As supply chains become more elongated and complex, gathering the necessary data to make sourcing, transportation and customs compliance decisions is becoming more complex. Some large companies are gaining a competitive advantage because they understand and leverage the linkages between logistics and compliance data.
But most traders aren’t taking advantage of the opportunities available from better management of trade data. That’s one of the key takeaways from this year’s edition of American Shipper
’s benchmark survey on import compliance (available online under the “Research” tab on the Website). Two-thirds of shipper respondents admit they still use spreadsheets or other manual process for import operations and compliance.
According to the study, the top two concerns of import managers are customs delays at ports of entry and the increasing cost of compliance.
Automation can help solve that and further enable efficient trading operations. Global Trade Management systems are good at taking data used in various corporate activities, such as purchase orders, transportation contracts or Food and Drug Administration forms, and reusing it to create accurate and complete customs entries and related documents. They augment the transactional data with product attributes to simplify valuation, classification, country of origin, and other reporting requirements.
GTM systems also prevent users from providing incomplete or inaccurate information with edits that flag errors before closing out a document and by using existing data in enterprise resource planning systems so it doesn’t have to be re-keyed into the system.
The study shows that systems-based shippers process more than three-times the number of entries than manual shippers, yet require only twice the full-time equivalent employees that manual shippers do. That efficiency enables systems-based shippers to maintain more complex import supply chains. On average, they import from 62 percent more countries of origin, and answer to nearly 40 percent more regulatory agencies. Companies seem to be holding back on IT investment because of cost, or a perception that the return on investment is minimal.
As the responsibilities of logistics and compliance personnel proliferate, trade grows, developing nations join more free trade agreements — which are chock full of rules about preferential duty rates — and the cost of compliance continues to rise, the need for database applications will grow, Ty Bordner, vice president product management and solutions consulting at GTM provider Amber Road, said on American Shipper’s June 13 webinar (Two Worlds Collide: The Challenges and Benefits of Blending Import Operations and Compliance
, available online under the “Webinars” tab).
Electronic data is the key variable and there are multiple ways to obtain it, he said. In related-party transactions, the export information can easily become the import information on the other side. Unrelated companies can obtain information they don’t control themselves through collaborative supplier portals. And, of course, EDI exchanges are another source of data.
GTM systems can help reduce transportation costs by 5 to 8 percent and cycle stock inventory 10 to 15 percent, compress order cycle times by four to seven days, and improve on-time delivery by 20 to 200 percent, Bordner said.
But as everyone who has worked with software programs knows, garbage in equals garbage out. GTM systems need good data too to be a valuable decision support tool.
One way companies can help ensure they are getting the necessary data to the right place is through a global trade training program.
The study recommends shippers provide customized training to personnel in various parts of the company so they understand how their job functions impact import operations and compliance. For example, the order management team is responsible for entering accurate information into the enterprise resource planning system that will later be used for classification, country of origin management or security screening. The research and development department must share product roadmaps with trade compliance and advise of any function, feature, or sourcing modifications so that classification and duty exposure can be assessed and country of origin can be determined. And the finance department should team with trade compliance to establish valuation methodologies that are also appropriate for customs purposes.
Get those relationships right and you’re well on the way to minimizing your total landed cost and maximizing efficiency.
Another best practice identified in the study is auditing one’s customs filings to make sure a company’s internal controls are strong and mistakes aren’t being perpetuated that can lead to costly regulatory sanctions.
A small subset of shippers — 7 percent in the survey — don’t audit at all. Andrea Appell, a director at consultant BPE Global who co-authored the study, said on the webinar that without auditing one’s customs filings there is no way to know if a company is in compliance with trade rules or just getting lucky for not getting caught.
People balance their checkbooks to check their budgets, weigh themselves to make sure they are sticking with their diet and exercise programs and try different routes to work to make sure their commutes are following the path of least resistance. All these actions are an audit to verify things are working properly, so why wouldn’t a company audit its customs operations, she rhetorically asked.
“No training and no auditing points to an extremely weak internal controls program that exposes importers to fines, penalties or even the loss of trading privileges,” Appell said.