Although it's hard to predict what the future holds for international trade, it's certain there's an urgent need to cut costs and gain efficiencies in the process. To do so, companies must embrace technological change within their global trading systems.

Global Trade Has Become More Complex

For better or worse, the events of Sept. 11 have changed cross-border trade forever. The attacks were as much an assault on world trade as they were on buildings and people. They have resulted in new hurdles to the global trading process, such as more stringent import and export compliance regulations and much greater scrutiny during customs clearance.

"The various Restricted Parties Lists including embargoed countries and denied persons issued by the U.S. government have had constant changes and more than 250 additions to them since the terrorist attacks," says Dan Chapman, export control manager for Motorola's personal communications sector. "Keeping up with these changes presents an increasingly complex challenge." And U.S. Customs has instituted a mandatory advance review of all cargo and passenger manifests, while all ports of entry and exit have been placed on the highest level of alert.

The aftermath of the terrorist attacks has brought about new requirements that have piled an enormous burden onto an already inefficient method of conducting global trade. This existing, inadequate method is comprised of the systems and procedures multinational companies use for completing processes, such as import and export compliance screening including checking against the Restricted Party Lists, compliance documentation, for example, filling out a bill of lading, transportation documentation including the manifest documents, and landed cost calculations or determining how much the goods will cost after all duty, taxes, insurance and freight are added.

Current trade management systems used by most organizations tend to be manual, paper-intensive and costly. If an organization uses any type of global trade automation software, it is often with stand-alone client-server systems that do not allow communication between divisions, much less between supply chain partners. The additional complexities companies now face mean that these antiquated systems are simply incapable of supporting the level of global trade needed today and in the future. Industry desperately needs a solution that brings global trade to a new level of efficiency. "Collaboration" is more than just the popular buzzword of today--now is the time for global companies to leverage this technological capability in order to ensure that demands for international shipment volumes can be met.

System Overload

Within the last decade alone, the volume of global trade has doubled, increasing from $3.1 trillion in 1990 to over $6 trillion. International trade volume is expected to reach nearly $9 trillion by 2005 according to the World Trade Organization's annual report. While an economic downturn causes domestic sales to shrink, it actually creates more pressure to source from and sell to international markets. With the tremendous growth in international trade, it is baffling that the standard systems multinational companies use to process import and export transactions have evolved very little. For several years, companies around the globe that conduct cross-border trade have been struggling with antiquated systems for processing such transactions. The events of last September served to draw attention to the dire need for global trade processing systems to evolve.

A Call For Greater Efficiencies

International companies must take into consideration security issues that will significant impact the overall efficiency and cost of the global trade process. The new security measures are widespread. For example, customs now requires the FAA to require carriers to hold cargo up to 72 hours prior to shipment so that customs can conduct target exams and warehouse sweeps. Customs has instituted new security measures at our seaports, for example, by boarding every vessel twelve miles from port in order to conduct a thorough search of all crew, passengers and cargo. Customs has also provided support by giving access to certain customized informational databases, such as Automated Commercial Environment and Americans Counter Smuggling Initiatives to the FBI and CIA--translating to additional entities inspecting each global trade transaction, and thus increasing the likelihood that errors will be detected.

It's anticipated that security controls will continue to increase and that these more aggressive regulatory changes will impact business substantially. International companies will be expected to implement and enforce even tighter compliance controls over their global trade activities. These changes inevitably slow down general processing and clearances of shipments, and they create additional pressure to create an efficient supply chain.

Because many importers and exporters were hurt by disruptions in transportation, particularly those dealing with time-sensitive goods, many manufacturers are now cautious about working on a just-in-time basis. Therefore, many have responded by carrying additional safety stock. A major impact soon to be felt by multinational companies will be the cost of carrying this additional inventory, which will ultimately result in higher carrying costs, warehousing costs and obsolescence costs. While this tactic may prove to be an effective safeguard, it not only compounds the problems by adding additional costs, it does not address increased scrutiny of compliance procedures.

Collaborative Technology

Unquestionably, the process of global trade has become more complex, and, therefore, less operationally efficient. This new level of complexity will drive multinational organizations to finally embrace technological solutions that have the power to dramatically increase efficiencies. What is the key to this new level of efficiency? The foundation of an effective global trade management solution is a database of first-rate global trade content, as well as the ability to fully automate the trade and compliance process. Yet, these capabilities alone aren't enough to fully streamline one's global supply chain. The key to supply chain efficiency is to have a single global trade solution that can be leveraged by one's entire supply chain--from manufacturer to shipper, from internal compliance experts to outsourced customs brokers, and so on.

An effective automated global trade solution must also be able to empower supply chain partners to collaborate on transaction information in real-time and throughout the entire shipment process--from the point the order is received to the point it is delivered to the customer. This is the only way to effectively reduce errors and streamline the import/export process. Tremendous efficiencies are to be gained by preventing documentation errors, since this is the main cause of customs delays. Admittedly, a solution that automates the processes of compliance screening and document generation will both reduce costs and increase accuracy by eliminating human errors. An entirely new level of accuracy and overall efficiency can be attained with a solution that ensures information is both accurate and consistent among all supply chain partners. The key is the ability to share real-time transaction information with contract manufacturers, 3PLs, freight forwarders and customs brokers, in a continuous workflow. Visibility to the information is not enough. The solution needs to empower users to take action, via exception-based management alerts, and then update the workflow with current information. The system must then instantly communicate the updated information to affected partners.

Critics may doubt that such solutions exist today, yet they do. There has been a tendency for many multinational companies to rely on outdated technology for their global trade solutions, perhaps because a significant investment had been made in such solutions, and the systems appeared to operate adequately. Thus, change did not seem necessary. However, with the burden of a dramatically more complex trade process and with the stakes, such as compliance penalties and the negative publicity attached to violations, growing ever higher, corporations can no longer rely on global trade solutions that do not generate full workflow collaboration.

Any major multinational company conducting cross border trade should immediately seek to implement a global trade solution that allows for the highest level of collaboration between divisions and partners. It is essential to have a system where participants can all seamlessly access identical trade services, while sharing shipment data and a single trade workflow within the global enterprise and across the supply chain. Global trade has been changed forever due to the events of last September, making it imperative that the industry rapidly evolves by embracing collaborative technology.