GTM Update: Uncertainty drives adoption

Whether they’re grappling with the impacts of global tariffs, figuring out how events like Brexit will eventually affect their businesses, or dealing with any number of geopolitical happenings, today’s global shippers have a lot on their plates. Simply put, nothing is easy about the 2020 global business environment, and it doesn’t look like there’s any real relief in sight.

Pointing to escalating trade tensions and a slowing global economy as the key culprits, the World Trade Organization (WTO) downgraded its trade growth forecasts for both 2019 and 2020. World merchandise trade volumes are now expected to rise by 1.2% in 2019 (slower than the WTO’s original 2.6% growth forecast). It says the projected increase in 2020 is now 2.7% (down from 3.0% previously). “The economists caution that downside risks remain high and that the 2020 projection depends on a return to more normal trade relations,” WTO points out.

As the global trade environment becomes more complex and difficult to navigate, global trade management (GTM) vendors are stepping up to the plate and adding new capabilities that help shippers overcome these challenges. In return, shippers are increasingly turning to this supply chain software segment for help.

“When it comes to this market, the more uncertainty there is surrounding trade regulations, the greater the need for global trade compliance [GTC] solutions,” says Steve Banker, vice president of supply chain management at ARC Advisory Group. He says ARC uses the “GTC” acronym because trade compliance supports the required item classification, trade documentation, and communications with international government authorities.

“We’re in an age of economic nationalism,” Banker continues. “There’s more uncertainty than ever, and it won’t disappear anytime soon.” Looking specifically at current China-U.S. relations, for example, the signing of an interim agreement on January 15th to roll back some of the existing tariffs could positively affect U.S. companies that have felt the pinch of those tariffs.

“Following that, we may make progress on a broader trade deal, but probably not,” Banker predicts. “U.S./China trade experts warn us that not too much should be read into these kinds of announcements and negotiations.” For now, he says procurement executives are moving sourcing out of China to other locations, with a particular emphasis on Southeast Asia.

“But they worry that once they start sourcing from Vietnam or Indonesia, after a few years the same kind of trade breakdowns could occur in those locations,” Banker notes. “And as Brexit shows, it is not just the U.S. that’s rethinking trade relationships—it’s happening worldwide.”

Handling complex laws and requirements

Software that streamlines and automates processes related to customs and regulatory compliance, global logistics, and trade financing, GTM solutions facilitate the flow of information, money, and goods in global trade supply chains that include buyers, sellers and intermediaries (Customs agencies, banks and freight forwarders).

According to ARC, the software is designed to manage complexities like multiple languages, time zones, currencies, and modes of transport—all of which come into play when companies do business with overseas partners and customers. “Further, there can be more than a dozen parties involved in a single international shipment,” ARC points out, noting that the laws governing global trade are “numerous, highly complex and ever-changing.”

Of course, trading globally has never been simple. For all of the opportunities that it presents, the move to operate globally has also come with an almost equal number of risks. In 2020, for example, many shippers are trying to figure out what the new United States-Mexico-Canada Agreement (USMCA) means for them and what they have to do differently to comply with it.

“With the USMCA and other policies driving different duty rates and requirements, we’re seeing more companies taking an interest in GTM,” says Amit Sethi, senior manager for logistics and supply chain at Capgemini. For example, he says semiconductor companies that are involved with 5G and other technological advancements need a more streamlined way to manage item classification, item categorization and importer security filings for their products.

Sethi watched the same trend unfold several years ago, when large telecom and technology companies were facing similar challenges on the global front. Today, he says companies like ON Semiconductor Products and Skyworks are using the software to manage the flow of product from their offshore manufacturing and kitting assembly operations.

And, suppliers to large technology manufacturers like Apple have fabrication facilities in countries like Vietnam, India, and China. “These organizations are using GTM much more effectively than they were a few years ago,” says Sethi.

Reaping the rewards

Large U.S. manufacturers aren’t the only shippers that reap benefits from their GTM investments. According to Sethi, the apparel and retail sectors could also stand to benefit from the software. Companies that ship apparel overseas to customers in the UK—but that lack a brick-and-mortar presence in those countries—can use the software as an end-to-end solution for managing both D2C shipments and customer returns.

And apparel manufacturers and distributors that are sending goods to countries like Mexico can leverage GTM to determine what can or cannot be shipped into the country, the country of origin restrictions (e.g., Chinese-made goods can’t be shipped to Mexico), what the duties are, and what other compliance requirements must be met. The same solutions also facilitate cash transactions in countries where that’s the payment method of choice.

“Shippers need systems that can manage their entire end-to-end global supply chain requirements,” says Sethi, “including COD (cash on delivery), the returns process, and other nuances that come into play when transacting business internationally.” In most cases, those solutions are either offered as part of a larger, enterprise resource planning (ERP) platform, with Oracle and SAP both providing their own versions of global trade management software.

Other shippers opt for best-of-breed options from vendors like E2open, Infor Nexus (formed when Infor acquired GT Nexus), and Descartes. “Oracle built GTM on top of its OTM (Oracle Trade Management) solution and is seen as the market leader in terms of end-to-end global trade management functionality,” says Sethi. “E2open is definitely a big player, and Info Nexus is seeing a lot of good traction right now—particularly in the retail sector.”

The right choice

To shippers that are shopping around for a new GTM or upgrading an existing system in 2020, Sethi says the top vendors to explore include Oracle, SAP, Infor Nexus, E2open and Descartes. He tells mid-sized shippers to look for a solution that offers a multi-tenant Cloud (where companies share computing resources in the public or private Cloud) that doesn’t require an on-premise installation.

“This is more of a subscription model,” says Sethi, “which works well for mid-sized shippers that want to leverage the Cloud capabilities of solutions from E2open or Infor Nexus, but don’t want to install
on-premise software.”

For larger shippers, Sethi points to Oracle GTM’s Cloud-native solution as a good option, noting that it’s not multi-tenant in nature. “The database and the application servers are in the Cloud,” Sethi explains, “but multiple companies aren’t using the same database like they are with multi-tenant, which lets users leverage economies of scale.”

What’s ahead?

As the complexities of global trade continue to mount, GTM vendors are coming up with new ways to help shippers overcome obstacles while also enjoying the benefits of operating globally. Achieving this balance isn’t always easy, but Sethi says there are few new developments coming that could help ease at least some of the main pain points associated with global trade.

For example, Sethi expects predictive analytics to play an increasingly important role in GTM in 2020 and beyond. With global trade lead times extending out much further than those associated with domestic shipments—and particularly when ocean is involved—he says software makers are integrating more artificial intelligence (AI) into their solutions.

One example of this involves the use of historical and seasonal data to predict when a cargo vessel will make landfall. Much like the airlines publish on-time departure rates for specific routes, having this information in hand will help shippers get a better handle on their carriers’ on-time probability rates. “This is just one example of a whole explosion of data analysis,” says Sethi, “and computing power that we’re seeing in GTM.”