Executive Summary: Global Trade Management

It’s Not My Problem: How Companies Should View Their Trade Compliance Responsibility in Outsourced Arrangements.

   Outsourcing has become an undeniably loaded term in recent years. But stripped to its most basic element, outsourcing is about shifting work and processes from inside an organization to outside that organization. There are myriad reasons that a company would wish to outsource, but chief among them are cost, bandwidth and core competence.

   Many companies outsource trade compliance because they know little to nothing about the process. Trade compliance is often seen as a cost burden at the executive level, and there’s often little understanding about why costs are so high.

   This report discusses outsourcing as it relates to managing global trade, and specifically, trade compliance. The report is intended to help importers and exporters better understand what outsourced global trade management is, how to prepare to outsource key compliance functions, managing the implementation of that outsourced arrangement, and following through on the maintenance of the relationship with the outsourced provider.

   The report also delves into the way an outsourced relationship might evolve over time, including decisions about whether an importer or exporter should bring outsourced functions back in-house, and the role that technology plays in that evolution.

Preparing for Outsourcing. Companies outsource activities all the time. Unfortunately companies sometimes inadvertently “drop” a new process on a service provider or expect a system to provide a specific function but they neglect to provide the data that the service provider or system needs to do the new task. Regardless of whether a company is outsourcing to a service provider, a managed services company or a GTM solution provider, it’s essential to define processes for all compliance-related activities. If a company can’t describe how it wants import/export activities to be performed then it simply can’t consider outsourcing them.

   Outsourcing compliance processes does not absolve the importer/exporter of responsibility for those processes, from a regulatory perspective, but also from a business efficiency perspective. And the bottom line is not just about trade compliance, it’s about ensuring company viability and profitability.

   Companies that outsource import or export activities are likely doing it for cost savings, but it is essential to design an outsourced model that includes reporting so volume, spend, staffing, savings, geographies, compliance levels and other efficiencies obtained from outsourcing can be measured. Again, it’s important to note that companies who don’t measure this before outsourcing will have little to compare to once they’ve outsourced it.

   Whether a company outsources or not, it’s vital to use global trade compliance metrics to analyze issues, improve processes, recognize strengths and weaknesses, set goals, budget and predict trends. Importers and exporters must first and foremost realize that the onus is on them to ensure compliance, not on an outsourced provider.

Implementation and Integration. The preparation for outsourcing any trade compliance activities, including automation, may become a full-time job in addition to that resource’s existing full-time job for a period of time. Companies intending to outsource must plan ahead — make sure to schedule the implementation in such a way that it does not overlap with peak periods whenever possible, such as quarter-end and year-end. Also, make sure to delineate back-ups for the team leader in case they win the lottery.

   If specific services are being outsourced, the company should request a dedicated team to service the account who will become familiar with the products and processes specific to the company, rather than allowing activities to be shared across a pool of resources. Often companies do not perform an adequate evaluation of the standard services or settings, nor do they fully understand how it will impact their existing business. It’s unheard of to simply buy a system or outsource a process and turn it on and be up and running, so be prepared to specify some customizations to get the outsourced solution to do what is required. But remember — every customization comes with a price tag.

Ongoing Management. The beauty of outsourcing is that it allows a company to take a step back from the day-to-day operations and set strategic goals for operations to improve and optimize processes.

   Interview the outsourced providers at regular intervals to determine if their business remains compatible. Additionally, don’t presume the expertise of the providers matches or exceeds in-house expertise. As companies grow, they often develop compliance expertise that exceeds their initial evaluation.

   And companies that are green when it comes to compliance can gain additional expertise through dealings with their service providers, who are ostensibly veterans. No company-service provider relationship is static, and companies must measure operations on a systematic basis to understand the costs and benefits of bringing some or all of their processes back in-house.

   Technology plays a crucial part in this determination. It is likely that when a company decides it is ready to bring compliance functions back in-house from an outsourced vendor that it will need to lean on a GTM system to help it manage those functions. But there’s another way to strategize this evolution as well. Companies ought to consider investing in GTM systems even while in an outsourced relationship so as to build in-house expertise. The transition from outsourced reliance to internally capable is dependent on GTM technology investment and usage.