appliance called VelociRaptor.)
Pioneering visionary security technology seems to be one of the things that Mr. McConnon does best. The word "OKENA" means "to fulfill" in Hawaiian, and OKENA's pro-active approach to network and system intrusions holds promise to fulfill a segment in the security market not yet developed by other vendors.
Corporate Information
Headquarters 71 Second Avenue
Waltham, MA, 02451
Website http://www.okena.com/
Employees 40
Field Offices Boston, Chicago, New York,
San Francisco, Washington D.C.
Contact Information 781-209-3200
Detecting an intrusion is useful. Preventing an intrusion is far more useful. OKENA's StormWatch intrusion prevention technology offers break-through capabilities previously unseen by traditional intrusion detection companies.
This is not surprising news for anyone who knows OKENA's founder Shaun McConnon. Mr. McConnon founded Raptor Systems in 1994, and at Raptor introduced the first firewall built for NT. In an already competitive market, and defying security critics who downplayed the marketability of an NT firewall, Mr. McConnon lead Raptor to become one of the most respected names in firewall engineering, and later sold it to AXENT. (Just last year AXENT was sold to Symantec, and has since introduced a souped up Raptor based firewall appliance called VelociRaptor.)
Pioneering visionary security technology seems to be one of the things that Mr. McConnon does best. The word "OKENA" means "to fulfill" in Hawaiian, and OKENA's pro-active approach to network and system intrusions holds promise to fulfill a segment in the security market not yet developed by other vendors.
Corporate Information
Headquarters 71 Second Avenue
Waltham, MA, 02451
Website http://www.okena.com/
Employees 40
Field Offices Boston, Chicago, New York,
San Francisco, Washington D.C.
Contact Information 781-209-3200
Competitive Landscape
Although the TradeBeam's solution has been (and will be) indisputably competitive, especially in light of Vastera's logistics product gaps, the GTM market is characterized by early adopters and is rapidly evolving. Even a company of TradeBeam's current stature—one with several years of existence, less than $20 million (estimated) in annual revenues, an immaculate financial position, and a slew of marquee customers—might not be able to maintain its competitive position against current and potential competitors in the long term, especially against international brokers, freight forwarders, logistics companies, and other companies with greater financial resources, name recognition, and other resources. Competition might also come from in-house development efforts, consulting companies, other software companies, and third-party development efforts. The market is competitive, rapidly evolving, and highly fragmented, and one should only expect the intensity of competition to increase in the future.
Just as banks, such as JP Morgan Chase, are changing their roles, so will the roles of third-party logistics (3PL) providers, which are focused predominantly on the management of the shipment bookings through proof of delivery process and logistics costs management. As user companies continue to embrace the value of broader GTM solutions, logistics providers will be looked upon to provide leadership and to add more value to the entire order life cycle, including purchase order management, total landed cost modeling, insurance and claims, import/export compliance, security regulations, and more seamlessly integrate invoice reconciliation and trade financing systems.
Like other parties in global trade, 3PL providers must still mitigate their risks of providing correct and timely documentation relative to documents for transportation, customs, and settlement, such as LC. They will also be liable for trade compliance issues such as denied parties and anti-boycott and will need a corporate wide solution to protect them from liability. TradeBeam will likely prefer to partner with banks, 3PL providers, or even some logistics management vendors like G-Log or Xporta, given the currently complementary nature of their offerings. These entities, however, might likely decide to grab a bigger slice of the GTM pie through acquisitions such as that by JP Morgan Chase of Vastera or through in-house developments and competency building.
Additionally, the number of stand-alone GTM vendors is quickly dwindling, given the fairly recent mergers of SSA Global and Arzoon (see SSA Global Forms a Strategic Unit with an Extended-ERP Savvy); TradeBeam and Open Harbor, Qiva, etc.; and Kewill and TradePoint (which had previously acquired ClearCross). One should expect GTM software technology and managed services to continue to merge. These acquisitions may also indicate that further, accelerated restructuring in the logistics services market is inevitable. Currently, there is a plethora of point solution providers that specialize in narrow areas, from land cost calculation, visibility, collaboration, export compliance, trading document generation, hazardous material handling; they may move to more complete transportation management capabilities.
There are, however, a number of remaining players in several niches, just enough to muddle the message and nibble at the potential revenues of full-fledged GTM players. For example, we could talk about the remaining ITL players like NextLinx, Precision Software, Intermart, Nistevo, MercuryGate, Xporta, Tarrific.com, OCR Services, Impporters Software Services, MSR Customs Corp., Questaweb, GT Nexus, and LOG-NET, global settlement players like Bolero.net, TradeCard and S1, and a number of other vendors that, arguably, are more specialized in SCEM, visibility, and shipment tracking like Viewlocity, Descartes Systems, Management Dynamics (through recently acquired BridgePoint), Timogen, etc. But, none of these vendors handles all the requirements of automating global e-business. Furthermore, some of these vendors have apparently already merged with or acquired other companies to provide more complete offerings.
Just as banks, such as JP Morgan Chase, are changing their roles, so will the roles of third-party logistics (3PL) providers, which are focused predominantly on the management of the shipment bookings through proof of delivery process and logistics costs management. As user companies continue to embrace the value of broader GTM solutions, logistics providers will be looked upon to provide leadership and to add more value to the entire order life cycle, including purchase order management, total landed cost modeling, insurance and claims, import/export compliance, security regulations, and more seamlessly integrate invoice reconciliation and trade financing systems.
Like other parties in global trade, 3PL providers must still mitigate their risks of providing correct and timely documentation relative to documents for transportation, customs, and settlement, such as LC. They will also be liable for trade compliance issues such as denied parties and anti-boycott and will need a corporate wide solution to protect them from liability. TradeBeam will likely prefer to partner with banks, 3PL providers, or even some logistics management vendors like G-Log or Xporta, given the currently complementary nature of their offerings. These entities, however, might likely decide to grab a bigger slice of the GTM pie through acquisitions such as that by JP Morgan Chase of Vastera or through in-house developments and competency building.
Additionally, the number of stand-alone GTM vendors is quickly dwindling, given the fairly recent mergers of SSA Global and Arzoon (see SSA Global Forms a Strategic Unit with an Extended-ERP Savvy); TradeBeam and Open Harbor, Qiva, etc.; and Kewill and TradePoint (which had previously acquired ClearCross). One should expect GTM software technology and managed services to continue to merge. These acquisitions may also indicate that further, accelerated restructuring in the logistics services market is inevitable. Currently, there is a plethora of point solution providers that specialize in narrow areas, from land cost calculation, visibility, collaboration, export compliance, trading document generation, hazardous material handling; they may move to more complete transportation management capabilities.
There are, however, a number of remaining players in several niches, just enough to muddle the message and nibble at the potential revenues of full-fledged GTM players. For example, we could talk about the remaining ITL players like NextLinx, Precision Software, Intermart, Nistevo, MercuryGate, Xporta, Tarrific.com, OCR Services, Impporters Software Services, MSR Customs Corp., Questaweb, GT Nexus, and LOG-NET, global settlement players like Bolero.net, TradeCard and S1, and a number of other vendors that, arguably, are more specialized in SCEM, visibility, and shipment tracking like Viewlocity, Descartes Systems, Management Dynamics (through recently acquired BridgePoint), Timogen, etc. But, none of these vendors handles all the requirements of automating global e-business. Furthermore, some of these vendors have apparently already merged with or acquired other companies to provide more complete offerings.
Web-Based Tools
The number of users wanting solutions delivered over the Internet with monthly subscriptions or transaction-based fees has noticeably increased. Most new customers want a transaction-based model rather than a straight purchase with a big, upfront, payment (see Trends in Delivery and Pricing Models for Enterprise Applications). Moreover, an enterprise-wide, on-premise approach to global trade and logistics might not be the best approach because of high costs and implementation difficulties. In fact, products with the broadest appeal for global trade today appear to be hosted, web-based solutions that allow companies to go outside their firewall to deliver supply chain visibility, event management, multimode logistics execution, import and export management, and trade security to enterprise shippers.
Such a web-based tool is not just the choice for connecting to far-flung carriers, forwarders, and other service providers, but is often a better approach than ERP-oriented solutions for trade compliance and documentation. This is largely because ERP systems usually only have product marketing descriptions in their item master data, not technical descriptions needed for regulatory compliance. So, for example, if Apple Computer is importing PowerBooks, its name and associated marketing description would not be adequate for US Customs. Trade compliance applications should be able to take the marketing description off of the purchase order and associate it with a commercially acceptable description and the correct Harmonized Tariff Schedule (HTS) classification. For example, the system should list the PowerBook as a laptop computer with certain features and specifications, and the right HTS code number.
Further, complying with the 24 Hour Rule, and based on the importer's purchase order, and the information about the customers' products, the application should be able to create the shipping instructions for the forwarder and send it to the carriers for their manifest. Thus given all the information that needs to be complied, a web-based system, connected to trading partners around the world, should be faster, easier, and better than taking an enterprise-based system and trying to turn it into a global logistics system. Enterprise-based systems are notoriously difficult to integrate with a large network of users. Also, hardly any company would want its ERP master data going directly to vendors. It is far more secure to have a system that takes only the absolute necessary data from the ERP or back-office system to share with the supplier.
In the case of TradeBeam, the company has been striving to distinguish itself from peers and competitors by offering more than the mere ability to track orders and shipments, by aiming to improve all three groups of activities that make up a global trade—the order, the shipment, and the financial settlement. It has designed several so-called "solution blueprints" for solving specific global trade issues, ranging from providing import shipment visibility and trade compliance to eliminating financial discrepancies while managing LC. TradeBeam's Solution Blueprints begin with the key pain points of global trade and identify tools and strategies available to corporations seeking the advantages of the value of optimized GTM. They include an on-demand set of GTM applications that individually might contribute significant value to a corporation while solving specific event management problems. This supply chain monitoring system enables businesses to proactively monitor their supply chain performance by automatically alerting users to exceptions in the order fulfillment process. TradeBeam harnesses data to provide integrated decision support to give managers their best response to out-of-tolerance situations pertaining to order execution and fulfillment. TradeBeam provides near real-time monitoring, measuring and visibility of order and shipment tracking across the entire global supply chain.
Such a web-based tool is not just the choice for connecting to far-flung carriers, forwarders, and other service providers, but is often a better approach than ERP-oriented solutions for trade compliance and documentation. This is largely because ERP systems usually only have product marketing descriptions in their item master data, not technical descriptions needed for regulatory compliance. So, for example, if Apple Computer is importing PowerBooks, its name and associated marketing description would not be adequate for US Customs. Trade compliance applications should be able to take the marketing description off of the purchase order and associate it with a commercially acceptable description and the correct Harmonized Tariff Schedule (HTS) classification. For example, the system should list the PowerBook as a laptop computer with certain features and specifications, and the right HTS code number.
Further, complying with the 24 Hour Rule, and based on the importer's purchase order, and the information about the customers' products, the application should be able to create the shipping instructions for the forwarder and send it to the carriers for their manifest. Thus given all the information that needs to be complied, a web-based system, connected to trading partners around the world, should be faster, easier, and better than taking an enterprise-based system and trying to turn it into a global logistics system. Enterprise-based systems are notoriously difficult to integrate with a large network of users. Also, hardly any company would want its ERP master data going directly to vendors. It is far more secure to have a system that takes only the absolute necessary data from the ERP or back-office system to share with the supplier.
In the case of TradeBeam, the company has been striving to distinguish itself from peers and competitors by offering more than the mere ability to track orders and shipments, by aiming to improve all three groups of activities that make up a global trade—the order, the shipment, and the financial settlement. It has designed several so-called "solution blueprints" for solving specific global trade issues, ranging from providing import shipment visibility and trade compliance to eliminating financial discrepancies while managing LC. TradeBeam's Solution Blueprints begin with the key pain points of global trade and identify tools and strategies available to corporations seeking the advantages of the value of optimized GTM. They include an on-demand set of GTM applications that individually might contribute significant value to a corporation while solving specific event management problems. This supply chain monitoring system enables businesses to proactively monitor their supply chain performance by automatically alerting users to exceptions in the order fulfillment process. TradeBeam harnesses data to provide integrated decision support to give managers their best response to out-of-tolerance situations pertaining to order execution and fulfillment. TradeBeam provides near real-time monitoring, measuring and visibility of order and shipment tracking across the entire global supply chain.
Dealing With GTM Complexity
The moves of JP Morgan Chase and TradeBeam, and their respective acquisitions, as discussed in Market Leaders of Global Trade Management of this note, indicate that the global trade management (GTM) space is consolidating and that point solution providers are disappearing. Leaders like JP Morgan Chase and TradeBeam understand that to truly improve global trade, one must be able to manage both the physical and the financial supply chain across the entire trade transaction. The physical supply chain consists of export/import compliance, document management, shipment tracking, supply chain electronic management (SCEM), inventory management, global parts management, security management, and contract management. The financial supply chain refers to tasks such as purchase order processing, letter of credit (LC) management, open account management, pre- and post-shipment financing, reconciliation, invoice presentment, dispute management, foreign exchange, and insurance management (See figure 1).
As for the acquisition of Open Harbor by TradeBeam, product integration should be complete by the second half of 2005, and TradeBeam pledges to maintain uninterrupted service and support for a key group of Open Harbor clients during the immediate transition phase and post contract execution. TradeBeam has also been engaged in discussions with Open Harbor's customers to understand their specific circumstances, the scope of their projects, and to jointly agree on terms to work together to ensure alignment of business goals. GTM is a new and potentially very large enterprise applications space that has been compared by some to be the next corporate paradigm after enterprise resource planning (ERP). TradeBeam is considered a thought-leader because of its significant "first mover" advantage. It has had a few years head start compared to most competitors, and began with an "end-to-end" GTM portfolio, and did not retrofit its solution onto other "cousin" enterprise applications. So far, TradeBeam has an impressive functional scope, and it promises much more in the future.
As for the acquisition of Open Harbor by TradeBeam, product integration should be complete by the second half of 2005, and TradeBeam pledges to maintain uninterrupted service and support for a key group of Open Harbor clients during the immediate transition phase and post contract execution. TradeBeam has also been engaged in discussions with Open Harbor's customers to understand their specific circumstances, the scope of their projects, and to jointly agree on terms to work together to ensure alignment of business goals. GTM is a new and potentially very large enterprise applications space that has been compared by some to be the next corporate paradigm after enterprise resource planning (ERP). TradeBeam is considered a thought-leader because of its significant "first mover" advantage. It has had a few years head start compared to most competitors, and began with an "end-to-end" GTM portfolio, and did not retrofit its solution onto other "cousin" enterprise applications. So far, TradeBeam has an impressive functional scope, and it promises much more in the future.
Other Potential GTM Vendors
Since many importing/exporting manufacturers rely on the shipper to handle the hassle compliance and regulation, logistics service providers, like airfreight leaders FedEx and DHL, are providing similar services and are providing the broader market access to technology and trade experts. FedEx, for example, has recognized that many customers simply wanted to rid themselves of the burdensome compliance chore, and in 2002 it formed a specialized division, FedEx Trade Networks, to do just that, thus becoming possibly the largest customs brokerage in the US. Some of its compliance services are free, or more accurately, are available from its Web site as part of its overall shipping service. Other services, such as the Harmonized Tariff Schedule (HTS), is available electronically for a fee. The company also offers the services of its consultants, which are trained in dealing with trade and compliance ambiguities, to categorize a manufacturer's entire inventory. To that end, FedEx acquired former content provider WorldTariff a few years ago, which covers the tariffs, taxes, duties, and preferential trade programs of nearly 120 countries.
Even smaller shippers can now leverage import/export software through third parties. Specialized software and managed service providers are now working behind the scenes make it possible for carriers and freight forwarders to offer selected services to their customers, such as landed-cost calculators, product classification, and document preparation, often on a fee-per-transaction basis. To that end, DHL has in the past partnered with Open Harbor, and FedEx Trade Networks has partnered with NextLinx, whose database carries nearly 20,000 HTS product classifications and more than 40 landed cost components for 100 countries and accounts for about 95 percent of the entire world's trade.
In addition to FedEx and DHL, other companies offer compliance services. For example, the sea freight company APL, and the global logistics software specialist G-Log offer such services. In the trade compliance space, there may even be a distinction between content-specific vendors and process-specific vendors, whereby FedEx and G-Log are examples of process-centric vendors, while content-specific vendors, which compile, maintain, and sell access to the data on tariffs, embargoes, and denied parties, include the likes of Vastera, NextLinx, and Open Harbor.
Also entering the global trade realm is the enterprise applications giant SAP. In February, SAP introduced an updated global trade solution that should help companies more easily conduct business under the North American Free Trade Agreement (NAFTA) and EU trade agreements with lower costs and easier regulatory compliance. Important new trade preference processing capabilities have been added to the latest version of SAP Global Trade Services (SAP GTS), a packaged composite application that enables businesses to standardize and streamline import and export processes to speed their global supply chains. Over 125 companies, including Advanced Micro Devices (AMD), a leading designer and producer of innovative microprocessors; ASML, a semiconductor manufacturer; and Teekanne Group, a tea trading company, are reportedly achieving new trade efficiencies and legislative compliance with SAP GTS.
Even smaller shippers can now leverage import/export software through third parties. Specialized software and managed service providers are now working behind the scenes make it possible for carriers and freight forwarders to offer selected services to their customers, such as landed-cost calculators, product classification, and document preparation, often on a fee-per-transaction basis. To that end, DHL has in the past partnered with Open Harbor, and FedEx Trade Networks has partnered with NextLinx, whose database carries nearly 20,000 HTS product classifications and more than 40 landed cost components for 100 countries and accounts for about 95 percent of the entire world's trade.
In addition to FedEx and DHL, other companies offer compliance services. For example, the sea freight company APL, and the global logistics software specialist G-Log offer such services. In the trade compliance space, there may even be a distinction between content-specific vendors and process-specific vendors, whereby FedEx and G-Log are examples of process-centric vendors, while content-specific vendors, which compile, maintain, and sell access to the data on tariffs, embargoes, and denied parties, include the likes of Vastera, NextLinx, and Open Harbor.
Also entering the global trade realm is the enterprise applications giant SAP. In February, SAP introduced an updated global trade solution that should help companies more easily conduct business under the North American Free Trade Agreement (NAFTA) and EU trade agreements with lower costs and easier regulatory compliance. Important new trade preference processing capabilities have been added to the latest version of SAP Global Trade Services (SAP GTS), a packaged composite application that enables businesses to standardize and streamline import and export processes to speed their global supply chains. Over 125 companies, including Advanced Micro Devices (AMD), a leading designer and producer of innovative microprocessors; ASML, a semiconductor manufacturer; and Teekanne Group, a tea trading company, are reportedly achieving new trade efficiencies and legislative compliance with SAP GTS.
TradeBeam Keeps on Rounding Out Its GTM Set
Combined, JPMorgan and Vastera promise to deliver a holistic approach to global trade management; however, it may not be the one and only option for international traders. TradeBeam Holding Inc. is also vying to create an integrated physical and financial supply chain. Its solutions aim to streamline global trading processes for enterprises and their partners, including import and export compliance and global trade finance solutions, like open account and letters of credit (LC) management. It also offers solutions for inventory management, shipment tracking, and supply chain electronic management (SCEM), and has over 3,000 customers, and users in over 100 countries worldwide. At the end of 2004, TradeBeam announced that it acquired the assets of Open Harbor, a leading provider of international trade logistics solutions (ITL).The terms of the deal were not disclosed.
Founded in 1999, Open Harbor possessed deep expertise in trade compliance, including a comprehensive centralized repository of global trade content. This harmonization engine contains millions of trade rules from more than sixties countries, in a one-to-one relationship. The company was also considered a leading player in the landed cost management arena, and customers have leveraged its technology and experience to gain crucial accurate pricing for international orders based on an aggregate of product cost, shipping costs, and fees charged by the exporting and importing countries. However, based on its solution sets and market demand, Open Harbor has not seen the level of success that is should have. Its failure was primarily caused by poor management
Conversely, TradeBeam has focused more on the application side of trade management, such as creating shipment tracking, insurance, event management, and other applications central to the actual movement of goods. Because of the market demand for experts in trade regulations interpretation and application, Open Harbor became a logical acquisition choice for TradeBeam, thus the acquisition bid was made and accepted.
TradeBeam believes that Open Harbor will bring a logical extension to its current offering, since customers will now have enhanced access to the latest global trade content for more than 60 countries and to landed cost management. The move is a continuation of TradeBeams' strategic expansion of its product footprint, which covers the entire life cycle of global trade across order, logistics, and financial settlement activities. There should also be a complimentary vertical focus, since Open Harbor had developed solutions and attracted clients in the hi-tech and automotive markets.
Founded in 1999, Open Harbor possessed deep expertise in trade compliance, including a comprehensive centralized repository of global trade content. This harmonization engine contains millions of trade rules from more than sixties countries, in a one-to-one relationship. The company was also considered a leading player in the landed cost management arena, and customers have leveraged its technology and experience to gain crucial accurate pricing for international orders based on an aggregate of product cost, shipping costs, and fees charged by the exporting and importing countries. However, based on its solution sets and market demand, Open Harbor has not seen the level of success that is should have. Its failure was primarily caused by poor management
Conversely, TradeBeam has focused more on the application side of trade management, such as creating shipment tracking, insurance, event management, and other applications central to the actual movement of goods. Because of the market demand for experts in trade regulations interpretation and application, Open Harbor became a logical acquisition choice for TradeBeam, thus the acquisition bid was made and accepted.
TradeBeam believes that Open Harbor will bring a logical extension to its current offering, since customers will now have enhanced access to the latest global trade content for more than 60 countries and to landed cost management. The move is a continuation of TradeBeams' strategic expansion of its product footprint, which covers the entire life cycle of global trade across order, logistics, and financial settlement activities. There should also be a complimentary vertical focus, since Open Harbor had developed solutions and attracted clients in the hi-tech and automotive markets.
Vastera Certifications
At the end of 2004, Vastera announced that its eleven managed services operations in Mexico and its site in Bydgoszcz, Poland were certified in compliance with the International Organization for Standardization (ISO) 9001:2000 standard, and ISO 9001:2001, respectively. Founded in 1947, ISO facilitates the international coordination and unification of industrial standards. It has a network of national standards institutes from 148 countries, working in partnership with international organizations, governments, industry, and consumer representatives. ISO 9001:2000 and 9001:2001 certified organizations enhance customer satisfaction by not only meeting customer and regulatory requirements, but also by continually working to improve performance. The certification process includes a rigorous review of business processes, documents, work practices, data, and records by an independent third-party auditor. Thus, such certification indicates that these sites have an exemplary quality management system in place. In addition to participating in such reviews, Vastera employees were interviewed and on-site observations were held at its Mexico and Poland facilities. To date, Vastera has received ISO certification for fourteen managed services operations, including those in Mexico, Poland, US, and Canada.
In addition to being ISO 9001:2000 and ISO 9001:2001-certified, Vastera is
* Customs-Trade Partnership Against Terrorism (C-TPAT) certified, enabling expedited clearance through and reduced physical examinations at US Customs' checkpoints. The C-TPAT program was designed to ensure that proper security procedures are in place to protect the flow of global trade entering the US.
* Partners in Protection (PIP) certified in Canada, recognizing Vastera's dedication to enhanced border security in North America. Mid-2004, Vastera announced that it has been accepted as a member of the Canadian government's PIP program, a joint government-business initiative designed to enhance border security, combat terrorism and organized crime, increase awareness of compliance issues, and detect and prevent smuggling. Available to importers, carriers, brokers, warehouse operators and associations who work in international trade, the PIP program teams private industry with the Canadian Border Services Agency (CBSA). To be admitted to the program, eligible companies must complete a memorandum of understanding, conduct a thorough self-assessment of their supply chain security procedures, and meet periodically with CBSA representatives to exchange information and participate in awareness sessions that help detect illegal activities. In working with the CBSA, Vastera is building a working relationship with the Canadian government in relation to protecting the health, safety, and economic prosperity of Canadians. In return for acceptance into PIP, Vastera will offer support to its own clients throughout the application process. Once approved under the PIP program, Vastera clients can then consider participation in the Free and Secure Trade Program (FAST), a joint US-Canada cross-border program under which pre-approved carriers, importers, and drivers can leverage expedited clearance into either country, transforming the compliance obligation into an opportunity to streamline the supply chain. Additionally, Vastera is a certified customs broker, and an approved software provider of the Customs Self Assessment Electronic Data Interchange (CSA EDI).
* Simpler Trade Procedures (SITPRO) certified in the UK, whereby Vastera is an approved document supplier. It can produce and supply nearly seventy SITPRO standard documents for its customers operating in the UK and Europe.
* Wewn�trzny System Kontroli (WSK) certified in Poland, recognizing Vastera's exemplary quality and compliance management systems. WSK is the Polish internal control system certification. Vastera's Managed Services operations in Poland received WSK certification from the Polish Center for Testing and Certification. The vendor is also IQNet certified in Poland recognizing that its Managed Services operations have implemented and are maintaining a management system which fulfills the requirements of the ISO 9001:2001 standard.
In addition to these certifications, at the end of January, Vastera announced that it is expanding its trade management consulting practice to the European Union (EU). Its management consulting practice complements the software and outsourced trade management solutions already offered by Vastera in Europe. Among the trade management consulting services being offered in the EU are import/export compliance program assessments, process design and implementation consulting, and consulting in areas such as global supply chain management (SCM), and trade lane redesign. Vastera hopes to leverage its strong in-country presence as it pursues new consulting opportunities in Europe, where it currently provides trade management operational solutions and software to companies such as Dell, Ford, Logica, Lucent, Nestle, Nortel Networks, Schenectady International, and Seagate Technology.
Thus, JPMorgan hopes to leverage all of Vastera's certification and prominence in international trade. However, one should note, that though Vastera is impressive, and JPMorgan has notable reach, Vastera, focuses more on the rules and regulations imposed by the many governmental bodies required in cross-border trade (such as product harmonization coding, customs clearance, duties, tariffs, and taxes). Ultimately, the acquisition agreement with JPMorgan will not compensate for what Vastera has always lacked—the technology to automate and manage global logistics tracking, goods movement, and the visibility part of the physical supply chain. JPMorgan Chase will thus have to continue its pursuit of solutions to round out a complete GTM product portfolio, as to reach a "breeze" to navigate international trading channels to place orders, send, and receive shipments and settle bills anywhere in the world.
In addition to being ISO 9001:2000 and ISO 9001:2001-certified, Vastera is
* Customs-Trade Partnership Against Terrorism (C-TPAT) certified, enabling expedited clearance through and reduced physical examinations at US Customs' checkpoints. The C-TPAT program was designed to ensure that proper security procedures are in place to protect the flow of global trade entering the US.
* Partners in Protection (PIP) certified in Canada, recognizing Vastera's dedication to enhanced border security in North America. Mid-2004, Vastera announced that it has been accepted as a member of the Canadian government's PIP program, a joint government-business initiative designed to enhance border security, combat terrorism and organized crime, increase awareness of compliance issues, and detect and prevent smuggling. Available to importers, carriers, brokers, warehouse operators and associations who work in international trade, the PIP program teams private industry with the Canadian Border Services Agency (CBSA). To be admitted to the program, eligible companies must complete a memorandum of understanding, conduct a thorough self-assessment of their supply chain security procedures, and meet periodically with CBSA representatives to exchange information and participate in awareness sessions that help detect illegal activities. In working with the CBSA, Vastera is building a working relationship with the Canadian government in relation to protecting the health, safety, and economic prosperity of Canadians. In return for acceptance into PIP, Vastera will offer support to its own clients throughout the application process. Once approved under the PIP program, Vastera clients can then consider participation in the Free and Secure Trade Program (FAST), a joint US-Canada cross-border program under which pre-approved carriers, importers, and drivers can leverage expedited clearance into either country, transforming the compliance obligation into an opportunity to streamline the supply chain. Additionally, Vastera is a certified customs broker, and an approved software provider of the Customs Self Assessment Electronic Data Interchange (CSA EDI).
* Simpler Trade Procedures (SITPRO) certified in the UK, whereby Vastera is an approved document supplier. It can produce and supply nearly seventy SITPRO standard documents for its customers operating in the UK and Europe.
* Wewn�trzny System Kontroli (WSK) certified in Poland, recognizing Vastera's exemplary quality and compliance management systems. WSK is the Polish internal control system certification. Vastera's Managed Services operations in Poland received WSK certification from the Polish Center for Testing and Certification. The vendor is also IQNet certified in Poland recognizing that its Managed Services operations have implemented and are maintaining a management system which fulfills the requirements of the ISO 9001:2001 standard.
In addition to these certifications, at the end of January, Vastera announced that it is expanding its trade management consulting practice to the European Union (EU). Its management consulting practice complements the software and outsourced trade management solutions already offered by Vastera in Europe. Among the trade management consulting services being offered in the EU are import/export compliance program assessments, process design and implementation consulting, and consulting in areas such as global supply chain management (SCM), and trade lane redesign. Vastera hopes to leverage its strong in-country presence as it pursues new consulting opportunities in Europe, where it currently provides trade management operational solutions and software to companies such as Dell, Ford, Logica, Lucent, Nestle, Nortel Networks, Schenectady International, and Seagate Technology.
Thus, JPMorgan hopes to leverage all of Vastera's certification and prominence in international trade. However, one should note, that though Vastera is impressive, and JPMorgan has notable reach, Vastera, focuses more on the rules and regulations imposed by the many governmental bodies required in cross-border trade (such as product harmonization coding, customs clearance, duties, tariffs, and taxes). Ultimately, the acquisition agreement with JPMorgan will not compensate for what Vastera has always lacked—the technology to automate and manage global logistics tracking, goods movement, and the visibility part of the physical supply chain. JPMorgan Chase will thus have to continue its pursuit of solutions to round out a complete GTM product portfolio, as to reach a "breeze" to navigate international trading channels to place orders, send, and receive shipments and settle bills anywhere in the world.
Market Leaders of Global Trade Management
Completion of the merger is subject to Vastera shareholder, various banking, and other regulatory approvals. The transaction was approved by Vastera's board of directors recommending that Vastera shareholders vote in favor of the transaction. Two major shareholders representing approximately 28 percent of outstanding Vastera shares, Ford Motor Company and Technology Crossover Ventures, have reportedly committed to vote in favor of the transaction pursuant to voting agreements.
With approximately 650 professionals in 14 countries and with over 400 clients throughout the world, Vastera is the worldwide leader of GTM solutions. It serves an international client base, including companies such as Alcatel, Dell, Ford, General Electric (GE), Lucent, Fonterra, Goodyear, Nortel Networks, and Seagate. Vastera's clients use its solutions and services to manage their trade, worldwide by managing the information flows associated with the cross-border components of importing and exporting goods. The vendor's solutions and services enable clients to manage the complexities and inefficiencies inherent in global trading in a manner that allows them to capitalize on the large, highly fragmented, and rapidly growing opportunity that exist in the international market. These clients reportedly realize significant reductions in costs to manage their global trade operations while improving compliance with government regulations and service levels.
Vastera touts its trade experts to be the company's most valuable asset and they were certainly a key factor in JPMorgan Chase's acquisition decision. There appears to be a strong, global demand for trade consultants, because companies want to understand the impact of ever-changing regulations on their business strategy, network design, operations, and financial performance. Consequently, Vastera sells its products and services through its offices in the US and through subsidiaries and branch entities in the UK, Europe, Mexico, Canada, Brazil, and Japan. Its key strengths include comprehensive regulatory content, blue-chip clients, and its ability to merge technology with managed services. It has a strong presence in the automotive and high-tech industries, has in-depth expertise in Brazil, Canada and Mexico, and is currently targeting China. As the only GTM vendor with dedicated personnel and facilities in fourteen countries, Vastera continues to be recognized for its superior management systems and B2B best practices around the world, resulting in service that emphasizes compliance, efficiency, and effectiveness.
With approximately 650 professionals in 14 countries and with over 400 clients throughout the world, Vastera is the worldwide leader of GTM solutions. It serves an international client base, including companies such as Alcatel, Dell, Ford, General Electric (GE), Lucent, Fonterra, Goodyear, Nortel Networks, and Seagate. Vastera's clients use its solutions and services to manage their trade, worldwide by managing the information flows associated with the cross-border components of importing and exporting goods. The vendor's solutions and services enable clients to manage the complexities and inefficiencies inherent in global trading in a manner that allows them to capitalize on the large, highly fragmented, and rapidly growing opportunity that exist in the international market. These clients reportedly realize significant reductions in costs to manage their global trade operations while improving compliance with government regulations and service levels.
Vastera touts its trade experts to be the company's most valuable asset and they were certainly a key factor in JPMorgan Chase's acquisition decision. There appears to be a strong, global demand for trade consultants, because companies want to understand the impact of ever-changing regulations on their business strategy, network design, operations, and financial performance. Consequently, Vastera sells its products and services through its offices in the US and through subsidiaries and branch entities in the UK, Europe, Mexico, Canada, Brazil, and Japan. Its key strengths include comprehensive regulatory content, blue-chip clients, and its ability to merge technology with managed services. It has a strong presence in the automotive and high-tech industries, has in-depth expertise in Brazil, Canada and Mexico, and is currently targeting China. As the only GTM vendor with dedicated personnel and facilities in fourteen countries, Vastera continues to be recognized for its superior management systems and B2B best practices around the world, resulting in service that emphasizes compliance, efficiency, and effectiveness.
Enter the Leaders of GTM
While many eyes are still on the consolidation of the mainstream enterprise resource planning (ERP) market, the end of 2004 and the beginning of 2005 also have seen the acquisition moves of two prominent players in the global trade management (GTM) market to streamline the entire life cycle of a global trade and make cross-border transactions more efficient. Providing solutions that integrate the physical and financial supply chains by more holistically optimizing the "procure-to-pay" and "order-to-cash" cycles for global corporations appears to no longer be mere buzzwords and concepts.
Two of these acquisitions are JPMorgan Chase Bank, N.A. (NYSE: JPM) and Vastera (NASDAQ: VAST) ; and TradeBeam Holdings, Inc., and Open Harbor.
Part four of the Will 2005 Validate the Realm of GTM—Unifying Financial and Physical Supply Chains? series
JPMorgan Chase Bank Acquires Vastera
On January 7, JPMorgan Chase Bank, N.A.(NYSE:JPM), a leading global financial services firm with assets of $1.1 trillion (USD) and operations in more than 50 countries signed an Agreement and Plan of Merger with Vastera (NASDAQ: VAST), the only publicly traded software company that focuses on global trade. With services including software, managed services, global trade content, education, and high-end consulting services, Vastera was deemed a desirable complement to the Logistics and Trade Services business of JPMorgan Chase's Treasury unit.
The Treasury Services unit is a top-ranked, full-service provider that meets the needs of corporations, financial services institutions, middle market companies, small businesses, governments and municipalities worldwide. Its services include innovative payment, collection, liquidity and investment management, trade finance, commercial card, and information solutions. With more than 50,000 clients and a presence in 36 countries, it is the world's largest provider of treasury management services. Under the Agreement and Plan of Merger, Vastera shareholders will receive $3.00 (USD) for each outstanding share of Vastera common stock they own, for a total transaction value of approximately $129 million (USD), about 50 percent premium over the annual revenue of Vastera.
Vastera's solutions automate the required trade management processes associated with the physical movement of goods internationally. The acquisition should further provide JPMorgan Chase clients with a "one-stop shop" service that addresses the increasing challenges and risks associated with international trade. The JPMorgan Chase solution currently facilitates the seamless management of information and processes to support the movement of physical goods and financial settlement of the complete global trade process. With the services of Vastera, JPMorgan Chase boasts it will be the first global financial institution to offer a complete, integrated cash, trade, and logistics solution across the physical and financial supply chains in a way that would maximize benefits to its clients.
Previous to the acquisition, Vastera had an extensive working relationship with JPMorgan Chase by providing GTM solutions. Now the two tout to be able to build on that relationship as part of the same firm, in a broader GTM infrastructure, to bring tangible benefits to clients of both formerly independent companies. This acquisition should give current JPMorgan Chase's clients the benefits of broader GTM solutions. In tturn Vastera's clients will receive the benefits of JPMorgan Chase's comprehensive financial services platform and product set. Vastera will continue to independently market its software and services, but much more growth opportunity is expected from bundling Vastera's software and services with JPMorgan Chase's offerings.
Two of these acquisitions are JPMorgan Chase Bank, N.A. (NYSE: JPM) and Vastera (NASDAQ: VAST) ; and TradeBeam Holdings, Inc., and Open Harbor.
Part four of the Will 2005 Validate the Realm of GTM—Unifying Financial and Physical Supply Chains? series
JPMorgan Chase Bank Acquires Vastera
On January 7, JPMorgan Chase Bank, N.A.(NYSE:JPM), a leading global financial services firm with assets of $1.1 trillion (USD) and operations in more than 50 countries signed an Agreement and Plan of Merger with Vastera (NASDAQ: VAST), the only publicly traded software company that focuses on global trade. With services including software, managed services, global trade content, education, and high-end consulting services, Vastera was deemed a desirable complement to the Logistics and Trade Services business of JPMorgan Chase's Treasury unit.
The Treasury Services unit is a top-ranked, full-service provider that meets the needs of corporations, financial services institutions, middle market companies, small businesses, governments and municipalities worldwide. Its services include innovative payment, collection, liquidity and investment management, trade finance, commercial card, and information solutions. With more than 50,000 clients and a presence in 36 countries, it is the world's largest provider of treasury management services. Under the Agreement and Plan of Merger, Vastera shareholders will receive $3.00 (USD) for each outstanding share of Vastera common stock they own, for a total transaction value of approximately $129 million (USD), about 50 percent premium over the annual revenue of Vastera.
Vastera's solutions automate the required trade management processes associated with the physical movement of goods internationally. The acquisition should further provide JPMorgan Chase clients with a "one-stop shop" service that addresses the increasing challenges and risks associated with international trade. The JPMorgan Chase solution currently facilitates the seamless management of information and processes to support the movement of physical goods and financial settlement of the complete global trade process. With the services of Vastera, JPMorgan Chase boasts it will be the first global financial institution to offer a complete, integrated cash, trade, and logistics solution across the physical and financial supply chains in a way that would maximize benefits to its clients.
Previous to the acquisition, Vastera had an extensive working relationship with JPMorgan Chase by providing GTM solutions. Now the two tout to be able to build on that relationship as part of the same firm, in a broader GTM infrastructure, to bring tangible benefits to clients of both formerly independent companies. This acquisition should give current JPMorgan Chase's clients the benefits of broader GTM solutions. In tturn Vastera's clients will receive the benefits of JPMorgan Chase's comprehensive financial services platform and product set. Vastera will continue to independently market its software and services, but much more growth opportunity is expected from bundling Vastera's software and services with JPMorgan Chase's offerings.
Managing Global Trade Flows
Countries and localities also have different licensing requirements and charge different duties. For example, customs duties may nearly double the cost of music compact disc (CD) for buyers in countries like Brazil, while a bottle of nutritional supplement pills can increase 25 percent on shipments to countries like Germany. This with value-added taxes (VAT), and other fees, can altogether amount to a major content management challenge. Different custom offices even in the same country sometimes classify products in different ways, which means multiple tariff rates could be applied to a single product, depending on where it enters the country.
Beyond these regulations, there might be many other financial and logistical considerations, since GTM has complex, processes for financing, risk management, and financial settlement, prompting financial institutions and software vendors to continue ironing out the applications and services e-businesses require for automating international payments. Suppliers will want integration with their order management systems, whereas retailers will want integration with their sourcing and procurement systems. Alternatively, many of these functions may be embedded in a broader GTM/ITL solution.
Although global trade requires the multimodal shipping of goods across borders, many international shippers that want to automate their global supply chains do not yet have e-logistics software that provides the necessary visibility and flexibility needed to conduct e-businesses. They also do not have e-procurement software that can analyze the total landed cost, such as the costs of sourcing and shipping a product internationally, including customs management, tariffs, transportation, cost of goods, etc. However, there have been a number of Internet-based logistics tools that are helping companies analyze and reduce costs by automating the processes of booking shipments, keeping customers informed, and making sure goods arrive on time (for more information, see Understanding the True Cost of Sourcing).
Savvy customers have been increasingly asking for help in researching costs for importing from different countries. By using software to check duties, taxes, and trade regulations in the potential countries of origin, GTM experts should be able to create "what if" scenarios that will help importers make the right decision.
Beyond these regulations, there might be many other financial and logistical considerations, since GTM has complex, processes for financing, risk management, and financial settlement, prompting financial institutions and software vendors to continue ironing out the applications and services e-businesses require for automating international payments. Suppliers will want integration with their order management systems, whereas retailers will want integration with their sourcing and procurement systems. Alternatively, many of these functions may be embedded in a broader GTM/ITL solution.
Although global trade requires the multimodal shipping of goods across borders, many international shippers that want to automate their global supply chains do not yet have e-logistics software that provides the necessary visibility and flexibility needed to conduct e-businesses. They also do not have e-procurement software that can analyze the total landed cost, such as the costs of sourcing and shipping a product internationally, including customs management, tariffs, transportation, cost of goods, etc. However, there have been a number of Internet-based logistics tools that are helping companies analyze and reduce costs by automating the processes of booking shipments, keeping customers informed, and making sure goods arrive on time (for more information, see Understanding the True Cost of Sourcing).
Savvy customers have been increasingly asking for help in researching costs for importing from different countries. By using software to check duties, taxes, and trade regulations in the potential countries of origin, GTM experts should be able to create "what if" scenarios that will help importers make the right decision.
Other Risks of Global Trade
Though less dramatic, there are also other financial risks. Where imports attract tariffs or duties, items purchased from overseas may turn out to be more expensive if, for example, the wrong tariff code is applied. Importers can pay more than necessary if the paperwork omits mention of any one of dozens of "preferential programs" under which tariffs are cut, or waived altogether, owing to a slew of free trade agreements. Moreover, even more expensively, tariffs for some goods vary throughout the year, as low-tariff special quotas expire, with the end result being that what seemed a bargain when the purchase order was placed, could turn out to be an expensive mistake when goods enter customs.
In addition to language barriers, and different formats for weights, units of measurements (UOM), dates, telephone numbers, addresses, etc., global trade management (GTM) and international trade logistics (ITL) compliance issues are other hurdles for e-business. Collaborative e-business applications must be able to comply with a variety of complex regulations to engage in global trade, and companies that cannot handle these regulations will end up leaving "a lot of money on the table" and walking away with very little profit.
There are some indications that almost half of the international orders to US via e-commerce remain unfulfilled because companies cannot handle the necessary customs and duty procedures. On the other hand, billions in US import duty refunds go unclaimed each year by companies that do not understand the trade laws. For example, under the US government's "duty drawback" scheme, importers that subsequently re-export what they import can be refunded up to 99 percent of the duties they paid; however, this is on the condition that they can prove that, for example, the widgets they are exporting are the same widgets they imported. This can be especially difficult to prove when the widgets in question are parts that are built into a complex assembly, and are regularly sourced from more than one supplier across the globe.
Further, customs requires that all imports be coded and categorized, and, because these codes vary among countries, they must also be harmonized from country to country, while restricted-party screening regulations may apply to products that cannot be imported or exported between specific countries for national security, health, and environmental reasons. All imports, for example, must specify a Harmonized Tariff Schedule (HTS) identification code to US Customs—a code which is found within the Harmonized Trade Schedule of the US, a two-volume catalog almost eight inches thick. Moreover, one must read it carefully, since previously acceptable descriptions like "general industrial goods" are no longer permitted. Even worse, the same type of product, made from different material will fall under different tariff laws. To illustrate, leather gloves attract one tariff, wool gloves another, and lined gloves still another.
To that end, many GTM solutions providers offer products that will extract data from a supplier's advance shipment notification (ASN) to create a US Customs Form 7501, which is used to collect duties and other fees, and which must declare exactly what is in a shipment coming to the US port. The system can even forward this electronic document to the user company's customs broker, ensuring that the shipment is ready to clear customs before it leaves the country of origin. Additionally, besides classifying each item in the shipment in line with official tariff codes, such as the HTS, the solution should also flag merchandise that is regulated by government agencies other than Customs.
For example, a retailer may import many items that incorporate animal products such as furs, feathers, skins, and bone, which are all regulated by the US Fish and Wildlife Service. Thus, a shipment that includes even one of these products must wait while the importer files the necessary documents, and, lo and behold, many shippers, and even their suppliers, do not realize that an item such as a shirt with mother-of-pearl buttons requires special treatment. A GTM application should automatically identify and separate items that need to be processed through Fish and Wildlife or other agencies, and allow other non-Fish and Wiildlife merchandise, to be cleared and moved. It should be able to create a separate entry for the Fish and Wildlife and only delay that portion of the shipment one day. Furthermore, once the system has assigned a code to a product, it will automatically attach the same code every time the company brings that item into the US, which will result with future saves in time-consuming chores.
In addition to language barriers, and different formats for weights, units of measurements (UOM), dates, telephone numbers, addresses, etc., global trade management (GTM) and international trade logistics (ITL) compliance issues are other hurdles for e-business. Collaborative e-business applications must be able to comply with a variety of complex regulations to engage in global trade, and companies that cannot handle these regulations will end up leaving "a lot of money on the table" and walking away with very little profit.
There are some indications that almost half of the international orders to US via e-commerce remain unfulfilled because companies cannot handle the necessary customs and duty procedures. On the other hand, billions in US import duty refunds go unclaimed each year by companies that do not understand the trade laws. For example, under the US government's "duty drawback" scheme, importers that subsequently re-export what they import can be refunded up to 99 percent of the duties they paid; however, this is on the condition that they can prove that, for example, the widgets they are exporting are the same widgets they imported. This can be especially difficult to prove when the widgets in question are parts that are built into a complex assembly, and are regularly sourced from more than one supplier across the globe.
Further, customs requires that all imports be coded and categorized, and, because these codes vary among countries, they must also be harmonized from country to country, while restricted-party screening regulations may apply to products that cannot be imported or exported between specific countries for national security, health, and environmental reasons. All imports, for example, must specify a Harmonized Tariff Schedule (HTS) identification code to US Customs—a code which is found within the Harmonized Trade Schedule of the US, a two-volume catalog almost eight inches thick. Moreover, one must read it carefully, since previously acceptable descriptions like "general industrial goods" are no longer permitted. Even worse, the same type of product, made from different material will fall under different tariff laws. To illustrate, leather gloves attract one tariff, wool gloves another, and lined gloves still another.
To that end, many GTM solutions providers offer products that will extract data from a supplier's advance shipment notification (ASN) to create a US Customs Form 7501, which is used to collect duties and other fees, and which must declare exactly what is in a shipment coming to the US port. The system can even forward this electronic document to the user company's customs broker, ensuring that the shipment is ready to clear customs before it leaves the country of origin. Additionally, besides classifying each item in the shipment in line with official tariff codes, such as the HTS, the solution should also flag merchandise that is regulated by government agencies other than Customs.
For example, a retailer may import many items that incorporate animal products such as furs, feathers, skins, and bone, which are all regulated by the US Fish and Wildlife Service. Thus, a shipment that includes even one of these products must wait while the importer files the necessary documents, and, lo and behold, many shippers, and even their suppliers, do not realize that an item such as a shirt with mother-of-pearl buttons requires special treatment. A GTM application should automatically identify and separate items that need to be processed through Fish and Wildlife or other agencies, and allow other non-Fish and Wiildlife merchandise, to be cleared and moved. It should be able to create a separate entry for the Fish and Wildlife and only delay that portion of the shipment one day. Furthermore, once the system has assigned a code to a product, it will automatically attach the same code every time the company brings that item into the US, which will result with future saves in time-consuming chores.
Managing The Process
With penalties for violating export control laws that can potentially reach $30 million dollars (USD), the reasons to build compliance checks into a company's business processes and to find software that can establish protocols for processing export orders and create transaction records are compelling. Also, the merging of federal agencies into huge organizations like the US Department of Home Security (DHS) will make software an important tool for complying with security mandates. Import and export administration, trade policy, and national security are all converging under a single bureaucratic umbrella, and that means importers and exporters will need to organize data in a similar fashion.
The other aspect to consider is the verification of financial data and business processes. Shippers that are involved in mergers and acquisitions, or undergoing customs and tax audits can use GTM software as an audit tool because it automatically records each step in every trade transaction. This capability also helps companies comply with the US Sarbanes-Oxley Act (SOX), which requires companies to certify that their business processes and financial statements meet specified standards (for more information, see Attributes of Sarbanes-Oxley Tool Sets). If there is sufficient reliance on export revenues that it would materially affect a company's financial performance if something went wrong, such as a denial order forbidding the company from exporting because of a violation, then the company's export control procedures would have to be certified.
The other aspect to consider is the verification of financial data and business processes. Shippers that are involved in mergers and acquisitions, or undergoing customs and tax audits can use GTM software as an audit tool because it automatically records each step in every trade transaction. This capability also helps companies comply with the US Sarbanes-Oxley Act (SOX), which requires companies to certify that their business processes and financial statements meet specified standards (for more information, see Attributes of Sarbanes-Oxley Tool Sets). If there is sufficient reliance on export revenues that it would materially affect a company's financial performance if something went wrong, such as a denial order forbidding the company from exporting because of a violation, then the company's export control procedures would have to be certified.
Global Trade Flows
Regarding the flow of goods, it is important to manage the processes around areas such as the original order and contract, product information, trade compliance, shipment tracking, and landed costs. For example
* Order management requires the ability to track the business terms of the order correctly. As an order progresses, it is essential to reconcile all shipment activities against the order to ensure that the process is smooth from a transactional and security perspective.
* Trade compliance requires the ability to manage import and export compliance processes. The proper management of these processes includes screening trading partners against governmental prohibition lists, determining that commodities can be shipped to the country of destination, managing outsourced service provider activity, such as a broker and auditing compliance activities, to ensure the correct flow of information and the accurate payment of taxes, duty, and fees.
* Product information must manage the flow of goods related information relevant to the physical goods. For example, Harmonized Tariff Schedule (HTS) or the Export Control Classification Number (ECCN) numbers to assist trade compliance, weights for shipment booking, and documents for tracking.
* Shipment tracking has to provide visibility for the location of the goods throughout the life of the trade, including entry and exit from ports, and title exchange through to proof of delivery, with status on when the goods reach the final destination.
As for the flow of funds, it is important to manage the way invoices are handled, international payments are made, and how these payments are reconciled. For example
* Reconciliation should handle global trade requirements for n-dimensional matching to sort through the vast amount of information required to settle global transactions. Matching must be managed across trading documents, highlighting exceptions at the line-item level.
* Invoice management has to manage commercial and customs invoice creation and presentation, and manage outstanding invoices.
* Letter of credit (LC) management has to manage the flow of letters of credit from their creation through to their final presentment. The process needs to synchronize between LC data and critical supporting documents, including bill of lading (BOL), invoice, and packing list.
* Dispute management has to flag issues and manage the resolution flows between multiple trading partners
* Trade financing requires functions factoring trade receivables based on multiple trade characteristics such as shipping lane, currency, buyer supplier rating, or trade credit.
With regard to the flow of information, it is critical to track and manage information anomalies, documentation, and interaction with trading partners to create secure audit trails and settle transactions. For example
* Pro-active information alerting provides the ability to act on exceptions and information anomalies between trading partners and service providers
* Document creation and management is needed to ensure that documents are both accurate and compliant with business agreements and regulations to ensure the swift exchange of title of goods and payment
* Trading partner integration has to manage the flow of information with all trading partners
* Audit trails are required to provide clear document appraisals for all documentation, processes, and communication with partner interactions.
To recap, across the three major flows, user companies need to deploy tools that support the automation of standard workflow procedures, synchronize, and reconcile the exchange of data, automate document generation, provide for exception management, and provide for detailed and flexible visibility into orders and shipments. This all must be done while complying with security, compliance and other regulatory requirements.
* Order management requires the ability to track the business terms of the order correctly. As an order progresses, it is essential to reconcile all shipment activities against the order to ensure that the process is smooth from a transactional and security perspective.
* Trade compliance requires the ability to manage import and export compliance processes. The proper management of these processes includes screening trading partners against governmental prohibition lists, determining that commodities can be shipped to the country of destination, managing outsourced service provider activity, such as a broker and auditing compliance activities, to ensure the correct flow of information and the accurate payment of taxes, duty, and fees.
* Product information must manage the flow of goods related information relevant to the physical goods. For example, Harmonized Tariff Schedule (HTS) or the Export Control Classification Number (ECCN) numbers to assist trade compliance, weights for shipment booking, and documents for tracking.
* Shipment tracking has to provide visibility for the location of the goods throughout the life of the trade, including entry and exit from ports, and title exchange through to proof of delivery, with status on when the goods reach the final destination.
As for the flow of funds, it is important to manage the way invoices are handled, international payments are made, and how these payments are reconciled. For example
* Reconciliation should handle global trade requirements for n-dimensional matching to sort through the vast amount of information required to settle global transactions. Matching must be managed across trading documents, highlighting exceptions at the line-item level.
* Invoice management has to manage commercial and customs invoice creation and presentation, and manage outstanding invoices.
* Letter of credit (LC) management has to manage the flow of letters of credit from their creation through to their final presentment. The process needs to synchronize between LC data and critical supporting documents, including bill of lading (BOL), invoice, and packing list.
* Dispute management has to flag issues and manage the resolution flows between multiple trading partners
* Trade financing requires functions factoring trade receivables based on multiple trade characteristics such as shipping lane, currency, buyer supplier rating, or trade credit.
With regard to the flow of information, it is critical to track and manage information anomalies, documentation, and interaction with trading partners to create secure audit trails and settle transactions. For example
* Pro-active information alerting provides the ability to act on exceptions and information anomalies between trading partners and service providers
* Document creation and management is needed to ensure that documents are both accurate and compliant with business agreements and regulations to ensure the swift exchange of title of goods and payment
* Trading partner integration has to manage the flow of information with all trading partners
* Audit trails are required to provide clear document appraisals for all documentation, processes, and communication with partner interactions.
To recap, across the three major flows, user companies need to deploy tools that support the automation of standard workflow procedures, synchronize, and reconcile the exchange of data, automate document generation, provide for exception management, and provide for detailed and flexible visibility into orders and shipments. This all must be done while complying with security, compliance and other regulatory requirements.
Fighting Terrorism with Global Trade Management
One should notice a multitude of complex interactions between the global trade flows within a secure supply chain. Namely, across few dozens of required pertinent processes, global trade requires managing the flow of goods, funds and information. That is to say, the flow of information must support the tracking and management of the goods to enable the secure and compliant entry and exit to and from countries for the correct funds to flow to eligible business and trading partners.
Security Initiatives Boost GTM Software
Given all of the compliance and regulatory issues that exporters, importers, shippers, financial institutions, etc. must adhere to, time and cost savings are not the only reason why there is an increased interest in the GTM software these days. With increasing security concerns and demands for supply chain visibility, companies are looking for more functionality from their existing enterprise software packages and providers, while spending cautiously on new technology. Because of post 9/11 security issues, many of GTM products include modules for checking orders against denied-parties lists, tracking suppliers' and end users' activities, and checking compliance with export control regulations, while some shippers leverage the software to create electronic advance shipment notices (ASN) required by US CBP and to comply with C-TPAT.
The challenge for government and industry is to secure trade without impeding growth and the best way to do this is through the electronic transmission of data. Thus, many new laws and initiatives have been created that require a shift away from traditional paper-based trade systems to new electronic formats. Emphasis is placed on collecting information on trades earlier in the supply chain, effectively "pushing back the borders", while securing them. These initiatives are summarized in Table 1.
Table 1: Global Trade Security Summary
| Initiative | Description |
| Container Security Initiative (CSI) | A government initiative for stationing US Customs employees and equipment in major foreign ports for pre-screening of containerized freight prior to sailing to US destinations. |
| 24-hour Automated Manifest Rule | A mandatory requirement that all shipping manifests must be filed with US twenty-four hours prior to departure from the foreign port of origin for containerized ocean freight |
| Free and Secure Trade (FAST) | A security certification for all truck traffic entering the US from Canada. Carriers with FAST certification will be granted expedited border clearance |
| Customs-Trade Partnership Against Terrorism (C-TPAT) | A voluntary certification program for US importers whereby they can obtain expedited customs clearance by documenting and submitting a self-audit of international supply chain partners, physical security procedures and escalation procedures to US Customs. |
| Sarbanes-Oxley | US congress requires corporations to provide ongoing reports and visibility into the flow of information and funds pertaining to financial processes. |
| Bioterrorism Act 2002 | Initiated under the Food and Drug Administration (FDA), this policy is under review and discussion and may require importers of food products into the US to disclose product level detail. It requires registration of foreign and domestic "food facilities"; record retention to be made to FDA within four hours; and prior notice of food import shipments before allowed entry to the US |
| Patriot Act of 2002 | This Act, signed into law by the US president, requires that financial institutions know their customers and, to the greatest extent possible, their customers' customers. |
Container Cargo Security
In addition to the 24-hour Automated Manifest Rule, the Department of Transportation, and US Customs have launched Operation Safe Commerce, which is intended to enhance security for international container cargo, and which will make global logistics systems even more dependent on timely, accurate data collection regarding shipment contents and movement. Since manual data entry is time-consuming and prone to errors, global logistics systems operate much better when supported by data collection based on automatic identification technologies, such as bar code labels and radio frequency identification (RFID) tags, which can be scanned at strategic locations between point of origin and destination. RFID is one of the emerging technologies that will drive increased supply chain visibility, control, and compliance. Additionally, suppliers such as Albertsons, Target, Wal-Mart, and the US Department of Defense (DOD) are pushing the RFID mandate on their suppliers, proving that RFID will have a significant impact on future supply chain operations (see RFID—A New Technology Set to Explode?) and will play a notable role in streamlining trade in the global trade management (GTM) realm.
Thus, no matter which import/export or package a shipper buys or uses, GTM should, in principle, save thousands of hours work while dramatically cutting costs. For example, export control laws require shippers to screen buyers against denied-parties lists. There are more than thirty of these constantly changing lists, which name entities with ties to terrorists, criminal groups, and unfriendly (unsavory) governments. Some exporters review tens of thousands of orders annually, thus it is difficult, if not impossible to conduct adequate checks manually. Conversely, software that is updated daily, by knowledgeable professionals, can do the job in a few seconds, and mitigate the major risk of selling to, or buying from, any of a number of prohibited individuals or organizations known as "denied parties". There are almost 12,000 of these named on lists maintained by the US state, treasury, and commerce departments, and a few thousand of which are deemed to be terrorists, or fronts for terrorist organizations. Others appear on the list for different reasons, such as unsavory states government, or because of their contribution to the proliferation of prohibited narcotics, chemical or biological weapons, and missile or nuclear technology.
In theory, enterprises have to screen everybody that is party to any transaction, including suppliers, forwarders, customers, and so on. For example, Section 326 of the USA Patriot Act was implemented to address terrorism and money laundering, enhance reporting on suspicious customer activity, and verify customer identity in an effort to curtail global money laundering and terrorist financing. It requires financial institutions, such as banks, insurance companies, credit card companies, money services businesses, mutual funds brokers or dealers, and casinos to establish minimal procedures to verify the identity of new customers when they open accounts. This section also requires cross-checking account holder and requester names against government lists of known or suspected terrorist organizations.
Banks must also have compliance programs in place to ensure that, under the rules issued by US Office of Foreign Assets Control (OFAC), their corporate customers are in no way dealing with a blacklisted party. On the other hand, any manufacturing plant that is suspected of breaching one or more trade compliance regulations, might even be temporarily shut down and its property impounded by agencies like the US CBP service, Export Enforcement (EE), or the Immigration and Customs Enforcement (ICE) service, to name a few. Even inadvertently dealing with denied parties that have shell, front-office operations in non-embargoed countries is alarmingly easy, thus the need for timely and accurate information becomes even more pertinent.
Thus, no matter which import/export or package a shipper buys or uses, GTM should, in principle, save thousands of hours work while dramatically cutting costs. For example, export control laws require shippers to screen buyers against denied-parties lists. There are more than thirty of these constantly changing lists, which name entities with ties to terrorists, criminal groups, and unfriendly (unsavory) governments. Some exporters review tens of thousands of orders annually, thus it is difficult, if not impossible to conduct adequate checks manually. Conversely, software that is updated daily, by knowledgeable professionals, can do the job in a few seconds, and mitigate the major risk of selling to, or buying from, any of a number of prohibited individuals or organizations known as "denied parties". There are almost 12,000 of these named on lists maintained by the US state, treasury, and commerce departments, and a few thousand of which are deemed to be terrorists, or fronts for terrorist organizations. Others appear on the list for different reasons, such as unsavory states government, or because of their contribution to the proliferation of prohibited narcotics, chemical or biological weapons, and missile or nuclear technology.
In theory, enterprises have to screen everybody that is party to any transaction, including suppliers, forwarders, customers, and so on. For example, Section 326 of the USA Patriot Act was implemented to address terrorism and money laundering, enhance reporting on suspicious customer activity, and verify customer identity in an effort to curtail global money laundering and terrorist financing. It requires financial institutions, such as banks, insurance companies, credit card companies, money services businesses, mutual funds brokers or dealers, and casinos to establish minimal procedures to verify the identity of new customers when they open accounts. This section also requires cross-checking account holder and requester names against government lists of known or suspected terrorist organizations.
Banks must also have compliance programs in place to ensure that, under the rules issued by US Office of Foreign Assets Control (OFAC), their corporate customers are in no way dealing with a blacklisted party. On the other hand, any manufacturing plant that is suspected of breaching one or more trade compliance regulations, might even be temporarily shut down and its property impounded by agencies like the US CBP service, Export Enforcement (EE), or the Immigration and Customs Enforcement (ICE) service, to name a few. Even inadvertently dealing with denied parties that have shell, front-office operations in non-embargoed countries is alarmingly easy, thus the need for timely and accurate information becomes even more pertinent.
The Tradeoff of Improved Global Trade versus Security
The US federal government has completed its legislative agenda receiving Congressional approval for a series of laws, including the Maritime Transportation Security Act and the creation of the Department of Homeland Security (DHS) that has realigned 22 former federal agencies and 170,000 federal employees. A result of the legislation is the need for shippers, carriers, and ports to introduce technology to better coordinate global trade processes. New transportation and trade security legislation has instituted far stricter compliance and asset tracking requirements, making technology vital to meeting the demands of these regulations.
For shippers before 9/11, process was all about getting as much work done as possible prior to reaching the border. Manually keying manifest information, for example, can take a few days, and in the past this would mean that US Customs would receive cargo data only after the ship had sailed. Now most work needs to be completed before the ship even sails. For example, the new 24-hour Automated Manifest Rule from December 2002 requires ocean carriers to provide the Department of Homeland Security's Bureau of Customs and Border Protection (CBP) with a cargo manifest, twenty-four hours before a ship sails from its original port for a US port. As a result of this new rule, there are significant ramifications on a shippers' contract management and streamlined collaboration with customers and delivery scheduling. Overall, the magnitude of work is great given that approximately 11 million sea containers enter the US waters annually.
For shippers before 9/11, process was all about getting as much work done as possible prior to reaching the border. Manually keying manifest information, for example, can take a few days, and in the past this would mean that US Customs would receive cargo data only after the ship had sailed. Now most work needs to be completed before the ship even sails. For example, the new 24-hour Automated Manifest Rule from December 2002 requires ocean carriers to provide the Department of Homeland Security's Bureau of Customs and Border Protection (CBP) with a cargo manifest, twenty-four hours before a ship sails from its original port for a US port. As a result of this new rule, there are significant ramifications on a shippers' contract management and streamlined collaboration with customers and delivery scheduling. Overall, the magnitude of work is great given that approximately 11 million sea containers enter the US waters annually.
Will 2005 Validate Global Trade Management and Unify Financial and Physical Supply Chains
To prosper in a highly competitive global economy, where competition can come from Arkansas or Argentina, enterprises have to take advantage of the cost advantages afforded by the global availability of goods and services. At least, if one does not taking advantage of the international availability of reasonably high-quality goods, low-cost labor rates and efficient, reliable transportation, then the competition likely will.
When we talk about the risks of globalization, many are usually referring to the threat of domestic jobs moving overseas. Global trade compliance is rarely discussed, even though it poses a risk that may affect almost every manufacturer that either imports or exports. Namely, getting these goods and parts shipped from one country to another is a daunting task and needs the support of GTM software and a service provider with a combination of global trade domain knowledge, proven processes and international trade best practices.
All of the nearly 200 countries in the world have individual governmental requirements for importing and exporting goods, where one has to account for factors like tariffs and duties, country-to-country preferences, and anti-dumping laws, with the danger of incurring hidden costs at every step. If that is not complex enough, the events of September 11, 2001 have increased the scrutiny countries place on global trade, which also impacts costs adversely. According to the Brookings Institution, the cost of slowing the delivery of imported goods by just one day because of additional security checks may amount to $7 billion (USD) per year. Stringent new documentation and homeland security requirements are placing serious legal and financial consequences on importers and exporters for violating these constantly changing trade regulations. The burden is on the importer/exporter to know exactly what the regulations are and how to comply with them.
When we talk about the risks of globalization, many are usually referring to the threat of domestic jobs moving overseas. Global trade compliance is rarely discussed, even though it poses a risk that may affect almost every manufacturer that either imports or exports. Namely, getting these goods and parts shipped from one country to another is a daunting task and needs the support of GTM software and a service provider with a combination of global trade domain knowledge, proven processes and international trade best practices.
All of the nearly 200 countries in the world have individual governmental requirements for importing and exporting goods, where one has to account for factors like tariffs and duties, country-to-country preferences, and anti-dumping laws, with the danger of incurring hidden costs at every step. If that is not complex enough, the events of September 11, 2001 have increased the scrutiny countries place on global trade, which also impacts costs adversely. According to the Brookings Institution, the cost of slowing the delivery of imported goods by just one day because of additional security checks may amount to $7 billion (USD) per year. Stringent new documentation and homeland security requirements are placing serious legal and financial consequences on importers and exporters for violating these constantly changing trade regulations. The burden is on the importer/exporter to know exactly what the regulations are and how to comply with them.
Appeal of GTM Solutions
Importers, exporters, forwarders, banks, and similar institutions increasingly see the appeal of GTM solutions. Gains from the top- and bottom-lines, derived from a corporate infrastructure that takes advantage of globalization, might far exceed any domestic-focused projects, (except in the case of new product development for those who do not outsource). Benefits include increased revenues through new global sales markets; decreased operating costs through lower cost materials sourcing, business process outsourcing (BPO), and globally distributed organizations; lower costs through improved working capital management; new business strategies, such as open account mechanisms linked to trade financing; and greater visibility and control of international receivables and payables.
Further, unlike several years ago, when the only option for deploying enterprise software was with multimillion dollar, multiyear customized implementation projects, the current, more mature software market gives companies a number of deployment options (for more information, see Trends in Delivery and Pricing Models for Enterprise Applications). Enterprises can now pursue pilot projects, deploy point solutions before expanding to broad-based solutions, and choose between hosted or behind-the-firewall, on-premise solutions.
However, while there are dramatic operational and cash flow benefits to be gained from implementing and efficiently executing global trade, as will be explained later in this series, global trade is a significantly more complex and risky business than domestic trade, . Further, despite the potential gains, there are organizational obstacles preventing many companies from taking advantage of GTM solutions. Namely, companies are still structured in functional silos, which impact decision-making, given that only a few companies have their corporate organization, technology, and processes properly aligned for global business.
Most large companies still run their businesses internationally rather than globally. In other words, large companies usually have an assortment of foreign subsidiaries that are self-contained businesses running their own systems that are out of sync with each other. Throughout the enterprise, functional silos further aggravate a seamless approach to global logistics management. For instance, compliance departments report to legal, whereas purchasing drives import; export is driven by sales, while transportation departments focus on getting the best rates. No one really questions whether or not the company is shipping efficiently throughout the system, given that the these silos often, inadvertently make gains or losses against each other.
Supply chain planning (SCP), trade compliance, strategic sourcing, and other strategic tasks cannot be managed on a global scale when key data is inconsistent and is not easily shared. Goods, in every step from raw material until delivery, might run logistics costs close to half of the total cost, and accounting can hardly assign these to the individual items. An example is a company that had seemingly, based solely on the unit price, saved dozens of million by expanding its global supplier base only to subsequently realize it had increased total logistics costs by twice the amount of their savings due to many non-economical less-than-truckload (LTL) shipments.
Successful implementation of GTM solutions requires companies to integrate their physical and financial supply chains in varying degrees and elements. To do this, companies must share data and collaborate across their functional silos and external business partners. Of coursee, making different solutions work seamlessly is a challenge for every aspect of SCM. Global logistics is perhaps the most difficult discipline to manage through one platform, because the universe of users is large and spread around the world, whereby systems- and user-capabilities vary widely. On the other hand, mandates for more functionality continue to grow, such as the recent trade security regulations from US Customs, as will be explained later in this series.
Further, unlike several years ago, when the only option for deploying enterprise software was with multimillion dollar, multiyear customized implementation projects, the current, more mature software market gives companies a number of deployment options (for more information, see Trends in Delivery and Pricing Models for Enterprise Applications). Enterprises can now pursue pilot projects, deploy point solutions before expanding to broad-based solutions, and choose between hosted or behind-the-firewall, on-premise solutions.
However, while there are dramatic operational and cash flow benefits to be gained from implementing and efficiently executing global trade, as will be explained later in this series, global trade is a significantly more complex and risky business than domestic trade, . Further, despite the potential gains, there are organizational obstacles preventing many companies from taking advantage of GTM solutions. Namely, companies are still structured in functional silos, which impact decision-making, given that only a few companies have their corporate organization, technology, and processes properly aligned for global business.
Most large companies still run their businesses internationally rather than globally. In other words, large companies usually have an assortment of foreign subsidiaries that are self-contained businesses running their own systems that are out of sync with each other. Throughout the enterprise, functional silos further aggravate a seamless approach to global logistics management. For instance, compliance departments report to legal, whereas purchasing drives import; export is driven by sales, while transportation departments focus on getting the best rates. No one really questions whether or not the company is shipping efficiently throughout the system, given that the these silos often, inadvertently make gains or losses against each other.
Supply chain planning (SCP), trade compliance, strategic sourcing, and other strategic tasks cannot be managed on a global scale when key data is inconsistent and is not easily shared. Goods, in every step from raw material until delivery, might run logistics costs close to half of the total cost, and accounting can hardly assign these to the individual items. An example is a company that had seemingly, based solely on the unit price, saved dozens of million by expanding its global supplier base only to subsequently realize it had increased total logistics costs by twice the amount of their savings due to many non-economical less-than-truckload (LTL) shipments.
Successful implementation of GTM solutions requires companies to integrate their physical and financial supply chains in varying degrees and elements. To do this, companies must share data and collaborate across their functional silos and external business partners. Of coursee, making different solutions work seamlessly is a challenge for every aspect of SCM. Global logistics is perhaps the most difficult discipline to manage through one platform, because the universe of users is large and spread around the world, whereby systems- and user-capabilities vary widely. On the other hand, mandates for more functionality continue to grow, such as the recent trade security regulations from US Customs, as will be explained later in this series.
Complexities
While many have strong and divided opinions about globalization and outsourcing products and services, everyone will agree that these modes of business are here to stay. Some reports claim that nearly 30 percent of the world's gross domestic product currently crosses borders, thus global trade is becoming an integral and growing part of almost every business. Yet, exporters and importers continue to struggle to coordinate old-fashioned, international freight, financial, and regulatory processes, and although they might isolate production from inbound logistics to mitigate this conundrum, increasing market pressures continue to force better coordination. Help may come from adopting a new crop of Web-based applications aimed at improving and automating intricate multiparty coordination. As a result, businesses have created GTM to define the challenges and opportunities unique to the new, highly global business environment. There are some compelling trends that have made GTM (which has lately begun incorporating ITL) a topic of interest to avant-garde businesses, including the fact that global trade is substantial, and will only increase with time.
Nonetheless, while many may see the rationale for sourcing goods from far-flung locations with cheaper labor and costs, not many clearly realize the intricacies and costs associated with such trading activities—a cost which often may negate the initial benefits of cheaper, nominal prices of imported items. Although many enterprises have made progress in improving aspects of their financial supply chains by implementing ERP or financial applications such as accounts receivable (AR), general ledger (GL), and accounts payable (AP), global trade requires a number of additional, crucial functions that are frequently absent from domestic trade, including functions like letter of credit (LC) management, global trade financing, country and party risk assessment, and transaction reconciliation (settlement), to name a few. Proper management of these specialized functions require GTM-oriented financial management solutions that should give organizations greater visibility and control over their international business partners, receivables, payables, working capital needs, and overall financial position.
Importing and exporting have to be among the most labor-intensive, paper-heavy business activities, and the preparation of export, import, and border/duty clearance documents is no small feat for shippers and carriers. When one adds up all of the documentation that must be complied, including shipping and payment documents, advance shipment notices (ASN), licenses, certifications, and includes the inspections required by the exporter, importer, freight forwarder, customs broker, local and international carriers, banks, customs authorities (at both the origin and destination) and assorted government agencies, it is not surprising to see why a typical international trade transaction may involve several dozens or more steps. On the other hand, taxes, tariffs, regulations, and compliance issues can quickly translate into shipment delays, unclaimed products, and costly return if the prescribed processes are not followed to the letter.
It is thus no surprise that nearly 10 percent of world trade is spent on administrative costs, with most of that money directed toward document preparation, handling, and transmission. A typical air-freight shipment takes eight to twelve days. Of this, the cargo is en route only 5 percent of the time. The rest is spent sitting in warehouses waiting for the required documents and compliance checks.
To manage such complexity, more and more shippers rely on import/export software, which has evolved into a more comprehensive GTM category. When this software first came on the scene, vendors focused on automating the repetitive creation of trade documents, and later expanded their products' capabilities to include tariff classification, landed-cost calculations, customs regulations, denied-party screening, and order tracking, etc. Today, exporters and importers still have a choice to purchase from low-cost solutions that handle a single task, such as document creation, to more expensive, nearly all-encompassing GTM solutions that control and track trade transactions from purchase order to final delivery.
Nonetheless, while many may see the rationale for sourcing goods from far-flung locations with cheaper labor and costs, not many clearly realize the intricacies and costs associated with such trading activities—a cost which often may negate the initial benefits of cheaper, nominal prices of imported items. Although many enterprises have made progress in improving aspects of their financial supply chains by implementing ERP or financial applications such as accounts receivable (AR), general ledger (GL), and accounts payable (AP), global trade requires a number of additional, crucial functions that are frequently absent from domestic trade, including functions like letter of credit (LC) management, global trade financing, country and party risk assessment, and transaction reconciliation (settlement), to name a few. Proper management of these specialized functions require GTM-oriented financial management solutions that should give organizations greater visibility and control over their international business partners, receivables, payables, working capital needs, and overall financial position.
Importing and exporting have to be among the most labor-intensive, paper-heavy business activities, and the preparation of export, import, and border/duty clearance documents is no small feat for shippers and carriers. When one adds up all of the documentation that must be complied, including shipping and payment documents, advance shipment notices (ASN), licenses, certifications, and includes the inspections required by the exporter, importer, freight forwarder, customs broker, local and international carriers, banks, customs authorities (at both the origin and destination) and assorted government agencies, it is not surprising to see why a typical international trade transaction may involve several dozens or more steps. On the other hand, taxes, tariffs, regulations, and compliance issues can quickly translate into shipment delays, unclaimed products, and costly return if the prescribed processes are not followed to the letter.
It is thus no surprise that nearly 10 percent of world trade is spent on administrative costs, with most of that money directed toward document preparation, handling, and transmission. A typical air-freight shipment takes eight to twelve days. Of this, the cargo is en route only 5 percent of the time. The rest is spent sitting in warehouses waiting for the required documents and compliance checks.
To manage such complexity, more and more shippers rely on import/export software, which has evolved into a more comprehensive GTM category. When this software first came on the scene, vendors focused on automating the repetitive creation of trade documents, and later expanded their products' capabilities to include tariff classification, landed-cost calculations, customs regulations, denied-party screening, and order tracking, etc. Today, exporters and importers still have a choice to purchase from low-cost solutions that handle a single task, such as document creation, to more expensive, nearly all-encompassing GTM solutions that control and track trade transactions from purchase order to final delivery.
The Pain and Gain of Global Trade
The Internet has enabled a networked world creating a communication infrastructure and ensuing enterprise applications, all which have opened the door for global trade. This, in turn, demands multi-enterprise services and software to automate the transportation and Internet-based logistics management needs of a global trading network. As the global trade management (GTM) space continues consolidating, it is becoming clear that market leadership belongs to companies that understand that, to truly improve global trade, one must be able to manage both the physical and financial supply chains.
Communications and transportation networks have improved so dramatically over the last few decades, that even the most faraway regions and nations are within the reach through a mere Internet connection. As a result, many companies have jumped into international markets, and have outsourced their manufacturing or procurement operations to cheaper overseas manufacturers and suppliers, while some have established subsidiaries around the world. E-business promises to further shrink the world into a "global village" as people, collaboratively or not, research, offer, source, and procure products globally via the ubiquitous Web. They buy and sell through various e-commerce sites, storefronts, and marketplaces and manage international supply chains with interactive software and trading exchanges.
Logistics managers have long sought technology solutions that offer a secure Internet system for scheduling and planning and provide the maximum benefit for multi-carrier, multimode, and multi-leg shipments in an overriding business process system—one which can also handle domestic and international transactions within the logistics trading community. The Internet naturally acts as the means of communication between traders and customers, and they want these systems to deliver almost real-time information in a cost-effective manner, virtually anywhere in the world.
However, this kind of e-business has yet to surmount the challenge of global trade compliance and the diverse needs of international customers and trading partners. Simply put, most supply chain management (SCM), let alone enterprise resource planning (ERP) vendors still typically lack strong international trade logistics (ITL) and global trade management (GTM) capabilities. Simply put, while technology may render a world that appears a lot smaller, in reality, the world is a lot more complicated. There are many barriers that exist to conducting international business over the Internet, of which most businesses are ill-prepared.
Few applications really offer multi-enterprise services and software to automate the complex, multimodal transportation and Internet-based logistics management needs of a global trading network. Most modern, Web-based, buy- and sell-side applications fall well short of providing automated global trade management, and traditional international trade logistics.
As described in the article, International Trade or ITL Adoption, ITL and GTM are execution systems designed to automate the import/export business process. Their basic functional components are trade document generation and transmission, and regulatory compliance validation, and includes a complex exchange of information between multiple entities, including suppliers, carriers, freight forwarders, customs brokers, banking institutions, and other third-party transportation and storage providers. A true ITL/GTM system is an interenterprise resource management system, and requires a data model that can account for the breadth and depth of information that is exchanged between this multiplicity of interrelated entities. Thus, ITL and GTM systems should support export and import borders-crossing processes; documentation and compliance (which are incomprehensible to ordinary mortals); and accounting, and financial reporting in a multicurrency, multilingual and multi-units of measure (UOM) environment.
Communications and transportation networks have improved so dramatically over the last few decades, that even the most faraway regions and nations are within the reach through a mere Internet connection. As a result, many companies have jumped into international markets, and have outsourced their manufacturing or procurement operations to cheaper overseas manufacturers and suppliers, while some have established subsidiaries around the world. E-business promises to further shrink the world into a "global village" as people, collaboratively or not, research, offer, source, and procure products globally via the ubiquitous Web. They buy and sell through various e-commerce sites, storefronts, and marketplaces and manage international supply chains with interactive software and trading exchanges.
Logistics managers have long sought technology solutions that offer a secure Internet system for scheduling and planning and provide the maximum benefit for multi-carrier, multimode, and multi-leg shipments in an overriding business process system—one which can also handle domestic and international transactions within the logistics trading community. The Internet naturally acts as the means of communication between traders and customers, and they want these systems to deliver almost real-time information in a cost-effective manner, virtually anywhere in the world.
However, this kind of e-business has yet to surmount the challenge of global trade compliance and the diverse needs of international customers and trading partners. Simply put, most supply chain management (SCM), let alone enterprise resource planning (ERP) vendors still typically lack strong international trade logistics (ITL) and global trade management (GTM) capabilities. Simply put, while technology may render a world that appears a lot smaller, in reality, the world is a lot more complicated. There are many barriers that exist to conducting international business over the Internet, of which most businesses are ill-prepared.
Few applications really offer multi-enterprise services and software to automate the complex, multimodal transportation and Internet-based logistics management needs of a global trading network. Most modern, Web-based, buy- and sell-side applications fall well short of providing automated global trade management, and traditional international trade logistics.
As described in the article, International Trade or ITL Adoption, ITL and GTM are execution systems designed to automate the import/export business process. Their basic functional components are trade document generation and transmission, and regulatory compliance validation, and includes a complex exchange of information between multiple entities, including suppliers, carriers, freight forwarders, customs brokers, banking institutions, and other third-party transportation and storage providers. A true ITL/GTM system is an interenterprise resource management system, and requires a data model that can account for the breadth and depth of information that is exchanged between this multiplicity of interrelated entities. Thus, ITL and GTM systems should support export and import borders-crossing processes; documentation and compliance (which are incomprehensible to ordinary mortals); and accounting, and financial reporting in a multicurrency, multilingual and multi-units of measure (UOM) environment.
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