Hard Times Are GTM Time

When the world economy plunged headlong off the cliff in the latter half of last year, global trade went right over the edge, too. World Trade Organization statistics show that by the first quarter of this year, global exports had fallen to levels not...


When the world economy plunged headlong off the cliff in the latter half of last year, global trade went right over the edge, too. World Trade Organization statistics show that by the first quarter of this year, global exports had fallen to levels not seen since 2005, off nearly 40 percent from peaks reached in Q2 and Q3 of last year.

It would be easy to see the decline in world trade as a logical justification for not investing in global trade management (GTM) solutions. After all, even before the recession took hold, with oil surging above $150 per barrel, many U.S.-based companies were reconsidering their strategies for sourcing goods overseas and taking a hard look at "near-shoring," or moving some portion of their supply base back from low-cost countries like China and Vietnam to locations closer to home.

But Nathan Pieri believes that this is just the time that companies ought to be looking at GTM solutions to shore up their global trade capabilities. Pieri is senior vice president of marketing and product management with Management Dynamics (www.managementdynamics.com), the East Rutherford, N.J.-based provider of GTM solutions. So he is not entirely impartial when it comes to the need to deploy global trade solutions. That said, Pieri, who blogs on global trade management at www.gtmbestpractices.org, offers several compelling arguments in favor of making GTM investments today.

First, he points to an Aberdeen Group study that suggested companies' global supply chains were only half as automated as their domestic supply chains. That means many companies have less visibility and control over that portion of their supply network and must expend proportionally greater effort to manage the global component. "Companies are realizing that they can't afford to continue supporting a business process as important as global trade management in a manual fashion," Pieri says.

In addition, although the WTO has cut its forecast for global trade volumes for this year, seeing as much as a 10 percent decline against 2008, the business cycle will inevitably tick back up again. Companies will start to increase their import and export volumes, and yet coming out of a recession, few will be eager to hire new staff to handle the increase in trade activity. "It's been difficult for folks to go down the path of hiring new people," Pieri notes. "Instead, the focus needs to be on automating the process and then building the business around that automated process."

Even companies pulling back from offshoring may well find themselves needing some level of GTM automation. "It's not like you're going to move everything back to the United States," Pieri says. "Regulations like Importer Security Filing, no matter what level of global operations you have, will always make you take a look at your level of automation, even if you do a rebalancing."

What about companies shifting to near-shoring strategies? Surely they don't need software just to manage cross-border trade with neighboring Canada or Mexico. "Maybe you don't have as much of a need for visibility because it's closer, but you still need trade compliance and trade agreement management capabilities to manage your NAFTA program," Pieri counters.

Finally, with nations negotiating a growing number of bilateral and multilateral free trade agreements, companies that don't leverage the inherent benefits for lower tariffs or greater market access could be missing out on significant savings or growth opportunities. And again, Pieri asserts, GTM can play a key role in help companies identify and manage their FTA programs.

In the end, Pieri sees the march toward increasing trade volumes — and increasing dependence on trade — as inevitable, and companies expecting to continue growing, or just to survive, must consider ways to enable more efficient GTM process or risk getting left behind. "Companies are realizing that shareholder value and their ability to grow long-term means they have to get much better about managing their operations globally, and GTM is a key enabler in this process," he concludes.

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