Global Trade Management Market Does Surprisingly Well Despite the Decline in Global Trade

Budgets may be tight, but the complexities of managing global trade are only increasing, and companies continue to seek ways to automate GTM processes, ARC Advisory Group finds

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Dedham, MA — September 14, 2010 — Global trade management (GTM) solutions automate trade processes, and when trade is down, the GTM market will be adversely affected. It is not surprising; therefore, that the global economic downturn has led this market to contract.

However, the market did not shrink as much as one might expect. Between 2007 and 2009 the market only declined by a compound annual growth rate (CAGR) of -0.8 percent, according to a new report from industry analyst firm ARC Advisory Group.

"As trade recovers, the GTM market will recover as well, although we don't expect strong growth until 2011," said Steve Banker, service director for supply chain management and the primary author of ARC's "Global Trade Management Worldwide Outlook Study." Banker said that ARC's five-year forecast through 2014, however, reflects very robust growth for the GTM market.

Changing Trade Content

One challenge in global trade is that much of the content involved can change on a daily basis. This can include:

  • Global Product Classification — Harmonized Schedule (HS) numbers that allow companies to determine how their products should be classified so that the correct duties can be applied.
  • Tax Classification — Different types of taxes might be applied to different products depending upon which nations the goods travel between. These include no taxes — free trade zones might apply, regular duties, preferential duty rates, countervailing duties, VAT taxes, etc. Tax classification also affects when and how the taxes are paid.
  • Regulatory Controls — Import and export regulations including licenses and visas, permits, inspection requirements, quota status (only a certain number of T-shirts can be imported into the US from Pakistan, for example), safety controls (toys from China were banned for a while because they contained lead paint), and other restrictions. These controls are applied not just by customs agencies around the world but by a variety of other agencies in the individual nations as well (Food & Drug, Transportation Security, Defense Departments, etc.).
  • Restricted Party Screening (RPS) Lists — These lists are used to determine whether individuals, companies or organizations are sanctioned by a government or restricted from conducting trade.
  • Documentation — Requirements for all trade lanes based on origin and destination, including those documents necessary to support the transportation of goods across borders, as well as the number of copies required, appropriate business rules, language requirements and authorities for each document identified. There is a global trend towards mandating sending certain types of documents electronically prior to shipment.

And content is just one of the challenges associated with automating global trade processes, Banker notes. There are also challenges associated with advanced electronic notification, calculating total landed costs, integrating GTM into a holistic governance, risk, and compliance solution, and other hurdles as well.

In short, managing the flow of goods, information and money across borders is a highly complex, regulated and dynamic process — and becoming more so every day. Companies can no longer rely on manual processes to manage their global trade operations. This is why the global trade management systems market will be one of the fastest growing segments of the enterprise software industry, Banker said.