Trade Compliance Management Services Market Seen Set to Boom in Europe

Expansion of U.S. companies into region creates awareness and demand for services, Frost & Sullivan reports

Expansion of U.S. companies into region creates awareness and demand for services, Frost & Sullivan reports

London — December 12, 2005 — The market for trade compliance management services is set to boom in Europe as U.S. companies expand into the region, creating awareness and demand for the services, according to a new report from consulting company Frost & Sullivan.

In cross-border trade, it is vital for companies to have considerable knowledge about trade processes to better manage their resources and reduce supply chain bottlenecks. U.S. companies are especially aware of this need and therefore give priority to trade compliance.

With several U.S. companies expanding into Europe, the local participants are being introduced to this business culture, and this trend is driving logistics service providers (LSPs) to re-evaluate their strategy for providing better value-added services and retain their customer base.

Education Needed

Service providers in this $4.60 billion market will have to intensify their efforts to educate companies about the criticality of outsourcing trade compliance management services, the consultancy said. They have to promote their capabilities and their value-added services for shippers from Europe to take interest in them.

Managing trade compliance issues is becoming increasingly complex as companies' need to integrate information from different global trading destinations and comply with a diverse range of government trade and security procedures. Moreover, they also have to keep tabs on long-distance supply chains.

Shippers are steadily realizing that tapping the "connected" resources of third parties such as LSPs, trade content managers and consultancies assists them in smoothly managing trade movements across borders instead of spreading their focus thin over numerous issues, Frost & Sullivan said.

"Service providers can drive the uptake of their solutions by approaching existing customers with value-added services in partnership with trade content/knowledge providers as well as application platforms and software providers," said Sharat Satyanarayana, a senior research analyst with Frost & Sullivan.

Pressure to Align Processes

Companies are recognizing the benefits of effective trade compliance management, and this focus can be a crucial differentiator in any business. While larger companies can leverage it to stay competitive, small and midsize enterprises can use it to overcome entry barriers and stay afloat.

Moreover, shippers are under pressure from the European Union (EU) to align their trade compliance management processes with mandatory requirements that will be developed by the next decade. The dynamic shifts in the rules and regulations of global trade across different European countries with diverse norms for classification of products are fuelling this complexity in compliance.

Although the European Union is seeking to standardize its numerous trade requirements and procedures, many countries still have a significantly long list of distinct needs. For example, different countries have distinct and detailed regulations for the transportation of hazardous chemicals or electronic/high-tech goods.

Eying Automation

To adhere to such complex procedures and facilitate the flow of information and physical goods it is imperative that shippers efficiently manage their trade processes. Even though most companies still follow the "paper method" of managing their trade documentation and other processes, greater awareness about automation is changing this trend.

"Many organizations are on the path to developing strategic relations with LSPs and are exploring the option of automating their supply chain processes," said Satyanarayana. "By 2010, the market is expected to touch $8.89 billion in revenues, since most companies' trade information for various operational destinations might be automated and provided with precision and security."

LSPs are anticipated to control the bulk of market shares by the early part of the next decade. With their stronger presence and interactive relations with various government agencies, LSPs are poised to surge ahead in the market for trade compliance management services.

Additional Articles of Interest

— For seven tips to improve regulatory compliance, reduce operating expenses and streamline global supply chains, read the exclusive, "Cross-border Trade: Keeping on Top of Customs Regulations."

— A logistics team is called upon to craft supply chain processes that update logistics and inventory management at the growing retail chain Michaels Stores Inc. Read more in "The Art of Supply Chain Optimization," a Best Practices article in the October/November 2005 issue of Supply and Demand Chain Executive.

— Looking to outsource your supply chain? For five success factors for your outsourcing project Read "Rising to the Challenge of the Outsourced Supply Chain," cover story in the October/November 2005 issue of Supply and Demand Chain Executive.