New Strategies for Global

Trade Management
Beth Enslow
Vice President, Enterprise Research
beth.enslow@aberdeen.com

The Destination of Choice

for Actionable Research

About Aberdeen Group

Research firm helping companies benchmark and
improve technology-enabled business strategies
Specialize in procurement, supply chain, global
trade, and retail research
Benchmarked more than 13,000 enterprises
Research is used by 90% of the Fortune 1000

Beth Enslow
Vice President
Enterprise Research

Todays benchmark data is from 170 companies we surveyed

for the New Strategies for Global Trade Management report.
About half were consumer-oriented companies (consumer goods and retail)
A third were $1 billion+ in revenue
Most were supply chain and procurement VPs and directors
2005 AberdeenGroup 2

Topics
Global Trade Growing Pains
Best in Class Practices
Building Preemptive Business Networks

2005 AberdeenGroup 3

Globalization Exceeds the Hype

China is the most popular trade destination
78% of all respondents and 9 out of 10 companies with
over $50 million in revenue currently have activity in
China
% of Companies With >25% International Vendors or Customers
70

% of Respondents

60
50
40

63
51

50
38

30

Today
2008

20
10
0

>25% Int'l Suppliers >25% Int'l Customers

2005 AberdeenGroup 4

The Supply Chain Conundrum

Globalization of Supply

Localization of Demand

Continued Pressure on Costs

Lead Times > Order Times

Tailored Products
Just-In-Time Shipments

Slower, More
Uncertain, Less
Flexible

Speed, Accuracy,
Agility
2005 AberdeenGroup 5

What Are Winners Doing?

70
60

Best in Class
Industry Average
Laggards

50
40
30
20
10
0

Corporate
Performance
Management

33
25
15
Gross Margin

2005 AberdeenGroup 6

What Are Winners Doing?

70
65

60

Best in Class
Industry Average
Laggards

50
40

41

30

Corporate
Performance
Management

32

20
10
0

Gross Margin

% Profitable
Market Segments

Closed-Loop Performance Management

Shine the laser on performance issues and market
opportunities as soon as possible
2005 AberdeenGroup 7

Why Companies Feel Pressure to Revisit

Their Global Trade Strategies

91% suffer unexpectedly higher costs and are challenged

to respond to market demands
2005 AberdeenGroup 8

Global Trade Is Tremendously

Inefficient

A quarter of large companies have problems

with more than 1 out of 10 shipments
30% of retailers and apparel manufacturers say they
have problems with more than 1 out of 6 shipments

63% of companies manage their global trade

process using paper and spreadsheets
Often combined with a hodgepodge of departmentlevel homegrown software

70% do not manage global trade crossfunctionally

54% do not measure their global trade
performance

Plus, companies pay brokers and forwarders to hand-key

data into disconnected systems multiple times in a
shipments journey
2005 AberdeenGroup 9

Why We Are Poised on the Brink of Global

Trade Management Innovation
Ecosystem
is ready for
automation

Suppliers, forwarders,
brokers and carriers
are now Internetenabled

Governments are
upgrading systems and
moving to electronic
document processing

Technology is
maturing to
support multiparty
automation
Financing
instruments
have matured

Visibility and event

management can now
be embedded into
workflow

Integration hub
technology and ondemand options make
connecting easier

Many alternatives to
Letters of Credit

Treasury & SOX

scrutiny on global
cash flow and working
capital mgmt
2005 AberdeenGroup 10

Changes in Corporate Attitude

We recently automated our global trade processes. This
effort, coupled with implementation of Six-Sigma
principles, has and continues to deliver huge
dividends.
VP supply chain, medical device company

A year ago, trade compliance was viewed as a

tactical, necessary evil. Now we understand that we
must operate global business processes and stop thinking
of ourselves as a U.S. manufacturer. Now were seeing
compliance as strategic.
Director in finance at billion-dollar manufacturer

Im positioning this program as a way to automate trade

finance, but my real agenda is visibility and process
automation across my global supply chain.
CFO,
apparel manufacturer
2005 AberdeenGroup 11

Topics
Global Trade Growing Pains
Best in Class Practices
Building Preemptive Business Networks

2005 AberdeenGroup 12

Global Trade Leaders Successfully

Reduce Uncertainties and Costs

2005 AberdeenGroup 13

Best-in-Class Practices
In-process and in-transit order visibility
Aggressive inventory management
Logistics flexibility
Corporate-wide automation
Corporate-wide measurement
Global trade competency center
Trade finance

2005 AberdeenGroup 14

How Do You Create Low Cost and

Responsiveness?
Virtual
inventory bin
JIT
VMI hub
delivery

Supplier min/max
replenishment or
consignment inventory

Distribution bypass
Virtual
inventory
bin

Component risk pooling and

intermediate postponement

Merge in
transit

Postponement of
finished goods

Supplier drop ship

Componetized designs/recipes
Postponement and JIT strategies
From outsource to wisesource
In-transit inventory allocation and re-direction
Contingency plans and event-based course corrections
2005 AberdeenGroup 15

Leaders Are Building More Points of

Flexibility into Their Logistics Networks
1. Reroute goods to alternate ports to avoid
congestion; companies are calling this port
shopping.
2. Move goods in-bond to a bonded warehouse in Chicago
to avoid recurring customs delays at an East Coast
airport.
3. Switch the domestic leg from rail to truck to meet
SLA.
4. Divert product directly from deconsolidator to the
store.
5. Have an Asian supplier hold 30 days of inventory buffer.
6. Drop ship from an Asian consolidator directly to a
customer.
7. Create visibility to raw material and in-process activity at a
supplier so contingency plans can be activated if problems
2005 AberdeenGroup 16

Corporate-Wide Process Automation

Pays

Reduction in Metric
Many companies are doing redundant work and under-leveraging
their learnings because of a decentralized and manual trade
process

2005 AberdeenGroup 17

Renaults Drive for Corporatewide

Automation

From: Separate import and separate export

databases in each country
To: One global database for all trade data
Take full advantage of trade agreements in product
design and sourcing to drive to 5,000 Euro car
Lower compliance and documentation costs by
automatically reapplying electronic data to different
parts of the import/export process
Gain new flexibility to update data while shipment intransit

Benefit: Changed Renaults strategic position

2005 AberdeenGroup 18

How Global Trade Leaders Have Benefited From

Automated Global Trade Technology
Technology Benefit Area

% Reporting Gain

Shorter delivery times

68%

Improved customer satisfaction

68%

Improved import/export regulation compliance

62%

Increased profitability

59%

Better shipment visibility for company and supply

chain partners

59%

Improved responsiveness to change

53%

Decreased inventory requirements

50%

Improved cash flow

44%

Increased revenue

35%
2005 AberdeenGroup 19

Technologies Perceived as Most

Beneficial

(common platform for executing trade process)

2005 AberdeenGroup 20

Adoption Plans for Global Trade

Technology

2005 AberdeenGroup 21

Financial Supply Chain Best Practices

Leveraging Cash & Credit Across the Supply
Chain Minimize LCs and
Early Payment

% of Respondents

80

Move to Open
Accounts

Programs

60

Plan to Adopt
by 2007

40

Do Today

20
0

All

Best in
Class

All

Best in
Class

56% of best-in-class companies say their next step is to

enhance IT for payment and cash flow management
2005 AberdeenGroup 22

Topics
Global Trade Growing Pains
Best in Class Practices
Building Preemptive Business Networks

2005 AberdeenGroup 23

How Winners Synchronize Their Supply

Chains

Localization of Demand
How fast can I spot demand shifts?
How quickly can I identify winning and losing
products and micro-market segments?
How rapidly can I adjust pricing and promotion
strategies to maximize my profit opportunity?

2005 AberdeenGroup 24

How Winners Synchronize Their Supply

Chains

Globalization of Supply
How fast can I recalibrate supply to support
new demand shaping tactics?
How quickly can I identify supply issues and
take preemptive action?
How effectively can I flow inventory across
my
end-to-end supply chain?
2005 AberdeenGroup 25

Supplier Events Monitored by Companies

Order acknowledgement matches
purchase order
Raw material arrival at supplier
Lifecycle
of an
order

Supplier production process events

Advance shipment notice created
Advance shipment notice matches
purchase order
Carrier pickup of goods
In-transit status events
Customs clearance
Final delivery
0

20

40

60

80

100

% of Companies
2005 AberdeenGroup 26

Supply-Demand Synchronization

Building a Preemptive Business Network

Preemptiv
e
Reactive
Planned
Pushed

1980
2010

1985

Focus on winners, divest losers

Get nosy with your suppliers
Adopt network view of inventory
flow
Plan for contingencies
Predict and monitor to get ahead
of demand
supply issues
1990 1995
2000 and
2005

2005 AberdeenGroup 27

Summary
Findings
How well companies manage the supply chain
conundrum of localization of demand and
globalization of supply will determine their
success over this decade

Takeaways
91% of businesses that source or sell goods internationally
suffer unexpectedly higher costs
Companies want to automate and innovate because of their
growing inability to react to changes in market demand due
to
longer lead times and more unpredictability
Global trade processes are still in the dark ages: Automation
is just beginning within the enterprise and across the supply
chain
The merging of the physical and financial supply chains is the
2005 AberdeenGroup 28

Thank You
Beth Enslow
519-883-1430
beth.enslow@aberdeen.com
www.aberdeen.com

The Destination of Choice

for Actionable Research