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Optimizing the Global Trade Management Solution Evaluation, Selection Process

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With increased global trade, many organizations are turning to Global Trade Management packages. This paper provides an overview of available GTM systems, as well as an objective evaluation of available models and a peek into the future of GTM.

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Optimizing the Global Trade Management Solution Evaluation, Selection Process

  1. 1. • Cognizant 20-20 InsightsOptimizing the Global Trade ManagementSolution Evaluation, Selection Process Executive Summary tors that can be leveraged to expedite selection, process design and successful implementation of Global trade and supply chains are expanding due a GTM package to the robust growth of markets across interna- tional boundaries. This has driven the establish- Global Trade Management — ment of manufacturing sites in distant locations a Necessity and Not an Enabler supported by a global supplier base. Trade volumes have increased by 13.5% in 2010 1 and with AMR Research Inc. defines GTM as “the practice it security requirements in managing global trade of streamlining the entire lifecycle of global trade have increased accordingly. With such growth and across order, logistics, and settlement activities security demands, effective communication and to significantly improve operating efficiencies collaboration with partners in the supply chain is and cash flow.”2 It is one of the few functions that gaining more attention. Consequently, many orga- directly affects the health of the entire supply nizations involved in global trade are focusing on chain — from procure, pay and order to cash — by processes and solutions that enable effective acting as a conduit for information flow and col- communication and collaboration. Solutions or laboration with supply chain partners. Like every packages focused on managing global trade aim functional area, GTM is a combination of people, to remove any informational blind spots and processes and technology. The key objective of widen the boundaries of information distribution, any GTM package is to manage import and export as well as make available timely and accurate functions, financial transactions associated with information for informed decision-making. cross-border trade and information exchange among the supply chain partners. Additionally This paper discusses the attributes of Global Trade GTM packages enable information exchange, Management (GTM) packages and highlights the also known as “visibility” or “business partner best practices in selecting, implementing and collaboration.” drawing benefits from them. Along with covering the functional and technology aspects of GTM The need to implement GTM packages has grown packages, this paper also provides an indepen- significantly. This growth is accelerated by factors dent and objective evaluation of the types of such as doing more with every dollar spent, packages and deployment models and what the business’s reduced risk-taking appetite, increas- future holds for GTM packages. The paper also ingly strict regulatory requirements, global describes our proprietary tools and accelera- security threats and the impact of events such cognizant 20-20 insights | december 2011
  2. 2. The Changing GTM Functional Footprint Global trade Global trade International trade management focused management with focus logistics focused on compliance and on compliance, logistics on compliance logistics and trade financeFigure 1as 9/11 on trade regulations. Factors such as the are the three C’s: Compliance, Connectivity andtype of industry served and the niche business Content.4 Compliance and Connectivity address,needs have also influenced the growth of GTM respectively, the regulatory requirements and thepackages. interactions among the supply chain partners. Content addresses the source and availability ofGTM Packages – Market Growth data used by the GTM applications to execute andThe GTM market comprising software and services manage the global trade processes. Some packageis expected to grow from the current $287.8 million vendors might outsource this component to nicheto $429.1 million by 2014.3 Originally starting as players. Thus, getting this information in a timelyinternational trade logistics (ITL) software, the and accurate manner might become an added yetsolutions have evolved into GTM packages with unknown risk.larger functional footprints. Packages of varying functional capabilities areDespite its growth in terms of numbers, func- available today. Gartner provides a view of thetionalities offered and developments in the key functionalities of a GTM package in Figure 2.5deployment model, the key components criticalto any GTM package have not changed. These Based on the Gartner classification of functional- ities and our experience in GTM, we have derived aGTM at a Glance Classification Functions Trade Sourcing; selling; export (customer) orders; import (purchase) orders; collaboration; Functions product management; vendor management; document management. Preferential trade agreements; license determination; document management; Trade document filing; product classification (harmonized tariff schedule — HTS); Compliance customs declarations; import rules; export rules; duties/taxes; RPS (restricted party screening). Carrier booking; global logistics execution; shipment planning; multimode Core transportation; shipment consolidation; shipment routing; carrier communication; Transportation global visibility; landed cost control; shipment documentation. Trade Letters of credit; settlement; reconciliation; invoice management; payment; Finance insurance; trade financing.Source: Adopted from “Developing an End-to-End Global Trade Management Functional Map,” by C. Dwight Klappich/ 5Gartner, Supply Chain Brain.com, e-INSIDER, March 2007.Figure 2 cognizant 20-20 insights 2
  3. 3. GTM: A Functional View Functional Pillars of GTM Trade Move Comply Finance Analyze Order Price Export / Documentary Collect Data Management Import Credit & Carrier Regulations Invoice Mine Within the Enterprise Credit Management Content Claims , Report /KPIs Key Elements Order Routing / Damages & Release/ Planning Document Analyze Detention Ready to Ship Management Benchmark Booking/ Cost Total Landed Tendering Customs Allocations Business Costs Filing / Intelligence Track & Trace Clearances Settlement Network Portal/User Integration Web Services Connectivity Interfaces Hub Outside the Enterprise Exporters & Logistics Trade Enterprise Carriers Importers Intermediaries Intermediaries PartnersSource: CognizantFigure 3view of a holistic GTM package, detailed in Figure and efficiently in terms of quality, accuracy and3. This footprint, we believe, will help address the reliability driven by process automation.needs of large global players operating acrossgeographical boundaries. We often find that departments managing GTM functions across many organizations are eitherHow GTM Packages are Used understaffed or ill-equipped with the knowledgeOf the GTM functions listed in Figure 2, the most required to manage these functions on a globalcommonly used are trade compliance functions, scale. This, along with frequent changes in thecomprising restricted party screening and those regulatory requirements, product classifica-related to regulatory compliance. The least-used tions and documentary requirements, makes itGTM functionality is trade finance, which had been infeasible for large global organizations to haveout of the GTM functional footprint until recently. in-house teams to track and execute such changesDespite the evolution of GTM packages and their manually. As mentioned earlier, this has forcedextensive use, a large part of GTM functions are many organizations to rely on third parties suchstill managed manually — thus increasing the risk as freight forwarders or brokers and on softwareof reporting errors to statutory authorities. This applications to manage the compliance-relatedhas resulted in large penalties, cancellation of roles. It’s also noteworthy that some large corpo-licenses and in some cases may lead to impris- rations have taken the compliance functions andonment. Citing poor compliance, many customs product classifications in house, citing poor serviceauthorities across the world have announced an levels, and have focused on automating the tradeincrease in penalties. Apart from slowing down management functions. For example, Leggett &operations, manual processes often prove costly Platt insourced its previously outsourced GTMand suboptimal as they rely on human intelli- functions and automated the functions, savinggence and tribal knowledge. Consequently, there about 2%-3% of its import costs.6has been an increased focus on managing the With no single solution to effectively manageassociated functional processes more effectively end-to-end cross-border transportation including cognizant 20-20 insights 3
  4. 4. GTM’s Key Challenges Compliance Connectivity Content • Low levels of automation - • Unable to connect with all • Frequently changing A lot of manual processes. partners including customs regulatory requirements and service providers. makes keeping the trade • Relying on third parties content current a challenge. to execute compliance • Lack of shipment functions in unknown visibility leading to high • Growing concerns on security geographic regions. “on-the-move inventory.” and non-compliance risks.Figure 4trade, compliance, transportation and finance Level of Automation infunctions, the key challenges of GTM solutions GTM Applicationsin terms of the three C’s discussed earlier aresummarized in Figure 4.Global trade is more complex than domestic trade. Manual 12%It has longer cycle times, larger numbers of touch 16% Semi-Manualpoints, multiple modes of transportation moving 16%goods across multiple time zones through multiple Fully-carriers, billing in diverse currencies, various Automatedlanguages and governance by numerous laws. Yet Integrated 56%it is common to find that the automation levels of Third Partyglobal supply-chain processes are generally lowerthan domestic supply-chain processes.4A large part of cross-border trade still uses paper Source: Kewill Benchmark Suvey4documents and manual entries. This is primarily Figure 5because the focus has largely been on optimizingground transportation. International trade has a choice of license, hosted or SaaS based. Tradi-traditionally been executed with the help of third tional custom-built applications, with niche cus-parties with local knowledge. tomer-specific capabilities, were able to sustain the business for some time. However, these oftenOver time, GTM packages have also adapted to fell short in terms of flexibility, especially whentechnology developments, largely in their col- users tried to expand or change their operationallaboration, processing capabilities and mode of or technology footprint. The proliferation of itemsdeployment. These range from in-house developed classifications and the dynamic regulatory com-applications deployed behind the firewalls to pliances have added to the limitations.present day SaaS-based applications such asGT Nexus and TradeBeam, which was recently As Figure 6 shows, after custom developed appli-acquired by CDC software. More vendors now cations, licensed on-premise, behind-the-firewalloffer many deployment options, beyond merely applications emerged. Large similarities in globalGTM Delivery Models Custom Licensed Licensed Service Fee – Developed, Behind Applications, Behind Applications, Multi-Tenant /Shared the Firewalls the Firewalls Remotely Hosted Applications (SaaS)Figure 6 cognizant 20-20 insights 4
  5. 5. operating models and initiatives of regulatory Like every other application that relies onbodies such as the World Customs Organization external communication, GTM solutions have(WCO) involving standardization of operating also moved towards a software-as-a-serviceprocedures around compliance and communica- (SaaS) deployment model. Many of the leadingtion across industries, have made this the most SaaS-based GTM packages such as GT Nexuscommonly adopted model. User apprehensions operate on a subscription fee and/or transaction-about data security and the risk of sharing data cost basis. Thus, they have been able to lowerbeyond the firewalls have fueled the popularity of the operating costs and scale up while providingthis model. a common platform for users to connect with service providers and carriers such as the oceanThe GTM package market is largely dominated carriers. Based on a multi-tenancy model andby the best-of-breed applications such as operating in a single environment, the advantageManagement Dynamics, Descartes, Integration of this model is that the upgrades are managedPoint, Kewill and GT Nexus deployed in many by the service provider. A clear advantage ofdifferent models. The package footprint may vary this model is that all the supply chain partnersbased on the requirements, region in which these operating in this model share the same applica-are deployed and the industry they serve. Some tion version and view the same data. This helps inpackage vendors outsource certain functional- breaking down silos both within and outside theities such as sourcing data and content to niche enterprise. Many organizations have also usedplayers, so they exist in functional silos and are this model to share information across functionsthus less comparable at a functional level. Pres- and departments, thus improving operationalent-day GTM packages may also compete with efficiencies. The potential adoption of this modelmany transport management systems (TMS), is higher since the Internet is used as the commu-but their capabilities in addressing the specific nication medium. To alleviate users’ fears aboutrequirements of global transportation might be data security and availability due to use of thevery different. Several ERP-based vendors have Internet, some vendors have made the applica-been late entrants in this space. Despite limited tions available via private networks. Generally,functional depth, ERP-based GTM packages SaaS-based applications have smaller but moresuch as SAP GTS and Oracle GTM provide the frequent upgrades.advantages of tight integration and seamless flowof information with the back-end ERP applications Despite the above-cited advantages — lower costsand thus other business functions. However, we of ownership, scalability, established networksoften find that this integration between ERP and and benchmarking with other players — anxietytheir GTM package is not up to the required levels remains around data security, availability andor is not readily available. This might reduce the flexibility in configuring specific workflows asadvantages of such solutions. However, given the compared to a traditional behind-the-firewalls,global security concerns on data integrity the tra- license-based model. It’s often noted that the costditional, behind-the-firewall, model is here to stay advantages of a SaaS-based model compared tofor some time. the traditional behind-the-firewalls license-based model even out after a few years, especially if theTo lower operating costs, some vendors offer transaction volumes are high.the traditional license-based application from aremotely hosted environment. Like the traditional The latest innovation in the area of deployingmodel, this model also has the license fee apart GTM packages is the hybrid deployment modelfrom the additional infrastructure fees. Though such as that offered by Questaweb.7 This is a com-not as common as the traditional model, this bination of the traditional on-premise model withmodel has helped some users to not only lower the customers retaining the critical functions intheir operating costs but also leverage superior house and using the hosted or the SaaS modelapplication performance supported by stringent to execute noncritical standard tasks such asSLAs offered by the vendors. Nonetheless, with tracking and tracing, messaging, etc. This modelthis approach there might be issues concerning has a large potential to grow though very fewintegration with other organizational applications vendors currently offer it. A wait-and-watchthat should be considered before adopting this approach is recommended for this model as it ismodel. still being established and fine tuned. cognizant 20-20 insights 5
  6. 6. Global Trade Management: Offerings GTM operating model needs and formulate an improvement and implementation plan.This section details how our proprietary tools andaccelerators can be leveraged in designing global Our eValuIT is a proven scientific means of struc-trade processes and selecting GTM packages. turing a multi-criteria decision-making framework. The framework statistically evaluates packagedTo gather requirements, we use a comprehen- applications and recommends the package withsive requirements gathering methodology using the best fit. It enables modeling and attachingappropriate tools and techniques, as shown in attributes to the functional requirements as wellFigure 7. as other non-functional and technical require-Our proprietary STEER framework, as presented ments. The framework also provides a means toin Figure 8, can be used to diagnose a client’s perform sensitivity analysis, thus reducing subjec- tivity and improving the consistency of results.An Approach to To better define the business objectives andRequirements Gathering scope, we can leverage our in-house solution envisioning workshops (SEW) methodology to help understand the business goals and critical- Drive Functional to-quality attributes of the project along with and Technical Requirements arriving at the high-level business requirements. SEWs are used to accelerate the requirements sign-off process, thus lowering the implementa- tion time. The SEW process is divided into five Add Requirements steps, as shown in Figure 9. Detailing For helping clients manage GTM package selection, we work in close coordination and alignment with the client teams. We recommend that the Monitor & Verify packages be evaluated using sample client data Requirements to better understand the functional capabilities offered. This will help set the baseline to compare packages in an unbiased and objective manner.Figure 7Cognizant’s STEER Framework Scrutinize ze Reali Tag Scrutinize Tag Establish Envision Realize En isi o lish v n EstabFigure 8Cognizant’s Solution Envisioning Workshops Framework Envision Assess Define Measure Advise Stakeholder Current State Desired State Business Case Solution Alignment Assessment Definition Development RoadmapFigure 9 cognizant 20-20 insights 6
  7. 7. Based on our experience, some of the key consid- • Strength and capability of in-house IT team toerations when selecting a GTM package include: manage GTM packages.• Functional fit— Addressed by the present capa- • Data archives and availability of user data, bilities or by the planned product enhance- including retrieving information from partners ments. “It is essential that organizations build beyond one’s firewalls. more points of flexibility into their systems to • Data security is a significant aspect. Many be able to accommodate future scenarios.”8 supply-chain practitioners are still apprehen-• Capability to manage regional requirements sive about putting their data on the cloud. and experiences — including multilingual and However, it is also true that data in the hands multi-currency capabilities. of persons inside or outside an organization, especially when the processes are managed• Experience in relevant industry verticals and manually, may not be very secure either. geographies.• Certification to connect with customs such as • Deployment capabilities and model should also be considered. automated broker interface (ABI).• Deployment models offered. To improve the collaboration among trading partners and getting timely and accurate status• Interfaces — with external systems and internal updates for key transportation milestones, we systems such as ERP, TMS, etc. have worked with a leading heavy equipment man-• Trading partner connections with existing ufacturer to enable the flow of information from trading partners including carriers, across legacy order management application to a leading modes and the levels of connection including SaaS-based GTM package, used for managing individual EDI messages, etc. international shipments. We converted the orders• Trade content source used by the vendor. to the format required by the SaaS-based GTM• Pricing options and SLAs along with the package. While enabling the information flow to financial viability of the vendors. the GTM package, we also enabled adding business rules to create milestones for tracking the ordersAfter customers select a vendor, it is advisable to based on the updates sent to the GTM package bypilot the solution in a trade lane-based approach. the client’s partners. The project has helped theOpting for a trade lane approach would help client leverage the advantages of a SaaS-basedthe customers to assess the capability of the application: connectivity with partners outsidepackage to address the requirements in a live the enterprise.environment. This option also provides optionsto measure and fine-tune the implementation GTM Applications: The Futureand subsequent rollouts across geographies as Despite the ERP-based GTM applications vendorsrequired, with lower risk. Trade lanes should be trying to catch up, there will always be some areascarefully selected so that the pilot may act as the such as trade finance and trade compliance thatbaseline. will be the domain of niche applications. There may not be a ubiquitous end-to-end solution orOnce the base implementation is completed, package in the immediate future even though arollouts should be planned with due considerations few leading ERP package vendors have partneredof the strategic directions, volumes, readiness to with smaller niche GTM vendors to enhance thechange and system limitations, if any. functional footprint. Thus, it is imperative toSimilarly, the key criteria for deciding the understand and work on the information flowdeployment model include: between the ERP/order management functions and the GTM applications. To avoid the high appli-• Total cost of ownership — With large volumes, cation and vendor switching costs and to recognize the cost advantage of the SaaS model (in the true benefits, a detailed assessment is recom- terms of hardware, software and personnel) mended. Apart from helping build a business case tends to diminish. The sliding scale pricing on the GTM package to use/build, this will also offered by some vendors might need close assist in finalizing the deployment model. To suc- attention before an approach is decided upon. cessfully select and implement a GTM package, it It is imperative to also consider the growth in is important to recognize that there is no escaping the number of transactions when deciding the the initial efforts required. TCO and creating the business case. cognizant 20-20 insights 7
  8. 8. The GTM landscape has seen and will continue ational efficiency in an increasingly security-to see a lot of acquisitions as bigger package conscious business environment with a growingvendors try to fortify their positions. Among the number of regulations and proliferation of itemsuser communities, particularly the medium to to move, voices for the need for a robust GTMlarge players, application modernization, ratio- application are only growing louder. If not alreadynalization and vendor consolidation will prevail. invested, now is the time to invest in automatingGTM packages and especially the SaaS-based and creating a strong GTM solution that not onlypackages are here to stay and grow, even though impacts the bottom line but also collaborates toit may take some time for these to be the norm. improve the operational efficiencies across theWith pressures to lower costs and improve oper- entire supply chain.Footnotes1 “Trade likely to grow by 13.5% in 2010, WTO says,” Logistics Management, September 2010, http://www.logisticsmgmt.com/article/more_encouraging_news_surfaces_in_new_trade_report2 “Global Trade Management: Redefining the Successful Execution of International Logistics,” Inbound Logistics, January 2006, http://www.inboundlogistics.com/cms/article/global-trade- management-redefining-the-successful-execution-of-international-logistics3 “Realizing Global Trade Management Potential,” Logistics Management, February 2011, http://www.logisticsmgmt.com/article/realizing_global_potential4 “Building Your Export Business: Global Trade Compliance, Content and Connectivity,” BPE Inc, 2010, http://www.kewill.com/il/component/docman/doc_download/39-whitepaper-bpe-kewill-gtm5 “Developing an End-to-End Global Trade Management Functional Map,” by C. Dwight Klappich/Gartner, e-INSIDER, March 2007, http://www.supplychainbrain.com/news/e03.28.07.newsletter.htm6 “Case Study: Leggett & Platt Springs Above & Beyond with Automated Import Compliance,” Supply Chain Brain, October 2009, http://www.supplychainbrain.com/content/sponsored-channels/ amber-road-global-trade-mgmt/single-article-page/article/case-study-leggett-platt-springs-above-be- yond-with-automated-import-compliance/7 “Models for Application Delivery,” http://www.questaweb.com/sln-delivery.aspx8 “Information Management: The New Game Changer in International Trade,” www.cognizant.com/InsightsWhitepapers/Information-Mgmt.pdfReference“Global Trade Management Landscape of Vendors,” AMR, September 2009About the AuthorRavi Joshi is a Manager at Cognizant Business Consulting, working within the Manufacturing and LogisticsPractice. With 16-plus years of experience in the manufacturing domain, Ravi has worked on a diversityof transportation and logistics consulting engagements with leading logistics service providers, portand terminal operators and freight forwarders. His key areas of expertise include supply chain consul-tancy, business process reengineering, transportation management, analytics and business intelligence.Ravi holds a bachelor’s degree in Nautical Sciences from the University of Mumbai, India and a master’sdegree in international transport with logistics from Cardiff Business School, Cardiff University, Wales,UK. He can be reached at Ravi.Joshi2@cognizant.com. cognizant 20-20 insights 8
  9. 9. About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 130,000 employees as of September 30, 2011, Cognizant is a member ofthe NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performingand fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060 Email: inquiry@cognizant.com Email: infouk@cognizant.com Email: inquiryindia@cognizant.com© Copyright 2011, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.