AtoB 03.2018. The return of investment of Automating Export Control Compliance.

Magazine for supply chain management, global trade, and IT. October.2018

www.aeb.com/se

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

AEB Media ▪ www.aeb.com/media

Automating Export Control Compliance

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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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7

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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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October.2018

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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October.2018

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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28

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

A TO B

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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32

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

A TO B

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)

A TO B October.2018

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)

A TO B

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