Magazine for supply chain management, global trade, and IT. October.2018
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The return of investment of
■ Tosoh Europe: Establishing peace of mind for export controls
■ What’s the right strategy for remediating impacts of a trade war?
■ Science or sorcery? All about the art of product classification
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Automating Export Control Compliance
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October.2018
3
Editorial
Did you expect all of this…? Global trade has always been a highly dynamic
even talked about Brexit yet. Customs Partnership,
environment. But the recent pace of change and
Maximum Facilitation, Chequers Plan – much has been
increasing volatility – especially when paired with
in discussion while the odds for a no-deal Brexit have
developments in our transforming marketplaces driven
been increasing and key points like the Ireland border
by technology advances, changing consumer behaviors,
issue remain, to date, unresolved.
and e-commerce trends – present unprecedented
Where does that leave us – the companies buying,
challenges for businesses.
selling, trading, and moving goods across the globe? It
We live in an era of political uncertainty. We should now
seems the only thing that’s certain is that uncertainty
expect the unexpected – it really seems like anything is
in both political and economic environments will
possible, at any time. The US, with its newly imposed
continue to affect us in the years to come. But you can
import duties that caused a series of retaliatory measures
arm yourself against this – by eliminating the risks in
from the EU and China, even puts relations with friendly
your supply chain and increasing the adaptability of your
powers at stake. And a protectionist approach prevails,
organization.
as the US is shifting its attention from Europe to other
How? You can find inspiration not only in this special
parts of the world. In the meantime, China continues
edition AtoB print magazine, but also in our online
to try winning the favor of emerging nations in Central
magazine as part of the newly launched website
Asia and Africa with major investments in, among other
www.aeb.com. Come visit and take a look around.
things, infrastructure. China’s focus is increasingly
What’s new in global trade and logistics that has an
on Europe, too, as shown by investments in the new
impact on your business? Get ideas and impulses from
Silk Road and the Greek Piraeus port. Let’s not even
experts on latest technology advances, digitization
get started on Russia, latest global sanctions and trade
trends, and best-practice examples from the world of
barriers, and headlines on stealthy internet practices.
supply chain management and IT.
So, what about Europe then? It seems the EU is mainly
The key thing to keep in mind for today is: modern
struggling with itself. In economic terms, things are still
IT solutions play an important role in our efforts to
going well – for the time being. But an unsettling feeling
cope with the uncertainty in trade environments and
remains that this bubble may burst. Of course, we haven’t
successfully manage shifts in marketplaces. Flexible software enables businesses to run efficient operations in accordance with the current state of affairs and quickly adapt if something changes – in the field of customs, for example. You may not be able to control impulsive behavior of leaders across the globe, but there is much you can do to successfully manage the changes they may come up with next. What are you waiting for? I hope you enjoy the read – please let me know if you have any questions.
Ted Roth, General Manager AEB Sweden
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October.2018
In this day and age, compliance with global trade laws and regulations is more important than ever. Export control programs form a vital part. What’s the role of software – and the return on investment? Page 6.
While digitization bears fruits in many areas, customs management often remains neglected. Developments in global trade bring a new urgency and customs experts recognize the potential. The race is on. Page 16.
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The Internet of Things, blockchain, and artificial intelligence dominate media headlines while other important trends are driving a silent revolution in the business software industry. Here is what’s not to be missed. Page 20.
Managing master data is anything but sexy. But automation as we envision it in a consumer driven world – with smart warehouses, autonomous vehicles, drone deliveries – depends on it. Especially in global trade. Page 12.
Classifying products is a time-consuming, cumbersome, and highly unpopular task. But does it really have to be? Find out what self-learning algorithms can do these days and how it can make your life much easier. Page 28.
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5
Content
Donald Trump has unleashed a trade war and businesses across the globe are hit by additional tariffs. What’s the best strategy for successfully managing and mitigating the impacts on your supply chain? Page 30.
Compliance 06 The ROI of automating export control compliance Master data
12
Not sexy but practical and essential in global trade Customs processes
16
Integration is the future and there is no time to wait Trending in IT
20
The quiet revolution: Reboot for business software Artificial Intelligence
28
Life can be easier. The art of product classification Global supply chains
30
The impact of a trade war and what traders can do
Chemical products are subject to strict regulations and Tosoh Europe takes its responsibility very seriously to ensure its products reach global markets fast, safely, and in compliance with all export controls regulations. Page 34.
Best practice
34
Tosoh: Systematic peace of mind for export controls Facts at a glance
38
Relevant numbers and stats in SCM and GTM
It’s hard to keep up with all the news, reports, and latest statistics in global trade and supply chain management. That’s why we read about latest developments for you and summarize the most relevant facts at a glance. Page 38.
Imprint 42 Events 43
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Much more than just legal compliance
The ROI of automating export control compliance In these volatile and unpredictable times, compliance with export controls is more important than ever. What are the key components of successful compliance programs and what’s the role of software? Which areas does software cover and what is the return on investment? Mark Brannan, AEB’s very own Captain Compliance, has the answers.
October.2018
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In today’s globalized and competitive markets, business leaders are typically focused on increasing productivity, reducing costs, developing innovative products, and winning new customers. To many, it seems like export control compliance does not inherently add value to a service or product – and they therefore regard it as a burden. After all, compliance can’t really be considered a revenue-generating portion of the company.
October.2018
Those that fail to implement effective export control compliance programs risk jeopardizing their business operations and reputations.“ Mark Brannan, International Business Development Director, AEB
Those that fail to implement effective export control compliance programs, though, risk jeopardizing their
Russia sanctions
business operations and reputations. Based on this alone, investing in export control compliance already
Volatility around Russian sanctions has had a great
makes good business sense. But there is even greater
impact on trade compliance for the Nordics region in
potential to be tapped: Companies that additionally
recent years. US regulations in particular can present
introduce automation into their compliance programs
great challenges for non-US companies.
also benefit from greater efficiency, reduced costs, and –
Non-US companies may face punitive measures if they
importantly – increased regulatory compliance.
knowingly cause a violation of the secondary sanctions relating to Russia pursuant to the US Government’s
Turning burden into opportunity in a world of constant change
Countering America’s Adversaries Through Sanctions Act (CAATSA). Companies must remain vigilant in monitoring all
Any compliance program today must be configured to
applicable sanctions – national, EU, and US – and align
cater for changing policies, legislation, technologies, and
their export controls compliance policies and procedures
so on. It must be robust and adaptable enough to deal
in accordance to latest legislation while avoiding impacts
with uncertainty and unpredictability.
on their trade operations.
EXPECTING THE UNEXPECTED In 2016, President Trump promised an unpredictable US foreign policy if he were to win the presidency. “We must as a nation be more unpredictable,” he said. “We are totally predictable.” An unpredictable foreign policy inevitably makes export control regulations more subject to change. It also makes the job of export control practitioners that bit harder. Keeping an eye on the news for foreign policy changes is therefore always advisable. Any change in the global security environment can directly impact financial sanctions and export controls, and with this also on international supply chains and business decisions regarding certain markets.
What makes an effective export control compliance program?
Commitment at the top
Recordkeeping
Compliance should be a cultural factor within a
To support audits, identification of violations,
company and this is based on the visible commitment
and voluntary disclosures, records should be easily
of senior executives and management.
accessible to support efficient and effective audits.
Screening
Training and awareness
To ensure trade does not take place with an individual or
To further support the cultural attitude towards
entity on one of the restricted party lists, a compliance
compliance, regular employee training is of paramount
program must include continued screening against all
importance to ensure all teams are aware of their
applicable, published entity lists.
responsibilities.
Written policies
Software automation
It is essential to define, document, and
Software systems are a very cost-effective means
communicate corporate policies.
of ensuring export control security without slowing down business processes.
Managing change
Self-audit
Compliance programs must be configured to cater
To support the ongoing maintenance of a compliance
for changing policies, legislation, technologies, etc.
program and to minimize the risk of violations coming to
They must be robust and adaptable enough to deal
light during an external audit, a company should perform
with uncertainty and unpredictability.
their own, internal audits periodically.
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Business benefits of automation: Export control compliance software
October.2018
• Minimize errors • Standardize procedures • Increase regulatory compliance
Considering the volume, complexity, and frequent changes of export control regulations across the globe,
• Improve recordkeeping and the level of information available to auditors
it’s virtually impossible to establish successful programs without IT support. Software solutions reduce reliance on
The best systems enable you to comply with all relevant
manual processes and therefore support companies to:
regulations, mitigate supply chain risks, increase
• Decrease costs
efficiency, and demonstrate due diligence to regulatory
• Increase efficiency
authorities.
What you should look for in effective export control compliance software solutions
Integrate with ERP systems
Restricted-party screening
Export control compliance should be part of standard
Screening all your business partner names and
business processes and not a separate activity. Software
addresses against the sanctions lists of the UN, EU, US,
can support real-time, automated checks for export
and other authorities is simply not practical as a manual
license requirements, restricted-parties, and more,
activity. Software can fully automate the process in
directly in your ERP.
real-time or as a batch run.
Product classification
License determination
The kind of automation commonplace for many other
Software can help you answer key questions about
aspects of global trade and logistics is now also available
your shipment: Are there any embargoes in place for the
to support the product classification process. Software
country I want to ship to? Do I require a license to ship my
can support correct identification of the customs
goods? It should also block goods shipment if
commodity codes and/or dual-use codes.
a license hasn’t been obtained yet.
Data service updates
License management
Automated data updates ensure that you are always
Automatically identify which license might be applicable
checking against the most up-to-date version of the
for the shipment; and, produce a full audit trail of which
sanctions lists and export control regulations.
licenses have been used for which shipment including decrements on value and quantity.
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Return on investment
11
A return on this investment is hard to measure. A robust compliance program is perhaps more comparable to
Implementing an effective export control compliance
having a good insurance policy in place. No reputable
program that is robust enough to cope with current
business would trade without insurance for professional
challenges and is flexible enough to facilitate future
liability, property, and vehicles. Similarly, no reputable
requirements is of utmost importance in protecting
business should trade without taking measures to
your business operations and reputation. This requires
ensure export control regulatory compliance. Here are
investment.
four good reasons why:
Protecting brand image
Avoiding penalties
Companies often spend significant amounts of money,
Prevention is better than cure, as they say. Criminal
time, and resources to develop their brand image.
fines, administrative penalties, and costs associated with
Integrity, trustworthiness, reliability, and transparency
defending against enforcement actions can impose a
often form key elements of this. Unfortunately, however,
massive burden on a company’s finances. Effective
it’s easy to lose a good brand image in a very short time
export control compliance programs are the best way
if the right protective measures are not taken.
to avoid such penalties in your company.
Penalty mitigation
Shareholder value
It’s far better to detect potential problems and violations
Damage to brand image and significant financial
before the enforcement authorities do so. If things do
penalties can have a very direct impact on the
go wrong, your company can make a voluntary self-
shareholder value of the company. It is extremely
disclosure (VSD) of any issues. Typically, this will lead
important, therefore, to ensure that an effective
to a government warning letter or significantly
export control compliance program is in place to
reduced penalties.
avoid such financial impacts.
About AEB More than 5,000 companies around the globe are automating their global trade, supply chain, and logistics processes with AEB software. They can prevent legal violations long before a delivery is made. Make global trade compliance an opportunity, not a risk. • Restricted Party Screening • E xport Controls • License Management • Automated Product Classification • ITAR and EAR • Politically Exposed Person (PEP) Screening • Anti-Bribery and Anti-Corruption • Multi-Country Customs Filing And much more.
Author: Mark Brannan is International Business Development Director at AEB with primary focus on developing new markets, key accounts and partner networks on a global level. This includes establishing effective, IT-supported export control compliance programs and automated customs processes for efficient movement of goods across borders – in compliance with all applicable EU, US, and international regulations.
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Master data in global trade management
Not sexy – but very practical Master data management takes a back seat in the IT strategy of many companies. That’s a missed opportunity. Because for IT to transform business operations, at least in global trade and logistics, a foundation of high-quality data is essential.
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October.2018
An
ambitious
13
IT
manager
might raise his or her profile in the company by managing the successful
implementation
Export controls and digital transformation as change drivers
volume of exports often seek a high level of automation. The only way to achieve this is if the export
of
declaration can be auto-completed
an ERP system, by introducing
What is the best way to achieve
with the appropriate master data
digital processes in a strategically
your data management objectives?
in addition to the logistical data.
important part of operations, or by
It starts with awareness. That may
If the quality of this data is good,
overseeing the worldwide rollout
sound obvious – and indeed, it is.
the process of completing export
of logistics software. Establishing a
Without an understanding of the
declarations can be fully automated.
system of high-quality master data
legal consequences and economic
This yields a significant advantage in
management is probably not one of
disadvantages
that
result
efficiency and performance.
the more promising routes to fame
poor
data
management,
and glory.
it’s not possible to implement the
master
from
Key master data
appropriate processes. That’s a crying shame. Because
Awareness of this message as it
But which data is important for
master data management is not only
relates to global trade has really
global trade? The following is a
a highly complex undertaking – it
taken hold in recent years. The
selection of typical master data:
also brings critical added value to the
developments
company. Consistent master data is
controls and digital transformation
the underpinning of the entire digital
can certainly be seen as one key
transformation, including next-gen
driver. The legal consequences of
industry and logistics, the internet
unclassified or misclassified goods
of things, and other digital business
can be significant.
models.
Moreover, the growing trend toward
around
export • Address data of customers, suppliers, service providers, etc. • Materials, products, item/ product descriptions • Product classification data (commodity codes, etc.)
electronic management of customs
• Classifications (EU dual-use
projects
and global trade processes require
numbers, Export Control
without high-quality data are doomed
that data be universally and centrally
to failure” – that’s the harsh verdict
accessible. The same is true of the
reached by the market research and
integration of internal systems –
non-preferential)
consulting firm Lünendonk in the
such as global trade and logistics
• Coded documents
study “Revival of master data: Is
solutions – and the integration
• Weight data
a poor quality of data slowing the
with external systems of service
• Legal basis/conditions
digital transformation?” A survey
providers and partners. Entering
(authorizations, bans,
conducted by Lünendonk in 2016
data separately in each system at
restrictions, etc.)
among 155 German companies in
the transaction level is a thing of the
the manufacturing and commercial
past.
sectors and beyond revealed that
The
is
This partial list alone hints at the
only 15 percent feel well positioned
pushing the integration of processes,
scope and thus the complexity of
in their master data management,
making it increasingly important to
master data management. That’s why
while another 60 percent rank
provide centralized access to data of
it’s important to have an appropriate
themselves as still mediocre at best.
the appropriate quality and scope.
process in place for entering and
Take
for
approving master data – one that
example: Businesses with a larger
involves a wide range of stakeholders
“Digital
transformation
digital
export
transformation
management,
Classification Numbers, etc.) • Origins (preferential and
• EORI/customs numbers
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October.2018
in the company. Only after all this
master data may require extensive
will continue to work when a new
data has been managed can it be used
knowledge of the legal context in a
version is released.
to trigger transactions and reports:
particular jurisdiction. The very same
to enter a customer order, submit a
article may be classified one way under
customs declaration, or report trade
the EU-TARIC index and another way
master data between various systems.
statistics to Intrastat.
under the Swiss nomenclature, for
This involves automatically trans-
A key organizational question is
example. To make things even more
mitting the master data from the
whether the data should be managed
complicated, product classification can
central ERP system to the various
in a more “centralized” model by the
be subject to varying legal interpretations
specialized applications (for customs
customs department or in a more
even within a single jurisdiction such as
management, etc.). The application-
“distributed” model by the product
the EU. Binding Tariff Information (BTI)
specific data is then used as needed in
management team, for example. Two
can help here.
the appropriate application.
2
The other approach is to sync
An example illustrates this scenario:
factors need to be considered here:
IT creates problems
Very few ERP systems allow you to manage coded documents centrally
A key challenge in master data
in the master data. This is necessary,
management
for
however, if you want to automate
Greater complexity = more distributed
consistency. Consistency ensures that
the customs management process.
a single (8-digit) commodity code is
The solution here is to manage the
When products are very technologically
used in the export declaration, in the
coded documents in the customs
sophisticated (such as complex chemical
Intrastat report, and in the invoice
management sub-system. But this
compounds), the product management
document.
makes it harder to achieve centralized,
team typically handles the classification.
The problems begin with the fact that
transparent management of global
For outsourced parts, the supplier’s input
many ERP systems only provide a
trade data. That’s because certain
is helpful. In this type of situation, the
reduced dataset for global trade master
master data can only be managed
customs department typically assumes
data. Some systems accommodate
“downstream” in the various sub-
overall responsibility for the processes
only 8-digit commodity codes, not the
systems if it has first been synchro-
and
quality
11-digit variants used internationally.
nized
assurance measures, but operational
Another example: Most ERP systems
systems.
responsibility lies elsewhere.
only provide one field for the origin. If
performs
additional
is
the
need
you want to enter both the preferential
among
the
respective
IT
Automation to the rescue
and non-preferential origin, you’re out of luck.
Caution is generally advised when
Larger company = more centralized
The solution to these IT limitations
product classification data. The
Larger enterprises are more likely to have
is usually one of two approaches:
complexity can vary greatly. Most
entering master data, especially
their global trade master data managed centrally. This type of centralization
companies have a fixed selection of 1
First, you can extend the ERP
primary materials and commercial
is also dominant in corporate groups,
system to accommodate the necess-
goods,
where a shared service center is often
ary functionality.
continually reclassified – when
set up to manage this data.
This requires a certain investment
changes are made to the pro-
The challenges here should not be
of time, however, and you have no
curement process, for example.
underestimated, however, since some
guarantee that your customization
Modern algorithms can help here by
but
they
need
to
be
MASTER DATA MANAGEMENT Professor Helmut Beckmann of Heilbronn University of
Dr. Beckmann distinguishes master data from transaction
Applied Sciences, writing in the Encyclopedia of Informa-
data. Master data is a company’s core data, which remains
tion Systems, defines master data management as “all the
static over a certain period of time: “A company cannot opti-
strategic, organizational, methodological, and technological
mize the services it provides if the master data is inconsistent,
activities associated with a company’s master data.” The
incomplete, obsolete, erroneous, or simply unavailable.”
stated objective is to ensure that the master data is consistent, complete, current, correct, and of high quality so that it can support the company’s business processes.
TOP TIPS FOR MANAGING MASTER DATA Document changes It sounds obvious, but this is all too often neglected in practice. If you are classifying your products and discover that a similar material was misclassified in the past, for example, you should first document which user entered the incorrect data, and when. IT systems generally capture this information automatically in log files. Then, you should also document any actual use of the obsolete or incorrect classification.
Use tools to help with year-end changes A lot of reclassifications are introduced at the start of a new year, especially when the comprehensive HS reforms come along every five years. At such times, government bodies and the various content providers offer “correlation tables” that let you automatically update all products for which the old commodity code is simply replaced with a new commodity code (1:1 relationship). Correlation tables can also be used for automatic updates when multiple commodity codes are consolidated into a single new commodity code (n:1 relationship). If, however, one commodity code is split into multiple new commodity codes (1:n relationship), the user must decide which commodity code to apply. These changes should also be documented, of course.
Establish collaborative master data management As companies become more digitally connected, there is an increased need to share certain master data with external partners. This is usually done for reasons of efficiency, but it can also be required for liability. Suppose, for example, that a company hires a service provider to clear its imports through customs. Above a certain volume of declarations, it might make sense for the importer to share its master data (product classification data, etc.) with the service provider so that the provider can use this data to clear the imports. Obviously, the digital transformation won’t work without smart master data management.
providing good suggestions based on previous product classifications: machine learning, in other words. This makes it possible to automate simple classifications, so your employees can focus on the tougher cases.
Author: Dr. Ulrich Lison is a member of AEB’s Executive Board responsible for product strategy in the area of global trade. He drives innovative product ideas and, as part of the AEB Corporate Startup, also thinks outside the box to elevate customs and compliance software to a new level.
Digitizing customs management
Integration is the future – and there is no time to wait The status quo of digitization in customs management reveals sobering facts. While it bears fruits in many areas, customs management still very often remains neglected. But recent global trade developments demonstrate the urgency to modernize and the tremendous potential that this area holds for businesses. It’s now a top priority to ensure goods move efficiently across borders while keeping costs down. The race is on. But what are the options?
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17
In the digital age, the pressure is
Of course, the legal requirements of
on top of all those countries’ varying
on for businesses to modernize
all relevant countries must be met,
customs regulations and systems
their international supply chains to
and the various customs authorities’
• Being active in countries with
keep up with competition and meet
certification, testing, and approval
customs laws that make it all but
rising customer demands. Shippers
requirements must be fulfilled.
impossible to get by without local
are looking to improve the visibility
Many companies that manage their
customs brokers
of goods in transit, accelerate their
own customs clearance processes
• Importing or exporting goods
processes, and ultimately drive
(self-filing) still maintain separate
in such small quantities that the
down transaction costs through
customs teams with specialists for
expense of maintaining an own
automation. As part of this, customs
each area, each using a standalone
in-house
processes form a natural launchpad
local
cannot be justified
for digitization initiatives. But while
location. This fragmentation leads to
the fruits of digitization are already
a lack of transparency, non-uniform
With developments under Brexit
conspicuous in many areas of
processes and standards – and
and the forecast increase of customs
business, when it comes to customs,
ultimately, inefficiency and increased
declarations for trade with the UK,
many companies are still in the dark
risks.
a significant increase in customs
customs
system
at
each
as to whether and how the digital revolution has arrived.
customs
department
broker engagements is expected It’s high time for companies to
in
affected
EU
markets.
And
harmonize their customs system
while customs brokers relieve the
And as the pace of globalization
landscape,
relevant
administrative burden of customs
and digitization pressure increases,
systems, or simply move to a
management on companies, the
businesses are struggling to find
central customs platform. This will
responsibility
the
right
strategy
for
customs
connect
all
and
risk
of
all
significantly streamline customs
transactions still lies with the
management. With today’s supply
processes,
exporter.
chains spanning the entire globe and
and minimize global trade risks.
the global marketplace becoming
And of course, it also pushes the
increasingly competitive, businesses
digitization agenda and prepares the
depend on efficient border crossings
business to successfully manage any
and cannot afford customs delays
global trade changes – as expected
This is what working with a customs
at any point from procurement to
under Brexit, for example – at the
broker currently often looks like on
fulfilment.
same time.
the ground:
But as soon as goods are imported
But what about outsourced customs management?
• Typically, the declarant company
or exported across borders, things can
get
complicated.
increase
efficiency,
Status quo: Not so digital in the digital world
sends the customs broker an email with instructions for customs
Different
countries use different IT systems:
As customs management can get
clearance, for example an export
Sweden uses TDS and the UK is
complicated, many companies opt
declaration,
in the process of moving from
for outsourcing to customs brokers.
necessary documents, such as a
CHIEF to CDS. Germany works
After all, they are the experts. Some
with ATLAS, in Belgium it’s PLDA,
examples for outsourcing drivers
in Switzerland E-DEC, and in the
include:
army of data entry clerks to then
Netherlands AGS. And these are
• Exporting to 10, 20, or 50 different
manually
just a few examples within Europe.
countries – and struggling to stay
and
attaches
the
pro forma invoice. • Most brokers employ a small
data
into
input their
the
necessary
own
system
A TO B
18
October.2018
so that they can generate the
clearance processes. Brokers notify
process management, and analytical
export declaration. If there are
their customers when the customs
capability.
no questions, that is, otherwise,
office has cleared the goods, how
there is usually quite a bit of
much they owe in duties, and which
The
communication back and forth. By
accompanying
are
fully integrates into a company’s
email. And phone.
required for each country. But often
overall global trade and supply
• Once goods are exported, the
the customer has no idea what exactly
chain
export accompanying documents
the broker declared, whether they
standardizing
and endorsements of exit are
followed the customer’s instructions,
processes
often sent by e-mail from the
and how long it took for the goods to
reducing
broker back to the exporter. Other
clear.
maintenance efforts. Global trade
documents
relevant documents arrive by mail
and
right
customs
management and
customs
processes, accelerating
and, costs
platform
importantly,
and
eliminating
regulations
and
or courier – all to be archived, as
This creates risks, particularly in
agreements change frequently and
exporters are required to comply
countries outside the EU, since
dynamically – Brexit developments,
with record-keeping provisions,
in-house
new
e.g. for customs audits.
don’t have the expertise to monitor
aluminum, and the following EU
the
retaliatory measures are the best
customs
services
departments
provided
by
the
US
tariffs
on
steel
and
In the digital age, this is a rather
brokers. What’s missing is risk-
inefficient process which leads to
based auditing. Efficient customs
data silos and paper archives at the
management depends on integrated
Once all relevant workflows, data,
various locations, making it difficult
IT between customs brokers and
and partners are fully integrated
to get the big picture. And of course,
their
into
manual efforts for data entry by
synchronization
the
supply chain processes, they can
brokers must be reflected in the
customer’s instructions and the
deliver added-value, efficiency, and
costs, too: customs brokers’ price
broker’s declaration would make it
regulatory compliance – ultimately
models show a cost differential of up
possible to identify and analyze any
accelerating
to 50 percent between the standard
discrepancies.
value chains. For businesses in the
customers.
An
automated
between
transmission of data by e-mail and
recent examples.
a
company’s
and
end-to-end
securing
the
digital age, this is direly needed for
an integrated solution. In addition,
Ideally, customs-related data should
survival in today’s fast-changing
the interruption of the digital data
be available on one centralized
and competitive environments.
stream is labor-intensive and error-
platform wherever possible. Data silos
The time to wait truly has passed –
prone, increasing costs and risks on
spread across various countries or
it’s high time for EU businesses to
both sides. Clearly, linking brokers
held by brokers must be consolidated.
digitize their customs management.
directly to their customers’ IT
This requires an IT solution that
systems would help to streamline
works seamlessly in both directions.
the process.
Establishing a direct electronic link from the importing or exporting
Risk-based auditing: The future lies in IT integration
company to the customs office or at least to the broker is primarily about efficiency. Integrating the customs
The lack of integration between
authorities’
customs brokers and their customers
system back into the company’s ERP
also creates difficulties in the post-
system will improve transparency,
or
broker’s
customs
Author: Richard Jönsson is Business Development Manager at AEB and joined the company in 2014. Richard knows the ins and outs of international logistics with all the steps in the process from procurement to fulfillment and helps businesses to become more efficient.
Advert
Is your company clear on who you’re doing business with? Do you need a software solution to clear the fog? Prevent legal violations long before a delivery is made. Light the way ahead – with AEB.
AEB Sweden Filial . www.aeb.com/se . info.se@aeb.com . +46 40 850 11
Securing global trade with restricted-party screening, export controls, license management, sanctions checks, anti-bribery and anti-corruption, multi-country customs, and more.
A TO B
20
October.2018
Trending in IT
Quiet revolution Reboot in the business software industry The internet of things, blockchain, artificial intelligence, big data: When it comes to IT for global trade and logistics, new technologies dominate the headlines. Outside the media spotlight, trends such as consumerization, agile methodology, and flexible new software models are shaking up the old order in enterprise IT.
0 1 0101001 0 0 10010001 0 101010110 1010010010 01 1010101010100 1001010100101 01 10010101000101 00101010110 111 0101101010100001 101010100 011 10100100101 0101010111 1 010 110010101 1010101001 0 0 1110 100101 11010101111 101010 1 0010 0101110 0101010110 101010010001 1 110101 101010 1010101010 0101010101010 01 100101110100 01010 000010110000 01 100100100010101001000100 010101101011110 11 1010100 01 1001001101 1110110 1 0101010 101 1 01010100001 1001010 1 01010011 101 0 0101111010101 010101 0 00101011010 00 10 1010011000 110101 0 10100010010 00 01 1100 00101 0 10 101010101010 101 11 100101 01111 10 101010 001 001 111010 01101 11 1 1110101 10101001010100 0 1010 000101 00 0010 10 001101101111101101 0101 1110110100110100 10 11010 00 0110101110111101010 11111 01 1 110 1010 00110111110110101 0101 100 0110 100 101 11100100001 010 010 100 11101 01 00101 001 01011 0 1010100 101 11100 1 100101010111 111 110101 01 000000 01 101010101100010 1010 0 10011010010000 100010010 0 100110011000 011010101010010 010101 100110101010100 100101010100000 111101010001010100 0001011000000000 0101 101010000000101010 11111 01010101111111110101010 0010 10101010100101000001 10110 001011011011110101010 0010 111111100101010101010 10101 100101010010000101 01011 1001010101010101000 011001 10010100100010101 100101 010101010101110000 10010 0010101010100000110 001011 110100100101100111 010101 0010101000101 1011010 110000010 0101010 11100001 111011010 001 0101101010 10 101001011011 01011010001011 01101010101010 10010
01000 101010101010 1110110100100 100101000000 1001001 10 110110 110 100 01 010 0 101 1110 01 11 01 10
10101110111011010 00110110101010 1010101010101 0000110101 001010101 10101010 00011011 10101010 01010111 1011010 000101 011010 1010101 100101 10101
A TO B
October.2018
21
October 28, 2015 was not a good day
since Deutsche Post planned to
went over budget, or fell short of
for Frank Appel and Larry Rosen.
implement
QA goals, while another 19% failed
The CEO and CFO of Deutsche Post
big-name IT players such as SAP
DHL had the unpleasant task on
and IBM. What’s more, DHL Global
One major problem that hinders the
that day of issuing a profit warning
Forwarding was consistent in hiring
success of IT projects – and not just
that was sure to create a stir – first
IT-savvy management to shepherd
large-scale projects – is the attempt
and foremost for the write-down of
the
for
to revamp too broad a functionality
€345 million for a failed software
example, came to Deutsche Post
all at once. “Customers frequently
project in the Global Forwarding
DHL from the telecommunications
fail to understand their precise
division.
giant
needs until the project is already
And yet the project, dubbed New
would certainly have had experience
underway,
Forwarding Environment (NFE),
managing large technology projects.
Matthias
had been a source of great hope
CFO Larry Rosen offered an official
Director of the software company
for the logistics giant just one year
explanation for the IT project’s
AEB. By that time, the requirements
earlier. It was supposed to replace
failure, calling the software far too
and specifications have typically
the aging legacy systems used
complex and ultimately buggy. CEO
already been defined, the contracts
worldwide for air and ocean freight
Frank Appel also spoke about the
signed,
and, at least temporarily, the road
reasons in a later interview with
implemented.
transport system as well. The goal
DVZ. “We were too ambitious. We
What follows are then changes
had been to achieve real gains in the
wanted too much, too soon. Instead
to an active project, and this is
fiercely competitive international
of taking an incremental approach,
generally associated with delays
forwarding market. “In the long
we tried to replace the entire IT
and increased costs. In the past,
view, NFE will make us unbeatable,”
environment in one fell swoop while
the response to this was even more
boasted Rajeev Singh-Morales in
reorganizing the company at the
extended
an interview with the trade journal
same time.”
rigid project management. But this
DVZ as the project unfolded. At the
Deutsche Post is not an isolated
approach seemed ineffective for the
time, Singh-Morales was CEO for
case when it comes to failed IT
considerable share of IT projects
the EMEA region. Today, he is no
projects. Only 29% of IT projects
that continued to go off the rails.
longer with the company.
worldwide
project.
NFE
together
Singh-Morales,
Alcatel-Lucent,
are
where
with ®
he
however” Kiess,
and
the
planning
explains
Co-Managing
first
features
phases
and
unqualified
successes, according to the latest
Too much, too soon
entirely (see graphic).
Project Benchmark Report of the
Fresh start for a new generation?
Standish Group, which looks at So, what caused this debacle? It
50,000 IT projects annually. Some
Results like these are helping
wasn’t likely the choice of partners,
52% of projects experienced delays,
to usher in a fresh approach to
We were too ambitious. We wanted too much, too soon. Instead of taking an incremental approach, we tried to replace the entire IT environment in one fell swoop…” Frank Appel, CEO, Deutsche Post DHL Group
A TO B
22
October.2018
The track record of IT projects shows mixed results Only 29% of IT projects worldwide are unqualified successes. Some 52% of projects experienced delays, went over budget, or fell short of QA goals, while another 19% failed entirely. Source: Project Benchmark Report 2015, Standish Group
IT projects, moving away from
from the spring of 2017 found that
remarked the consultant Judith
prolonged
projects
agile’s adherents are still primarily
Andresen in an interview, echoing
in favor of agile organizational
waterfall
in the software development sector.
the conventional wisdom. “They
models, transparent collaboration,
Among some 1,000 respondents,
are more accustomed to working
and manageable objective horizons
the reported usage of agile was only
in
– and the goal of a more living,
40% for IT-related activities and
hierarchical teams.”
constantly evolving system.
34% for non-IT activities.
The aim in such projects is not to
But many companies are already
toil away toward a solution that
implementing agile ideas at an
must then be presented all at once
entirely operational, smart level.
The goal of agile is, as outlined,
in its complete and final form at the
This is often evident in small ways.
to
conclusion of the project. Instead,
Consider, for example, a system that
yield benefits early on. The key
the team seeks to quickly achieve a
enters the first phase of go-live,
insight here, especially in software
good solution as a basis for moving
where all the features are available,
development, is that many things
forward.
but some fields still allow free input
will get done, but most of them
Breaking down long-term projects
instead of having a fixed menu of
will never be completely finished
into shorter sprints and getting
selections. This makes it impossible
– or if so, then only much too late.
the users involved early on makes
to vet the content of these fields,
“The final few percent is where the
it possible to identify and correct
but key users with the appropriate
real challenges lie and the greatest
missteps more quickly. This lowers
qualifications can still begin using
effort is required,” notes Markus
the risks. Another upside of this
the system. The rules and vetting
Meissner, AEB’s other Co-Managing
kind of iterative approach is that
mechanisms
installed
Director. “And it’s possible to derive
the features identified as market-
during the next phase, enabling a
most of a project’s benefit much
critical reach usability faster, since
rollout to all users.
earlier without making the last
they are assigned a higher priority
This trend toward a more agile
20% perfect. But this also requires
than
methodology
are
then
fluid,
interdisciplinary,
less
The goal of “living beta”
achieve
faster
results
that
the
a tolerance for continuous change.
Despite the benefits, the agile
increasing presence in the workplace
IT systems will and must always
methodology is still often the
of millennials – those born between
continue to evolve to keep pace with
exception rather than the rule.
1980 and 1999. “The agile way of
what businesses need.”
A study by Koblenz University of
thinking and working comes much
That’s why there are so many real-
Applied Sciences and the German
more
millennials
life examples of projects where a
Association for Project Management
than to any other generation,”
provisional solution evolved into a
the
secondary
features.
is
naturally
fueled
to
by
A TO B
October.2018
23
solution that was used for years and
And as the goalposts keep moving,
call for the IT industry to follow suit.
gradually optimized, incorporating
businesses are more willing to keep
The software of tomorrow, he says,
both
insights
investing in this kind of system
should be produced the way cars are
Software
rather than a “rock-solid, fully
made in Germany today.
companies and IT departments
specified system” in which lots of
Essentially, this means that IT
benefit
close
money is spent inching toward a
providers
relationship and ongoing dialog
100% final result that may never
business services into a flexible,
with users, because it gives them
be achieved. You could say that in
individually customizable process
the ability to continually refine the
today’s world, “less wrong” is the
layer. One major benefit: “Users get
user experience.
new “right.”
a solution built upon best-practice
and
accumulated changing greatly
needs. from
a
This approach aligns nicely with the growing role of the more digitally savvy millennials, who tend to be
integrate
standardized
templates – and so easy to customize
Software customized to the individual?
that they can even make the adaptations themselves,” explains
very pragmatic about using apps
Kiess. “Standardized components
that aren’t 100% perfect, because
This living beta mindset also requires
with specialized features provide
they know that an update will come
a new type of IT solution, however.
the necessary stability. The customs
along before too long to fix any
Standardized software alone often
clearance functionality, for example,
problems.
proves too rigid and inflexible here.
would
Many iPhone users, for example,
A rapidly changing world defined by
maintenance cycle of standardized
live with the latest iOS for months
what’s known as VUCA (volatility,
software, so it incorporates all
before the kinks are worked out.
uncertainty, complexity, ambiguity)
the
updates
When iOS 10 was introduced, early
requires global trade and logistics
the
requirements
adopters filled user forums with
processes that are more adaptive
authorities.” Such solutions could
complaints about the revamped
and flexible and software that can be
also be easily extended by integrating
Music app. Nevertheless, no other
continually tweaked.
new standardized business services.
operating system was installed by
One emerging trend is software
Another
so many users so quickly as iOS 10.
based on standardized components
process layer makes it possible to
Perhaps the best way to describe this
and
the
support unique requirements. This
phenomenon is with the expression
individual business. The role model
helps global trade and logistics
“living
consciously
can be found in industrial produc-
professionals live up to their role
accept living and working with a
tion, where assembly lines combine
as innovators and business drivers.
beta version, because you know that
standardized modules and specially
And it helps companies stand out
there will never be a final version.
constructed components to manu-
from the competition in this area
So why not make this the stated
facture a customized product. This
– by offering special delivery or
principle – including for IT projects?
idea is already producing outstanding
packaging options, for example, or
This
unfinished
results in automotive and machine
even entirely new business models.
software projects, a source of cost
production, where assembly kits
To ensure this type of support for
and frustration without any clear
are used to build solutions to
individualized processes, some of
benefit, in favor of systems that are
accommodate individual customer
these solutions integrate Business
optimized gradually and organically
requests. Professor Michael ten
Process
– in precisely those areas where the
Hompel, Director of the Fraunhofer
(BPMN). The result is that processes
user experience truly offers a big
Institute for Software and Systems
are
potential for improvement.
Engineering (ISST) in Dortmund,
implemented in a single system,
beta”:
helps
You
prevent
then
customized
to
match
the
and
benefit:
Model
defined,
established
satisfies of
The
and
all
customs
adaptable
Notation
documented,
and
A TO B
24
01011011101110101 01010101101100 1010101010101 1010110000 101010100 01010101 11011000 01010101 11101010 0101101 101000 010110 1010101 101001 10101 00000 011011 10101 111111 0101 1010 11111 010 001 010 10 11 10
00010 010101010101 0010010110111 000000101001 01 1001001 011 011011 10 001 0 010 101 0111 10 11 10 01 0 1 11 0 10 0 110 1 1011 01011 010101 01001 1010111 101011 10001 01000 01011
0 1001010 1 0 0 10001001 0 0 1 1 0 1 0 1 0 1 0100100101 10 0010101010101 1010010101001 10 10100010101001 01101010100 111 1000010101011010 001010101 110 10100100101 1110101010 1 010 101010011 1001010101 0 0 0111 101001 11110101011 010101 1 0100 0111010 0110101010 100010010101 1 101011 010101 0101010101 0101010101010 10 001011101001 01010 000011010000 10 001000100101010001001001 011110101101010 11 0010101 10 1011001001 0110111 1 0101010 1 101 10000101010 0101001 1 1 1 0 0 1 0 1 0 0 101 1010101111010 101010 0 01011010100 01 00 0001100101 101011 0 01001000101 10 00 0011 10100 0 01 0 1 0 1 0 1 0 1 0101 11 101 101001 11110 01 010101 100 100 010111 10110 11 1 1010111 00101010010101 0 0101 101000 00 0 1 0 0 01 101101111101101100 1010 0010110010110111 01 01011 00 0101011110111010110 11111 10 1 011 0101 10101101111101100 1010 001 0110 001 101 10000100111 010 010 001 10111 10 10100 100 11010 0 0010101 101 00111 1 111010101001 111 101011 10 000000 10 010001101010101 0101 0 00001001011001 010010001 0 000110011001 0 1 0 0 1 0 1 0 1 0 1 0 1 1 0 101010 001010101011001 000001010101001 001010100010101111 0000000001101000 1010 010101000000010101 11111 01010101111111110101010 0100 10000010100101010101 01101 010101011110110110100 0100 010101010101001111111 10101 101000010010101001 11010 0001010101010101001 100110 10101000100101001 101001 000011101010101010 01001 0110000010101010100 110100 111001101001001011 101010 1010001010100 0101101 010000011 0101010 10000111 010110111 100 0101011010 01 110110100101 11010001011010 01010101010110 01001
But
the
October.2018
consumerization
of
IT goes beyond just that. The software company AEB speaks of a 360-degree customer experience (see graphic below). What this means is that although the
functionality,
integrative
capability, and user experience of software are important, businesses and especially users also look toward other factors such as “buying experience.” In their personal lives, for example, users are accustomed to just buying software online and using it immediately without a
and the application is custom-built
to be performed in each work step
complicated licensing agreement.
step by step. New tasks, such as
and on the people performing
Freemium content and free trial
the addition of export controls to
those tasks – not on the object of
subscriptions are also showing up
a shipping process, can easily be
those tasks. The software looks at
in enterprise IT.
integrated into an existing process.
what a particular employee needs
The
Changes such as a new processing
to know, for example, and how
need to be completely rethought:
sequence can also be executed at the
the interface for this step should
High-quality support and phone
click of a mouse.
be designed. This leads to fewer
hotlines have long since become the
“One way to maximize the opport-
errors and greater efficiency – and
norm, but users also expect chat
unity for differentiation would be
a more pleasant user experience.
support and community forums
to invest in custom-developed soft-
In general, more attention is paid
where they can interact with other
ware, of course. But this option
to user experience. IT has become
users. “The self-service mentality is
has serious drawbacks: The initial
part of people’s daily lives outside
also becoming more important in
development is pricey, any sub-
the workplace as well. As a result,
enterprise IT” – of that, Meissner is
sequent changes you make are also
more and more features common
certain. “Users expect to be able to
costly, and maintaining the software
in consumer software have found
add new users, set up new scenarios,
is challenging,” Meissner warns.
their way into enterprise IT. The
or enter new tariff information on
magazine PC Welt wrote about the
their own in just a few clicks online
need for businesses to address this
without the distraction of turning
“consumerization” back in 2014:
to phone support or submitting a
“The IT revolution that employees
trouble ticket.”
Consumerization of business IT Another
aspect
of
the
more
customer
experience
will
have set into motion has begun, and
IT as an engine for innovation
individualized IT support inherent
there’s no turning back.”
in the solutions outlined above is
When it comes to user-friendliness or
that the software is increasingly
ease of use, for example, the question
customized to the specific role
is: Why shouldn’t business software
The
of those working in customs and
be as easy to use as the banking or
encourages the spread of “shadow
logistics. The focus is on the tasks
weather app on your smartphone?
IT” – hardware or software within a
consumerization
of
IT
A TO B
October.2018
25
Consumerization of IT requires a 360-degree perspective
User Experience
· Usability · User-friendliness · “User domain”
The functionality (business service), the integrative capability (API/Integration), and the user experience remain important features of performance. But more and more, the customer experience and buying experience are of increasing relevance, too.
Customer Experience
Integration
· Chat · Community · Support · Self-service · “Customer domain”
API Buying Experience
· Well documented · “Developer domain”
· Chat · Transparency · Freemium-offers · “One-click products”
Business Service
company that is not supported by the
IT directors and other department
to prepare their own supply chains
central IT department. If solutions
heads found that two-thirds of
for their roles in driving growth and
are easy to buy, implement, and
respondents in Germany no longer
innovation within the company.
integrate,
departments
see the IT department as the leader
will increasingly use them without
different
in the strategic management of
going through the company’s IT
technologies.
department.
shadow IT used to be predominantly
The
perception
of
New generation of IT ecosystems
systems
negative due to security risks, but
Concepts
running and up to date already ties
the mindset in the business world is
agile project management, and
up most IT capacities today,” adds
changing: The survey participants
consumerization
Meissner. “The remaining capacity
generally see an upside to this
influence
to respond to the other departments,
“decentralization” of enterprise IT.
environment. They help push a
who face increasing pressure to
Respondents cite the quicker market
stronger focus on the customers
adapt, is no longer adequate.”
launch of products and services
who are actually using the software
This is confirmed by the study
(65%), a faster response to new
– and on their customers. This
“Digital Innovation Reshapes the
market conditions (64%), and greater
is what an end-to-end customer-
Future of Business Applications”
freedom for innovation (63%) as the
centric approach looks like. Outside
by
“Keeping
the
current
such
the
as
living shape
enterprise
beta, and IT
which
fringe benefits of shadow IT. This is
the spotlight of the megatrends
found that IT departments spend
the origin of two tracks of IT moving
in tech, this is bringing about a
much more time on upkeep and
at different speeds.
minor revolution focused first and
updates of existing systems than
Given
on
surprising
Forrester
Research,
forward-looking
issues
that
these that
trends,
it’s
departments
not –
could hold a tremendous potential
especially those handling logistics
for the company. That’s why each
and supply chain management – are
department is taking it upon itself
hiring the necessary IT experts and
to make technology decisions and
allotting the necessary IT capacities.
push innovation.
According to the research firm
A worldwide study conducted in
Gartner, nearly three-fourths of
late 2016 by cloud-based software
companies have defined dedicated IT
company VMWare among 3,300
roles for supply chain management
foremost on the benefit that IT delivers.
Author: AEB’s journalists Björn Helmke and Jens Verstaen are no longer a part of the generation Y. But they both appreciate the fresh breeze this generation brings to businesses – with their straightforward approach in projects, for example, which delivers fast results.
A TO B
26
October.2018
Artificial intelligence
The art of product classification For many businesses, classifying their products is a tedious and time-consuming, manual process involving lengthy internal discussions, Excel spreadsheets, and a lot of head-scratching. The result is often frustrating: poor record keeping, a lack of transparency, and a high error margin.
But commodity codes are the key
about far-reaching consequences.
Identifying commodity codes and
classifier
trade,
This code doesn’t just affect fiscal
export control numbers is such a
determining the customs duties for
matters (e.g. customs duties, VAT
complex task that it’s almost an art
imports, for example. They also define
on imports and excise duties),
in itself. As such, some companies
import and export restrictions, as
but also import/export licensing
don’t give it the necessary attention.
well as documentation requirements.
and
permit
bans
Many have no established process for
Businesses dealing with controlled
and
restrictions,
documentation
product classification at all, or have
goods use an additional export
requirements, special foreign trade
only a few, if any, employees with the
control number to check whether
statistics
right subject matter expertise.
goods require an export license, if
and the obligation to report certain
An example of what can happen
they are subject to export controls,
measures. And as with any customs
when classification is inaccurate
and whether they can be exported
matter, official authorities across
was reported by Reuters recently:
in the first place. Benefiting from
the globe impose strict penalties for
Solar modules worth more than
preferential trade agreements is also
non-compliance – ignorance is no
$150 million that are stuck at various
linked to classification as it refers to
excuse.
Indian ports due to a dispute over
products with certain commodity
Keeping all applicable regulations
their classification and the import
codes.
on screen to ensure both regulatory
tax applicable to them. Several
This also means that assigning the
compliance and leveraging business
consignments are held up because
wrong commodity code can bring
benefits can be a great challenge.
customs officials have demanded that
in
international
requirements,
(supplementary
unit),
A TO B
October.2018
27
“Many companies that I have visited are quite surprised when I tell them that product classification doesn’t have to be a slow, cumbersome, and risk-prone, manual process.” Ted Roth, AEB Sweden
some of them be classified as “electric
that is referenced to suggest the
With the right software, product
motors and generators”, subject to
appropriate commodity codes and/
classification
7.5% duty, not as “diodes, transistors
or export control numbers. And once
automated, leading to an accelerated
and similar semi-conductor devices”
rulebases are defined, this can lead
global flow of goods. It also helps to
with no duty at all.
to a high degree of automation.
save customs duties and tap potential
Many companies that I have visited are quite surprised when I tell them
benefits
Self-learning algorithm:
that product classification doesn’t
of
can
trade
largely
be
agreements,
secure supply chains, and achieve a competitive edge by eliminating
have to be a slow, cumbersome, and
When a new material is defined and
risk-prone, manual process. They’re
its attributes (e.g. product group,
not aware that the IT support they
size, or application) are assigned,
expect for many other aspects of
the software compares the new
global trade and logistics is also
data against materials that have
available to automate much of the
already been defined and classified.
product classification process.
Commodity codes and/or export
errors in the execution.
control numbers are then proposed
How does it work?
based
on
statistical
probability
– if the new material has similar In a nutshell, as soon as a new
characteristics to, let’s say, 100
product is created in the ERP master
other materials that are all classified
data, it is automatically downloaded
with a single commodity code, then
into the software for classification.
there is a high likelihood that the
The key methods these powerful
new material should be classified
tools then use to determine the
with the same code. A sophisticated
classification are:
algorithm
helps
the
software
“remember” classifications already
Rulebase foundation:
accepted as correct. Over time, the software gets “smarter,” leading to
The product data defined in the ERP
a higher accuracy rate of commodity
system is used to define a rulebase
code suggestions.
Author: Ted Roth, General Manager of AEB Sweden and joined the company in 2014. He shares his ideas for supply chain optimization from more than a decade of experience working on multinational IT projects for global trade, customs, and logistics.
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What’s your strategy?
The impact of a trade war Donald Trump's tariffs on steel and aluminum gave rise to a trade war now raging around the globe. Here's what you can do to build a wall around your company.
October.2018
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October.2018
29
An update from the front lines Every week a new story seems to play out in the trade war raging right now around the globe. U.S. President Donald Trump has taken on the EU,
U.S. companies. Apple produces the
China, Canada and Mexico in what
iPhone there and auto giant General
he calls an effort to level the playing
Motors sells more cars in China than
field but what others see as tactics
it does in the U.S.
more intent on winning him votes.
While many in industry routinely
In just a few recent events:
adjust operations to account for a variety of barriers, they are widely
• The U.S. Imposed 25% tariffs
believed to be capable of driving
on another $16 billion of Chinese
up costs, creating uncertainty in
goods.
279
markets, and inviting politically
Chinese products, including chemi-
motivated counter measures that can
cal products, motorcycles, speedo-
attack a trader’s bottom line.
meters
The
and
move
affects
antennas.
China
retaliated with 25% tariffs on an equal number of American products.
How we can help you win the battle
AEB, said new trade barriers will ‘’undoubtedly drive companies to examine how best to redesign their
• Trump took to the stage recently at a campaign rally in West Virginia
At AEB, trade barriers are a reality
supply chains.’’
and said: “We’re going to put a 25%
in supply chain logistics and form a
‘’With
tax on every car that comes into the
part of our customers’ daily business
companies may look for domestic
United States from the European
operations. Our logistics software is
rather than overseas suppliers in
Union.”
designed to clear the hurdles – big or
order to keep costs down. Similarly,
new
U.S.
tariffs,
U.S.
small – regulators throw in front of
exporters to the U.S. may find
it is reserving the right to impose
your company and its profits.
that their products are no longer
tariffs on vehicles made in Canada,
It can automate and standardize
competitive and will therefore need
a senior administration official
your customs management, and
to seek new markets. Typically, new
told CNBC. Ford, General Motors,
seamlessly embed export, import,
trade barriers result in tit-for-tat
Honda and Fiat Chrysler all have
and more into the logistics process.
responses from other governments,
operations in Canada.
AEB’s software is designed to help
so it makes the situation even more
our customers stay the course when
complicated for traders.’’
the regulatory waters become rough,
The effect of the tariffs on steel and
murky, or the focus of political
aluminum proposed by Trump are a
football.
difficult call, Brannan said. He said
• And the White House hinted that
Impact on supply chains Trump’s rhetoric aside, such actions by governments can result in trade barriers that impact the global supply chain and the companies attached to it.
it’s difficult to tell if Trump will carry
Aligning supply chains and sourcing strategies
For example, China is a major
through or if the political imbroglio surrounding them will stop them from ever being enforced. He points
market and an important part of
Mark
Brannan,
International
out that Trump may just be using the
the global supply chain of many
Business Development Director at
tariffs as a NAFTA negotiation ploy
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30
October.2018
aluminum overcapacity in China, while impacting supply chains with vital trading partners who play by the rules,” said the association’s President and CEO Heidi Brock. “We fear that the proposed tariff may do more harm than good, hurting rather than helping the 97 percent of aluminum industry jobs in mid-anddownstream production processes.”
Political battle far from over
Members of the Brock’s association include Alcoa, Vulcan, and Rio Tinto
One thing that is certain, is that
Alcan. It represents 114 companies
the political battle over the tariffs
in the aluminum business and their
with Canada, the largest supplier of
is far from over. The US Aluminum
713,000 U.S. employees.
steel to the U.S.
Association, a trade group that
‘’With regards to supply chains,
represents one of the industries
it’s clear that any U.S. tariffs may
Trump hopes to help, added a new
impact on the flow of goods,’’ he
twist by saying it’s not in favor of the
said. ‘’British steel manufacturers
stern measures proposed by the U.S.
are concerned that U.S. tariffs will
president and this is largely because
encourage manufacturers in other
of the impact on the supply chain.
countries to look at non-U.S. markets
“Unfortunately, the tariffs proposed
for their steel, making the market
will
even more competitive.’’
fundamental problem of massive
do
little
to
address
the
Author: Mike Towle has been involved in content creation for more than three decades. A former reporter, he’s worked in all forms of international media – digital, print and video. He’s driven to find the best way to tell every story and then publish it in a mode that finds its perfect audience.
Examples from our experts • Companies typically look to redesign their supply chains. In the case of steep tariffs, they may look for domestic rather than foreign suppliers. • Exporting companies in the chain may look elsewhere for business, believing their products are no longer competitive in a tariff-heavy marketplace. • Changes in customs regulation can create barriers with complexity. The lack of communication between brokers and agencies and a subsequent lack of data quality can create delays in the chain. Ted Roth, General Manager at AEB Sweden, said supply chain managers must learn to cope with the barriers created by regulators to grow and survive in their markets. ‘’One of the re-occurring key delays is in customs handling,’’ Roth said. ‘’The complexity of cooperation between brokers and agencies and the lack of data quality causes issues to be compliant in the processes, i.e. a direct delay in the supply chain.’’
Advert
You need to react to the global trade uncertainty. Can you adopt your strategy as quickly as the markets around you change? Your business success depends on it.
Agility is needed to keep a competitive edge. Take action now. With software from AEB.
Driving business value with multi-country customs management, broker integration, product classification, business partner screening, export controls and license management, and more. www.aeb.com/se
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Best practice: Tosoh Europe
Systematic peace of mind for export controls Tosoh Europe is a supplier of chemical products that takes compliance with export control regulations very seriously. That’s why they partnered with AEB.
October.2018
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October.2018
33
Almost no other industry has supply chains as complex as those in the chemical industry. There are many reasons for this: The production and supply networks are global in nature. The products must meet the utmost standards of quality and safety during
manufacturing,
“Compliance is a top priority at Tosoh. This creates a strong need for transparency and visibility.” Lars J.T. Droog, Manager of Supply Chain & General Affairs, Tosoh Europe
transport,
and storage. And then there is the abundance of laws to comply with – hazardous goods regulations, for example, but also export controls. The international character of the supplier relationships in the chemical
providers for processes such as
beyond merely screening against EU
industry and the variety of potential
customs clearance, warehousing, and
and US sanctions lists of entities and
uses for chemical products means
transport. The relatively small core
individuals. When shipping outside
that managers really need to stay
staff at Tosoh Europe focuses on the
the EU, Tosoh also has to check
alert when it comes to compliance
core processes and on managing the
the US and EU’s product lists and
and export controls. Tosoh Europe
business. Tosoh also has production
embargo lists. Chemicals that were
B.V., based in Amsterdam, takes
sites in Europe, including in Greece
previously imported from the US are
these
seriously.
and the Netherlands. But most of
also subject to US re-export law. Last
“Compliance is a top priority at
responsibilities
the products that Tosoh Europe
but not least: As the subsidiary of a
Tosoh. This creates a strong need
sells come from plants outside the
Japanese company, Tosoh Europe
for
European
chemicals
also screens against Japanese lists.
emphasizes Lars J.T. Droog, Manager
are either shipped directly to the
“Our goal is full compliance,” Droog
of Supply Chain & General Affairs at
customers or put temporarily into
stresses.
Tosoh Europe. Tosoh Europe B.V. is
hazardous goods storage (bonded
Tosoh Europe was equally thorough
the European subsidiary of the Tosoh
or non-bonded) in Tosoh’s EDC in
in selecting an IT solution for export
Group, a global chemical giant based in
the Netherlands or other regional
controls and sanctions list screening.
Japan with 12,000 employees. Tosoh
warehouses in EMEA before being
The goal of the project was to
has a broad presence in the chemical
packed and shipped as needed to
automate the extensive export control
industry, manufacturing and selling
fulfill customer requirements. Droog
checks and integrate them efficiently
everything from basic and specialty
explains the distribution channels:
into the overall process. That’s why
chemicals to diagnostic systems and
“We sell a lot in the EU, of course.
Droog and his team wanted more
materials
transparency
for
the
and
visibility,”
Union.
The
semiconductor
But we also have customers in other
than just software with a powerful
industry. “You can actually find our
European countries such as Russia, as
screening algorithm. They wanted
products everywhere,” says Droog.
well as in Africa and the Middle East.
a centralized solution that also
There is a significant difference between Tosoh Europe and the parent
company.
Whereas
includes the content – the current
Tosoh‘s goal is full compliance
the
versions of the various sanctions lists and always be compliant with export
parent company accounts for a large
This
share of the value added, Tosoh
Tosoh Europe has foreign trade
complex
web
means
One
Europe outsources heavily to service
compliance
compliance software also needed to
obligations
that
that go
control regulations. more
requirement:
The
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34
October.2018
integrate easily into the SAP® system that Tosoh Europe introduced in 2013. Following a selection process involving multiple solutions, Tosoh Europe
decided
Screening
and
on
Compliance
Export
Controls
from AEB. The solution satisfied all the technical specifications, and AEB was also able to provide the necessary content in the form of a data service that keeps the lists up to date at all times. Another advantage of
AEB
Compliance
Screening
and Export Controls: The solution integrates directly into SAP® through a standard plug-in. This means that the screening runs in the background – and employees can work in their familiar SAP® environment without switching back and forth between two systems.
Tosoh Europe has outsourced its warehouse operation to logistics services providers.
AEB scored high marks in another area as well: “The sales cycle was
Every order is routinely screened
The
of the solution, training of the
AEB sales representatives personally
personnel, and extensive testing.
presented their system in great
Checking the customer master data
detail and went above and beyond
against the screening lists before
Tosoh repeats this check of the
to accommodate our needs,” says
the actual go-live in January 2017
complete customer master data on
Droog with satisfaction. The decision
turned out to be a good idea. That
a regular basis. In addition, every
to go with Compliance Screening and
made it possible to clear up apparent
order and every shipment is routinely
Export Controls integrated in SAP
matches outside of the pressures of
screened. The same applies to direct
was followed by a two-month project
day-to-day operations.
shipments to customers from the
especially
customer-friendly.
®
phase that included deployment
overseas plants that Tosoh Europe
“It was very important to us that nothing compromise the efficiency of our processes. Our experience so far has been positive.” Lars J.T. Droog, Tosoh Europe
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October.2018
35
The Tosoh factories in Japan have the size of small cities and supply its global network.
manages and to shipments from
verification under export control law.
For Lars J.T. Droog, the end result
the warehouses or the European
Only then will the screening solution
has been positive: “We are very
production sites.
present his findings to the user in
pleased with the solution, but also
The product classifications such
SAP .
with the support that AEB provided
®
as the export control classification number (ECCN) that are needed for automatic screening are stored
during and after the project phase.
Automatic notification by e-mail
We have complete visibility of all business transactions subject to
directly in the material master data of
screening and export controls and
the SAP® system. Saving or modifying
If such a “match” occurs, those
an order in the SAP system triggers
responsible for export controls are
the control process. The screening
notified by e-mail. The experts check
runs in the background, so users
whether
don’t normally notice it at all. “It was
applies, whether it’s necessary to
very important to us that nothing
obtain a license from the authorities,
compromise the efficiency of our
or whether the match is a “false
processes. Our experience so far
positive” (due to a similarity of
has been positive,” says Droog. The
names, for example). The transaction
workflow is interrupted only where
remains locked until the matter is
required by law: if a transaction
clarified and the transaction can be
requires a special procedure or
approved by the appropriate persons.
®
the
restriction
can document this in the system.”
actually
Author: AEB’s journalist Björn Helmke was quite amazed about Tosoh Europe's complex supply chain and the smart automation of export control processes. For the relatively small team of the chemistry company, it is extremely important not to waste resources through manual control processes.
We’re reading the latest industry reports and research for you and summarize the most relevant results here. Today: Artificial intelligence, blockchain, Brexit impacts, trade agreements, customs tariffs, and more.
Outsourcing
Only 56 % of companies are currently satisfied with the IT competency of their 3PL service providers according to a new study. Satisfaction has dropped by 10 percent since last year. (Source: Penn State University)
Logistics and transport market
With 271 Company takeovers in 2017 was a record year in
Embargo violations
49 countries From 2014 to 2017, they violated international sanctions against North Korea. Among them were 13
the global transportation
countries such as Angola, Eritrea or Myanmar, which
and logistics industry. The
committed military offenses and received or exported
total value of transactions,
military equipment, for example. 18 countries imported
at $ 134 billion, was well
goods and minerals, 19 countries violated sanctions
above the average for the last five years. Digi-
through other business activities. (Source: Institute for
talisation is also shaping the events: logistics
Science and International Security)
and trucking providers in particular are increasingly targeting high-tech targets. With a transaction volume of $ 70 billion, Europe ranks second in regional terms for the first time since 2012, placing Asia and North America in second place (69 bn) and $ 3 ($ 24 bn) by deal volume. (Source: PwC)
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37
Sustainability
15 % reduction of the average CO2 emissions of new trucks is required by 2025 (compared to 2019 levels), according to the EU Commission. As a benchmark for 2030, it proposes a reduction of at least 30 percent. (Source: EU Commission)
Blockchain
Only 1 % of CIOs are using blockchain in their companies and
Job market
8,000 jobs in Sweden are at stake if a hard Brexit would come to
only 8 percent want to actively experiment with the tech-
pass. This includes a GDP loss of 18 billion kronor by 2020.
nology or plan to deploy it in the short term. 77 percent
The UK is Sweden's fourth largest export market, and in
of surveyed CIOs reported that their companies have
2015 it was Stockholm's largest export market. If the UK
no interest in the technology and/or have no plans to
left the EU next year on WTO terms, Swedish GDP would
research it or work on its further development. (Source: Gartner)
PPI Inflation
8% That’s how far the producer prices in Sweden climbed yearover-year in June 2018, faster than the 6.3 percent rise in May. This was the strongest PPI inflation since January 2017, when prices had grown 8.2 percent. Prices on the export and the import market grew by 9.6 percent and 11.2 percent, respectively. The price index for domestic supply registered an increase of 9.0 percent. (Source: Markets Insider)
end up 0.3 percent lower than it would otherwise have been. (Source: Stockholm Chamber of Commerce)
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Imprint
October.2018
Trade agreements
This is a special AtoB edition of AEB Sweden.
Published by: AEB Sweden Baltzarsgatan 21 B 211 36 Malmö Sweden
Responsible for the content: Ted Roth
Up to 1 billion euros The free trade agreement between the EU and Japan for EU companies brings with it easements. In addition, numerous non-tariff barriers to trade are being dropped, which have been estimated to increase exports to Japan by 10 to 30%. Once the negotiations are completed at the end of 2017, the way is clear for the completion of internal EU procedures leading to the signing, ratification and full
Editorial office: Ted Roth, Richard Jönsson, Mark Brannan, Björn Helmke, Jens Verstaen, Mike Towle, Tatjana Schork
Layout: AEB GmbH
Photos/graphics: Photos © AEB except: © FooTToo – shutterstock.com (P. 1, 4, 6, 7) © l i g h t p o e t – (P. 5, 34) © ValeriMak – istockphoto.com (P. 4, 12) © Jacob Lund – shutterstock.com (P. 4, 16) © Tosoh Europe (P. 5, 37) © macondo – shutterstock.com (P. 2) © Stokkete – shutterstock.com (P. 28) © Halfpoint – shutterstock.com (P. 36) © Drawlab19 – shutterstock.com (P. 38) © IZ Stock Works – shutterstock.com (P. 41)
Circulation: 200
Printing: print24 är ett erbjudande från unitedprint.com Sverige AB S:t Eriksgatan 9 112 39 Stockholm Sweden
© All rights reserved. Reproduction, including excerpts, only with the written permission of AEB GmbH.
implementation of the Free Trade Agreement. President Juncker hopes to be signed in 2018 and to enter into force in 2019. (Source: EU)
Classification
More than 2,000 containers of imported solar modules were held up by Indian customs officials at various ports in the country – at times for several weeks. The reason was a dispute over the correct classification: Indian Customs officials called for the classification as "electronic engines and generators" with a tariff rate of 7.5% and not as "diodes, transistors and similar semiconductor elements", which can be imported duty-free. (Source: Reuters)
Customs facilities
For 484 tariff lines, China reduced tariffs on 1 July 2018. In doing so, the country is implementing the decisions of the 2016 WTO Member States IT Agreement. The tax reliefs range between 0.9% and 5% and relate to information and communication technology goods as well as mechanical engineering and electrical engineering goods. The tariff reductions, however, are faced with non-tariff barriers to trade. At the end of the year, Chinese ministries announced the latest lists of goods in which goods are subject to special licensing or controls. (Source: GTAI)
39
Artificial Intelligence
Around SEK 3 billion is invested annually by Vinnova – Sweden’s innovation agency – in fostering innovation, focusing increasingly on AI. Sweden released its National Approach for Artificial Intelligence in May 2018 and since then, new policy initiatives are being rolled out, including AI training for professionals, an AI Science Park, and various AI-related innovation projects through Vinnova, together with an extensive review of Sweden’s capabilities and potential in AI. (Source: Vinnova)
Events
Logistik & Transport
Logistics & Distribution
BIS Annual Conference on Export Controls and Policy
November 5-7, 2018, Svenska Mässan, Göteborg
February 6-7, 2019 Malmö Mässan, Malmö
May 2019, Washington D.C.
Meet hundreds of exhibitors and industry peers at this essential event for transport and logistics to discuss your individual business challenges. The conference program features best practice examples, workshops, and inspiring knowledge sessions. www.logistik.to
In a fast-changing world, today's solutions are soon yesterday's history. To keep up with rapid developments, the logistics community needs to regularly meet and discuss latest trends. This event provides the ideal platform –with a focus on logistics and distribution solutions. www.easyfairs.com
This is the most notable event of the US Bureau of Industry and Security and the key event for global export controls. It draws business and government representatives from around the world to learn and exchange ideas about latest export control issues. www.bis.doc.gov
Networking
Networking
Networking
Content
Content
Content
Products and services
Products and services
Products and services
Iran sanctions. US export controls. Brexit. Customs tariffs. Things are changing. Is your global trade IT ready to master it? You can't afford border delays or risk compliance violations. In a dynamic marketplace, your success relies on a flexible global trade system. Shape up your IT now – with AEB.
www.aeb.com/se