According to the World Trade Statistical Review 2018, merchandise trade grew by 4.7 percent in volume terms and 11 percent in value terms in 2017. The report, authored by the World Trade Organization (WTO), highlighted that manufactured goods accounted for 70 percent of all merchandise exports during 2017. This statistic far exceeded the other categories of fuels, mining products and agricultural products.
With the importance of global trade to corporate top and bottom lines, it is no surprise that multi-national manufacturers are increasingly placing more strategic value on global trade compliance programs. While many manufacturers still view their compliance programs as a burden of business focused on avoiding fines and penalties, leading organizations realize that strategic global trade programs result in improved international supply chain performance, reduced global duties and taxes, and less corporate risk.
With a systematic global trade management approach, let’s consider three key areas that consistently provide cost savings and process improvements for global manufacturers, no matter the size of their enterprise.
No. 1 - Combine Global Trade Compliance With Supply Chain Software
Most trade compliance programs have been created to avoid global regulatory fines and penalties. Today, manufacturers better understand the impact compliance operations have on global supply chain performance. For instance, how is on-time delivery performance impacted when shipments are delayed at Customs due to missing information? Can safety stock be lowered by improving cycle time for international shipments? How does customer satisfaction improve with a rapid response to unexpected supply chain disruptions? Have all duties and tariffs been considered when deciding where to build a plant or making other strategic supply chain decisions?
To fully transform trade compliance and global supply chain operations, global manufacturers must recognize the connected interactions between these operations and address with the appropriate processes and information technology. A comprehensive global trade management solution will capture the appropriate supply chain data required, provide the necessary import/export information and effectively share the information with all necessary global trading partners. With integrated global compliance and supply chain operations, manufacturers are advantageously situated to reduce global trade risks and improve supply chain performance.
No. 2 - Capitalize on Digital Technology
Given the size and global scope of supply chain networks along with the various responses that occur at different links within the chain, manufacturers must advance their current systems and operational practices to more digitally focused technologies. International trade and supply chain operations are inherently collaborative processes involving multiple trading partners across the globe that share data from multiple sources to address cross-border regulations and meet on time delivery objectives.
A tremendous amount of information is required to establish and maintain compliance with various country regulations. This information includes harmonized tariff schedules (HS) to classify goods, duty rates needed to calculate landed cost and various controls to legally complete import and export transactions. For manufacturers managing this process manually, the business impacts can include high error rates, compliance process inefficiencies and poor global supply chain performance.
Many global manufacturers still rely on manually intensive efforts to check government sources and track down officials for data. This is a time consuming process that requires data translation and verification. The regulations must then be interpreted to accurately meet import and export regulatory requirements. Improving this situation can be as easy as automating many of these steps and further leveraging digital technology. Boosting digital global trade and supply chain capabilities allows manufacturers to transform and fully support the areas of import management, export management, trade agreement management and international logistics.
No. 3 - Leverage Responsive IT Systems
Increasing reliance upon multiple trading partners around the world demands effective collaboration along with the ability to rapidly respond to changing business and regulatory requirements. Evolving international trade information and communication technology is changing how customs agencies collect and share information. For example, consider the growth of “single window” data exchanges and the progress of trusted trader programs between nations.
As technology and automation streamline these complex cross-border processes, manufacturers need to confirm their IT systems can harness increased data sharing and maintain the highest levels of security. The advancements in this area are expected to dramatically reduce paperwork and transaction costs previously seen at both the port of exit and entry. Consider the example where cargo-release decisions previously required manual checklists and random inspections. With more automation and collaborative execution, manufacturers and global trading partners will accurately meet multiple country regulations, enhance transaction visibility and improve overall supply chain decision making.
Deploying a responsive ERP system that includes global trade management is a requirement for fast-paced global supply chains. It must be adaptable to meet changing global business needs that respond quickly to establishing new global trading partner relationships, formalizing and automating global trade processes and identifying applicable global trade regulations on a timely basis.
Focusing on these global trade imperatives uncovers significant cost savings and improves the flow of goods across international borders. All three of these areas may not require your company’s attention but they are worth investigating for any potential improvements. Improved connectivity with global trading partners across import, export and supply chain operations provides the elements for reducing global trade risks, cutting duty costs and improving global supply chain performance. How effective are your global trade and supply chain strategies today and how effective would you like them to be?
Brent Dawkins is Director of Product Marketing and Supply Chain at QAD.