The shipping industry is incredibly complex and involves a massive network of vessels, businesses, owners, customers, and destinations. In order to keep all of these moving parts organized and performing in the most efficient manner possible, trade management has become an essential part of the equation.
Trade management provides effective coordination between entities within the maritime supply chain – such as vessels, cargo handlers, port authorities, and others – but this simple definition doesn’t begin to describe the full scope of what is involved with successful trade management in today’s competitive global environment.
As the global trade landscape continues to evolve, the shipping industry must pay close attention and stay informed of emerging trends in order to remain competitive. Managing successful international shipments is incredibly complex, involving multiple parties across different countries, varying regulations and guidelines for customs clearance, and more.
Navigating this process efficiently requires employing a strategic approach known as trade management – but what does this actually mean?
Here we will discuss some key considerations for approaching modern trade management so that your team can remain competitive in an ever-evolving market.
According to UNCTAD (UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT), after COVID-19,
“In 2021, in tandem with the recovery in merchandise trade and world output, maritime trade is projected to increase by 4.3 per cent. The medium-term outlook also remains positive, though subject to mounting risks and uncertainties, and moderated in line with projected lower growth in the world economy. Over the past two decades, compound annual growth in maritime trade has been 2.9 per cent, but over the period 2022–2026, UNCTAD expects that rate to slow to 2.4 per cent.”
Trade Management means the same thing in all niches as in any other industry. Only in the maritime field, it also involves the logistical problems that all sea transportation entails.
Conducting business on a global scale requires a well-thought-out strategy that is dynamic and capable of managing risk and the diverse challenges of international trade.
Companies that want to take their goods beyond the domestic market are faced with the struggle of making the right sourcing decisions, being proactive to changes in the global environment, linking trade compliance with business needs, leveraging free trade agreements, minimizing duty and delays, and staying ahead of the competition.
There is also the added cost of maintaining in-house resources to stay ahead of the changing compliance environment and sustain efficient operations. Despite all the challenges involved, businesses that successfully implement and execute their global trade strategy see significant operational and cash flow benefits.
Assessing their existing supply chain and compliance operations and measuring them against industry best practices.
Focusing their approach to international trade on improved performance, data management, risk mitigation, and process standardization.
Lowering inventory costs, shortening the order fulfillment cycle, increasing compliance and profitability by improving overall cycle times, and ensuring smooth import and export transactions.
Developing a model for governing import and export trade that stresses the enforcement and strict use of process documentation, audit plans, performance metrics, and detailed reporting allows for better business decision-making.
Companies without a global trade management software system must manually review each international customer order to ensure that the customer and associated parties are not on the list of sanctioned parties published by various government agencies. Delays like this can add days to an organization's order-to-cash cycle time, affect cash flow, and impact revenue. As soon as a sales order arrives, a global trade management system instantly clears it for shipment or flags it for export compliance issues.
An import cargo that lacks the necessary documentation can be subject to considerable delays at border control. If a company experiences such delays on a regular basis, it is forced to carry excess inventory or incur more stock-outs. Backlogs in inbound shipments are especially costly for companies in industries where product life cycles are short.
Without a global trade management solution, landed costs must be entered by hand. This means that real costs, such as product price, rebates and discounts, are not always factored into decision-making. Without that visibility, companies could be losing money on a product they deem profitable.
To be successful in the shipping industry, it is essential to have a good understanding of trade management. Trade management encompasses a wide range of activities, from sourcing and procurement to logistics and comply with global regulations.
It can be a complex and daunting task for companies new to international trade, but fortunately, there are many resources and service providers available to help you navigate the challenges of conducting business on a global scale.
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