Communications and transportation networks improved so dramatically over the last few decades, that even faraway regions and nations around the globe are now within the reach of a mere Internet connection. As a result, companies have jumped into international markets and outsourced their manufacturing and procurement operations to cheaper overseas manufacturers and suppliers, while some have established subsidiaries around the world. The Internet-based e-business promises to further shrink the world into a "global village" as people research, source, and procure products globally via the ubiquitous Web, buy and sell these via various e-commerce sites, storefronts, and marketplaces, and manage international supply chains with collaborative software and trading exchanges.
However, this kind of e-business has yet to surmount the challenge of global trade compliance and the diverse needs of international customers and trading partners. Simply put, many supply chain management (SCM), let alone enterprise resource planning (ERP) vendors lack strong international trade logistics (ITL) and global trade management (GTM) capabilities. Namely, while technology may be rendering a world that appears a lot smaller, the very same real-life world has become a lot more complicated in the process, as many barriers exist to conducting international business over the Internet and most businesses are not yet prepared for that.
The Internet has enabled a networked world and it has enabled a communication infrastructure and emerging enterprise applications, which have opened the door for international trade in earnest. But not many applications really offer multi-enterprise services and software to automate the transportation and Internet-based logistics management needs of a global trading network. In other words, web-based buy- and sell-side applications fall well short of providing automated global trade management and a traditional international trade logistics.
In addition to language barriers, and the fact that diverse countries use different formats for weights and other units of measures (UOM), dates, telephone numbers, addresses, and other commonly used information, other hurdles for e-business are GTM and ITL compliance issues. Collaborative e-business applications must be able to comply with a variety of complex regulations to engage in global trade, and the companies that cannot handle these regulations will leave a lot of money on the table.
There are some indications that almost half of international orders to US e-commerce sites remain unfulfilled because companies cannot handle the necessary customs and duty procedures. On the other hand, billions in US import duty refunds go unclaimed each year by companies that do not understand the trade laws. Enterprises with global operations cannot manage their transportation needs with generic sourcing and procurement applications any longer, and more astute transportation management systems (TMS) will have to help these enterprises address their ever more complex requirements, while the SCM functionality will have to continually enhance supply chain business relationships, transactions, and communication.
As described in more detail in "International Trade or ITL Adoption", ITL and GTM, which are execution systems designed to automate the import and export business process, and whose basic functional components are trade documentation generation and transmission, and regulatory compliance validation, would hence include a complex exchange of information between multiple entities, including suppliers, carriers, freight forwarders, customs brokers, banking institutions, and other third party transportation and storage providers. A true ITL and GTM system is, in effect, an inter-enterprise resource management system, and requires a data model that takes into account the breadth and depth of information exchanged between these interrelated entities. Thus, ITL and GTM systems should support export and import borders-crossing processes, documentation and compliance, accounting, and financial reporting in a multi-currency, multi-language and multi-UOM environment.
Further, customs requires that all imports be coded and categorized, and, because these codes vary among countries, they must also be harmonized from country to country, while restricted-party screening regulations may apply to products that cannot be imported or exported between specific countries for national security, health, and environmental reasons. In addition, countries and localities have different licensing requirements and charge different duties, value-added taxes (VAT), and fees, which altogether amount to a major content-management challenge. Beyond these regulations, there might be many other financial and logistical considerations, since ITL has complex processes for financing, risk management, and financial settlement, prompting financial institutions and software vendors to continue ironing out the applications and services e-businesses require for automating international payments. Suppliers will want integration with their order management systems, whereas retailers will want integration with their sourcing and procurement systems. Alternatively, these functions may be embedded in the ITL solution.
Although global trade requires shipping goods across borders in a multimodal transportation manner, many international shippers do not yet have e-logistics software that provides the necessary visibility and flexibility to e-businesses that want to automate their global supply chains. They also do not have e-procurement software that can analyze the total landed cost (i.e., all the costs of sourcing and shipping a product internationally, including customs management, tariffs, transportation, cost of goods, etc.), although there have been a number of Internet-based logistics tools that are helping companies analyze and reduce costs by automating the processes of booking shipments, keeping customers informed, and making sure goods arrive on time.
On top of all this, the dreadful terror attacks of fateful 9/11 made it excruciatingly clear that companies that manage international supply chains confront additional risks. Namely, prior to that, ensuring shipment security mainly meant preventing theft and pilferage. Needless to say that post 9/11, the security concerns have shifted to clearing receiving parties, identifying who gets in touch with the shipment during its journey, and meeting new and evolving government requirements related to prior notification and documentation.
However, this kind of e-business has yet to surmount the challenge of global trade compliance and the diverse needs of international customers and trading partners. Simply put, many supply chain management (SCM), let alone enterprise resource planning (ERP) vendors lack strong international trade logistics (ITL) and global trade management (GTM) capabilities. Namely, while technology may be rendering a world that appears a lot smaller, the very same real-life world has become a lot more complicated in the process, as many barriers exist to conducting international business over the Internet and most businesses are not yet prepared for that.
The Internet has enabled a networked world and it has enabled a communication infrastructure and emerging enterprise applications, which have opened the door for international trade in earnest. But not many applications really offer multi-enterprise services and software to automate the transportation and Internet-based logistics management needs of a global trading network. In other words, web-based buy- and sell-side applications fall well short of providing automated global trade management and a traditional international trade logistics.
In addition to language barriers, and the fact that diverse countries use different formats for weights and other units of measures (UOM), dates, telephone numbers, addresses, and other commonly used information, other hurdles for e-business are GTM and ITL compliance issues. Collaborative e-business applications must be able to comply with a variety of complex regulations to engage in global trade, and the companies that cannot handle these regulations will leave a lot of money on the table.
There are some indications that almost half of international orders to US e-commerce sites remain unfulfilled because companies cannot handle the necessary customs and duty procedures. On the other hand, billions in US import duty refunds go unclaimed each year by companies that do not understand the trade laws. Enterprises with global operations cannot manage their transportation needs with generic sourcing and procurement applications any longer, and more astute transportation management systems (TMS) will have to help these enterprises address their ever more complex requirements, while the SCM functionality will have to continually enhance supply chain business relationships, transactions, and communication.
As described in more detail in "International Trade or ITL Adoption", ITL and GTM, which are execution systems designed to automate the import and export business process, and whose basic functional components are trade documentation generation and transmission, and regulatory compliance validation, would hence include a complex exchange of information between multiple entities, including suppliers, carriers, freight forwarders, customs brokers, banking institutions, and other third party transportation and storage providers. A true ITL and GTM system is, in effect, an inter-enterprise resource management system, and requires a data model that takes into account the breadth and depth of information exchanged between these interrelated entities. Thus, ITL and GTM systems should support export and import borders-crossing processes, documentation and compliance, accounting, and financial reporting in a multi-currency, multi-language and multi-UOM environment.
Further, customs requires that all imports be coded and categorized, and, because these codes vary among countries, they must also be harmonized from country to country, while restricted-party screening regulations may apply to products that cannot be imported or exported between specific countries for national security, health, and environmental reasons. In addition, countries and localities have different licensing requirements and charge different duties, value-added taxes (VAT), and fees, which altogether amount to a major content-management challenge. Beyond these regulations, there might be many other financial and logistical considerations, since ITL has complex processes for financing, risk management, and financial settlement, prompting financial institutions and software vendors to continue ironing out the applications and services e-businesses require for automating international payments. Suppliers will want integration with their order management systems, whereas retailers will want integration with their sourcing and procurement systems. Alternatively, these functions may be embedded in the ITL solution.
Although global trade requires shipping goods across borders in a multimodal transportation manner, many international shippers do not yet have e-logistics software that provides the necessary visibility and flexibility to e-businesses that want to automate their global supply chains. They also do not have e-procurement software that can analyze the total landed cost (i.e., all the costs of sourcing and shipping a product internationally, including customs management, tariffs, transportation, cost of goods, etc.), although there have been a number of Internet-based logistics tools that are helping companies analyze and reduce costs by automating the processes of booking shipments, keeping customers informed, and making sure goods arrive on time.
On top of all this, the dreadful terror attacks of fateful 9/11 made it excruciatingly clear that companies that manage international supply chains confront additional risks. Namely, prior to that, ensuring shipment security mainly meant preventing theft and pilferage. Needless to say that post 9/11, the security concerns have shifted to clearing receiving parties, identifying who gets in touch with the shipment during its journey, and meeting new and evolving government requirements related to prior notification and documentation.
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