With nearly 30% of the world’s gross domestic product currently crossing borders, it is clear that global trade is an integral and growing part of business that is here to stay. As a result of this globalization, businesses have created a new concept to define the challenges and opportunities unique to the new highly globalized business environment – Global Trade Management (GTM). While savvy executives are wise to be wary of potentially short-lived buzzwords, there is no questioning the powerful trends that have made investing in GTM solutions such a topic of interest to forward-looking businesses:
- The volume of global trade is substantial, and will only increase with time
- Global trade is significantly more complex and risky than domestic trade
- There are dramatic operational and cash flow benefits to be gained by businesses that implement and execute global trade operations efficiently
WHAT IS GTM?
Global Trade Management is the practice of streamlining the entire lifecycle of a global trade across order, logistics, and settlement activities to significantly improve operating efficiencies and cash flows. The comprehensive nature of GTM is a boon for organizations that fully embrace the cross-functional, system-wide view of global trade. At the same time, because GTM crosses traditional functional silos within organizations, many businesses endure poor performance in their global operations for years before they realize the gains of applying GTM solutions.
THE CHALLENGES OF GLOBALIZATION
Insufficient planning, execution and synchronization of financial, logistics and regulatory procedures can lead to very costly business challenges, including:
- Shipment delays
- High inventory
- High AR & DSOs
- Increased logistics spending
- Penalties and fines
- Lost sales
- Claim write-offs and invoice deductions
THE OPPORTUNITY OF GTM
The promise of GTM is to enable corporations to take advantage of the opportunities of globalization. One way of doing this is through on-demand applications that are integrated into one platform allowing companies to manage their global orders, control global shipments and optimize global finance to help save time and improve working capital for order-to-cash and procure-to-pay cycles.
Finding an integrated solution to provide import and export compliance, inventory management, shipment tracking, supply chain event management and global trade finance solutions such as open account and letter of credit management is now within reach.
THE ROLE OF LOGISTICS EXECUTIVES
Today, logistics executives are often focused only on the management of the shipment booking through proof of delivery process and the management of logistics costs. As companies continue to embrace the value of broader GTM solutions, logistics executives will be looked upon to provide leadership in understanding and adding value to the entire order life cycle including purchase order management, total landed cost modeling, insurance and claims, import/export compliance, security regulations and integrating more seamlessly to invoice reconciliation and trade financing systems. As an example, classic track and trace applications will need to be extended and integrated with other systems to allow for multi-criteria searching (e.g. PO number, SKU, product classification, invoice number, LC terms, etc).
THE BOTTOM LINE
GTM initiatives are underway in many organizations via shipment visibility, supply chain security, trade compliance, or trade financing projects. The majority of these projects remain piecemeal. To be effective, companies must streamline the entire lifecycle of a global trade. The logistics executive is often the most familiar with global trade hurdles and can thus be a clear influencer in the deployment of more robust solutions. Only those companies that best leverage the whole of GTM solutions will be positioned to meet their objectives of effectively growing top line revenue and benefiting from more economical sources of supply through cross-border trade.
SUCCESSFUL GTM STRATEGIES
Global Trade Management requires the integration of the financial supply chain with the physical supply chain, enabling corporations to accomplish the following goals on a continuous basis:
- Grow top line revenue and reduce supply chain costs
- Provide full visibility into shipments
- Minimize working capital in inventory and accounts receivable
- Comply with required governmental reporting and security mandates
- Measure the efficiency and performance of global trade policies, procedures and trading partners