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.