Last week I was at the AAEI conference in Baltimore. As always AAEI puts together an agenda that is meaningful for the trade compliance community. The sessions are highly informative and relevant to the current trade environment and provide really good insights into what CBP, Commerce, and the PGAs are working on.However, my biggest take away from AAEI was not the information from the sessions. The overriding impression that I was left with was that most companies are huge laggards in embracing the technology to support their trade compliance departments. By far the major technology that companies embrace to manage trade compliance is..."the spreadsheet". There clearly is a love affair with spreadsheets by the trade compliance community. It made its first impression in 1978. It has evolved but fundamentally it is still the same product. History of Microsoft Excel 1978 – 2013 [Infographic].But are spreadsheets really the technology that trade compliance should be relying on to protect their company from the trade risks that exist. There are many articles written on why spreadsheets are bad for managing complex business functions like trade compliance. One of the best articles written on why spreadsheets are bad for business appeared in the June 2017 edition of Forbes magazine, written by Bernard Marr - Excel Reporting: 5 Reasons Why It Is Bad For Business. A second powerful blog on why spreadsheets are bad for business was prepared by Hubspot - 5 Reasons Why Excel Is Killing Your BusinessIt was stunning to informally engage with the AAEI attendee trade compliance professional, and we spoke with many from medium/large organizations, and hear how they use spreadsheets to manage master data (accounts and products) and aggregate supporting commercial invoice and manifest information. What was depressing was to hear the comments about how the information in spreadsheets is not easily accessible to support operational trade compliance activities, is not easily shareable, is difficult to ensure synchronization with enterprise systems and external systems (like brokers), is not timely, and is labor intensive to maintain.
So why does Trade Compliance still rely on Spreadsheets? It's so last century!
To answer this question is to look at the evolution and current status of trade compliance in the corporation. Until 9/11/01, trade compliance was hardly on any corporation's radar. Post 9/11/01 CBP, BIS, Treasury, and Defense took a great interest in security and border protection and focused the attention on enforcing compliance (for better or worse). This change in focus changed how companies related and responded to these government agencies and thus evolved the trade compliance profession. Back in 2001 there were no trade compliance solutions to support the new trade compliance professions and the spreadsheet was the only real tool available to help them manage their activity. And given the activities to be managed to ensure cross-border trade and security concerns, the spreadsheet was a very practical solution. But that was then, September 2001.Since 2001 companies dedicated to trade compliance solutions have evolved. These solutions provide extensive, deep, and automated capability i.e. product classification (HS, EAR, ITAR), Denied/Restricted Party screening, License determination, and Country of Origin determination. And with these solutions trade compliance within organizations have been able to improve work effectiveness. But, even with this support, most companies have not been able to get off of spreadsheets. They move the information from these point solutions to the supporting spreadsheet.Why?The answer lies in the fact that trade compliance activities are seen as discrete. In reality, trade compliance is about the process with discrete activities in support of the process.
The Path to Eliminating Spreadsheets
The path to eliminating spreadsheets is not difficult. It is not even expensive. All that it requires to eliminate the spreadsheet is a recognition that (1) it can be done and (2) that there is real value in going down this path.
Spreadsheets can be eliminated from trade compliance
There are comprehensive solutions for trade compliance that eliminate the need for spreadsheets. This is not radical stuff. It is proven in the real world. It is not particularly expensive. And, it will incorporate your current point technologies, such as product classification, DPS, License determination, and COO determination. These solutions are process driven. That means, the solutions focus on automating the process, reusing information, reducing (if not eliminating) data entry, streamlining workflow, improving data quality.
The VALUE for Trade Compliance from eliminating spreadsheets is real
When looking at what it takes to eliminate spreadsheets there are several issues to address. The first is understanding what it takes to eliminate spreadsheets from the trade compliance function. The second is the value proposition associated with eliminating spreadsheets. The third is the type of solution. And, the fourth is the cost of acquisition and maintenance.Automating trade compliance processes eliminate spreadsheets.Trade compliance, like every other operational function, is driven by process. One might argue that in trade compliance process control is even more critical than in many other areas of the business. Trade compliance is subject to process audits from both internal and external authorities. Failure to have strong processes and management of those processes leads to inefficiencies and associated costs. Trade compliance solutions that have process management as their underlying design allow organizations to manage and control both the activities and the data in a central database. This means that all account and product data is centrally managed and accessible natively and supported with a strong reporting structure that makes spreadsheets redundant. A well-designed solution integrates the point technologies with process providing the users with exceptional control and management at a lower cost.The Value of eliminating spreadsheets from Trade ComplianceThere are many factors where spreadsheets are deficient and costly to the trade compliance function. Below is a list of reasons why maintaining spreadsheets as the main trade compliance data source has become obsolete and how automated trade compliance solutions add value to the organization and ultimately lower cost.
- Spreadsheets are difficult (if not impossible) to maintain. On many levels, spreadsheets are very difficult to maintain. Information required to support full account and product masters are held in disparate systems within and external to the organization. Getting this information into a meaningful and manageable spreadsheet is near impossible. It is not uncommon for trade compliance spreadsheets to be more than 30 - 60 columns wide and 1000s of rows deep. Automated trade compliance solutions automatically accumulate and aggregate information in relational databases which enable the users to simplify access and outputs. The information is easy to maintain once implemented and easy to access and manipulate in reports and analytic tools. In fact, the databases can be programmed to provision the information into spreadsheets for presentation purposes, if the spreadsheet is the desired reporting tool.
- Spreadsheets are very difficult to "synch" - One of the more common problems we hear from trade compliance professionals who work on spreadsheets is that the information is very difficult to consistently "synch" with the ERP solution or with their customs brokers or 3PLS. This lack of synchronization leads to an error rate that is significant - although often minimized. Poorly synchronized data requires manual involvement when information is incorrect. This manifests itself in increased communication with service providers and internal stakeholders or unaddressed errors. Automated trade compliance solutions are easy to "synch" with other solutions through simple APIs (Application Program Interfaces). In web-based automated trade compliance solutions, these ABI interfaces greatly increase access to internal and external data sources in a very cost-effective way - without limited IT resources. This ability to grab and synchronize information increases the accuracy of the information well beyond the ability of the spreadsheet. This ability to increase accuracy has huge downstream effects on trade compliance and its stakeholders.
- Spreadsheets are inhibitors of the "sharing" economy. By their nature, spreadsheets are very difficult to share among participants. Spreadsheets are usually designed for a specific result and therefore the information is often difficult and time-consuming to extract and share in a dynamic environment. This reduces the opportunities for cross-functional collaboration and communication. In today's environment where information is so critical for a decision support, the ability to share accurate information in a timely manner is highly valued. Business exists in the digitized world. Being able to rapidly access and share information that is timely and accurate has exceptional value. It evidences itself by increasing trust among sharing partners. Accurate information reduces needless conversations and meetings while increasing understanding and decision outcomes. Automated trade compliance solutions greatly enhance the ability of trade compliance to share information and support other internal stakeholders and external service providers resulting in a lower total cost of operations and improved service support.
- Spreadsheets are notoriously poor on security. The lack of security inherent in the spreadsheet is a significant compliance problem. Access to information is very difficult to control once the spreadsheet is shared. Because they are so much more cumbersome to manage than database driven solutions they are highly susceptible to security issues. This fact often goes unaddressed because without more secure options it is the only way to share data between parties. The ability to control and use data in a secure manner greatly increases the organizations operating leverage. Automated trade compliance solutions operating on secure cloud databases are easily configured. The solutions allow users to control the information that they make available to "others". The ability to control information accessibility has real value. Security of information is a key element of compliance and trade data security should be top of mind for any organization.
So why do companies operate trade compliance like it's 1999?
There are several reasons. The reason we hear most often is that the organization does not value what trade compliance offers in support of operations.Secondly, there is a real lack of understanding and appreciation of how trade compliance eliminates needless bottlenecks in the supply chain and the related costs due to inefficiency.A third reason is that trade compliance reduces corporate risk. The exposure to compliance trade risk is growing with the changing environment and failure to increase trade compliance capabilities exposes the organization to potential operating penalties.Fourthly, many in trade compliance professionals are too mired in the "work" that they do not appreciate or understand the value of the trade compliance solutions that are available and continue to default to the spreadsheet.Finally, the spreadsheet continues to exist because it takes real and consistent effort and commitment to make trade compliance change within the organization. Change is hard work that is often under-appreciated.In order to get management to appreciate the value of trade compliance requires a clear explanation of the value proposition in terms that management understands. If you would like to make change to your current trade compliance operations give me a call and we can discuss how you might move trade compliance forward in your organization.
About 3rdwave:
3rdwave simplifies global trade through automation. 3rdwave is a GTM platform that delivers total global supply chain visibility, minimizes manual data entry, streamlines business process, and provides contextual information enabling its users to make informed decisions to reduce global supply chain risk. It's a cloud-based platform that requires minimal IT resources for quick implementation. 3rdwave ensures that companies meet the highest levels of GTM execution and Trade Compliance conformance.
Ned Blinick is Chief Product Officer of 3rdwave.co. He has been involved in global trade for too many decades. Ned loves making the global supply chain simpler for everyone. He can be reached at (416) 510 8800 ext 234 or at eblinick@3rdwave.co
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