As it stands now, a software script embedded in Anritsu's MFG/PRO ERP system from QAD generates XML messages at certain "trigger points" in the order process and sends the necessary data on the product in question and the buyer, end user, end-use country and so on via the Internet to TradeBeam. The TradeBeam software screens the information and returns either an "all clear," sending the order on to the next stage of fulfillment, or an exception alert, which prompts follow-up by Anritsu's compliance staff. A number of sales and order management staff in overseas field offices continue to use a manual process to screen customers through TradeBeam. These employees enter data like the end user's name and address directly into a Web-based application for pre-screening. Otherwise, the screening process is entirely automated.
Solomon estimates that of the more than 1,000 orders that the company processes each month, the TradeBeam system still kicks back between 30 and 50 exceptions per business day. In most cases, the exception either is a "false hit" or indicates that a certain license is required; in rare instances, the system may actually indicate a denied party or country, requiring the cancellation of the order. Thirty to 50 may still seem like a lot of exceptions, but because the process for clearing an exception is considerably less onerous than the previous screening process, Anritsu's compliance staff has seen a significant amount of labor reduction, according to Solomon. "Plus," she adds, "it reduces our risk of making errors because there is an automated process in place that is not dependent on someone's memory of the regulation or their ability to find the appropriate process to follow."
Building the Business Case
Which brings us to the business case for trade compliance automation. TradeBeam charges a monthly subscription fee to access the service, as well as a per-transaction fee each time Anritsu's employees run an order through the system. While TradeBeam doesn't publicize its rate structure, Solomon says that "it's not cheap, and with restricted budgets, it's a tough sell to the top executives in the company to justify that it's worth spending the money."
Solomon justifies the investment by pointing to both "hard" and "soft" savings. The hard savings have come from the substantial reduction in effort required to handle the screening process. Whereas before as many as 85 employees were involved in the process worldwide at Anritsu, today, in the North American operation, the company's screening process requires just three staffers, including Solomon. The other staff members have refocused on more value-adding activities. Using the solution also positions the company to increase its order volume without having to ramp up the size of its compliance staff, Solomon says.
However, much of the return on investment in a trade compliance solution is going to come in the more fuzzy area of risk reduction. "A good portion of your ROI is not having to pay these fines and penalties, and that's soft dollars rather than hard dollars, because if you've done a good job, you haven't paid fines in the past anyway," Solomon says.
Selling risk reduction involves documenting the cost of different kinds of errors, the compliance manager adds. "It's not just the error of sending a product to the wrong country. You may send a product to a country using the right license, but maybe you filled out the paperwork improperly, and there are also fines and penalties for that." Solomon points out that the risk of non-compliance is rising as regulations become more complex and the restricted party lists become ever longer. The fines for non-compliance are rising, too. In March 2007, for example, ITT agreed to a $100 million fine imposed after the company admitted illegally exporting restricted night vision technology to China, Singapore and the United Kingdom, one of the largest fines ever in a criminal prosecution in the United States.
Nine-figure penalties and front-page coverage in the Wall Street Journal build awareness in the corner offices and board rooms of the cost of potential mistakes. They also make compliance automation a more palatable option for executives interested in staying out of the headlines. "As more and more companies are in the papers for making these errors, it's not as tough a sell," Solomon admits. Still, she continues to see her colleagues in trade compliance at other companies struggling to justify investments in automation technologies at a time when budgets remain tight. "I don't know how they do it," she says of compliance staff still laboring without automation, concluding: "I don't know how we did it in the past. And I certainly don't want to go back to doing it in a manual process."