E2open’s recent acquisition of Amber Road was the latest in its long string of acquisitions, bringing E2open a significant step further on its journey to building out one of the broadest suites of supply chain capabilities available. This acquisition is significant for several reasons. First it is a milestone for the Global Trade Management (GTM) solution landscape – mber Road was the last remaining significant1 standalone GTM solution provider. All other notable GTM solution providers had already been acquired (see sidebar “The GTM Acquisition Bandwagon”), leaving a solution landscape where all major GTM solutions are now part of larger suites.
For E2open, the deal is significant as it further fills out their logistics and global trade capabilities, building on earlier acquisitions including TMS provider Cloud Logistics and ocean shipping network INTTRA. E2open started life as an industry-owned ‘marketplace’ platform, primarily for managing suppliers and sourcing. Over time it has evolved into a more complete platform, adding significant functionality in demand management, S&OP, and channel management. Until their acquisition of Cloud Logistics, E2open’s transportation management capabilities were primarily restricted to planning and they also had limited global trade management functionality. With the addition of Cloud Logistics, INTTRA, and now Amber Road, that has all changed.
Good Timing with Increasing Attention to GTM
The timing of this acquisition might work out well for E2open. The GTM solutions market has never been that big,2 but macro forces seem poised to promote growing adoption of GTM solutions. Analysts are predicting 9% to 12% CAGR for the GTM solutions market for the next several years. A number of factors are converging to encourage businesses to consider adopting a GTM solution.
For example, the increasing adoption of ecommerce means that more companies have a need to ship to numerous different countries around the world. Some countries, such as the US and UK, have been exiting multi-lateral agreements and negotiating multiple bi-lateral to replace them. This adds to the complexity of keeping up with all these different trade agreements. Increased use of sanctions, more diligence in anti-money laundering enforcement, and a growing emphasis on national security and restricted parties enforcement have combined to make compliance ever more important. The growing trade wars have increased the volatility of duties and tariffs. Taken altogether, these trends have made it more and more critical for businesses to achieve trade compliance and intelligently leverage trade data — and it is increasingly more difficult for them to do so without a good GTM solution.
Understanding Amber Road’s GTM Solution Functionality
There are different definitions of what is included in a GTM solution. One grouping we can use is to categorize functionality into ‘Core’ vs. ‘Cross-function’ GTM components.
Core GTM Components
- Trade Compliance — including restricted party screening, product classification, and duties and tariffs.
- Customs Management – utomated customs filings, broker collaboration, free trade zones, etc.
- Global Trade Data/Analytics — Total cost calculation and duty optimization, competitive trade intelligence, lead generation, supplier discovery, supply chain risk. For more on this, see Global Trade Data-as-a-Service.
Amber Road has a robust set of data and functionality in all three of these core categories. Specifics on the trade data that Amber Road provides can be found below in the section “Maintaining Trade Data is Labor-intensive.”
Cross-function GTM Components
GTM is also often integrated into logistics, supply chain, sourcing, and other functions’ workflows. Hence, some people consider these cross-functional capabilities to be part of GTM, while others consider them to belong in the other function’s domain (such as logistics or supplier management solutions). Regardless of how you categorize them, here are some cross-function solution capabilities where GTM tends to get integrated:
- Cross-border Transportation Management — In contrast to traditional TMS (which is often ground-centric and domestic-focused), cross-border transportation management solutions are multi-mode and typically ocean/air-centric. Cross-border TM solutions integrate customs declarations, regulatory filings, and document management (bills-of-lading, commercial invoices, SOLAS VGM, etc.) into transportation planning and execution. Ocean or air are typically the central leg around which the other legs (ground transport to origin port and from destination port) are planned and executed.
- Visibility — Solutions will provide visibility into events (such as carrier pickup, vessel departure/arrival, etc.) and inventory at rest and in motion (WIP and finished goods at suppliers, inventory in-transit, at your own and customer’s DCs and stores).
- Sourcing and supplier management — Sourcing optimization may include total cost and duty optimization. GTM data can also be used for supplier discovery and risk management.
- Ecommerce — Ecommerce is increasingly global, and international customers expect instant and accurate estimations of duties and tariffs. As well, it is important that ecommerce platforms do not sell to people and businesses on restricted parties lists, even if those people/firms were not on a restricted parties list when they first created an account.3
- Supply Chain Finance – lthough common supply chain finance solutions — such as reverse factoring and dynamic discounting (both based on approved invoices) — are not typically considered part of GTM, some people consider pre-invoice and pre-shipment finance to be part of GTM. Pre-invoice and pre-shipment finance require good data on supplier performance history, current status of goods in-transit, and other data that a GTM system may have.
Amber Road has functionality in cross-border transportation management, visibility, and sourcing and supplier management. Amber Road has other functionality, beyond what is typically considered to be part of a GTM solution. This includes supplier & production management, quality management, and supply chain collaboration.
Central Role of Trade and Regulatory Data
An effective GTM solution requires up-to-date trade and regulatory data. Maintaining that data is no small feat. There is an enormous and ever-increasing volume of classifications, duties and tariffs, restricted parties lists, free trade zone definitions and rules, various trade regulations, and so forth. In spite of efforts at some harmonization between countries, these data are often different for different countries around the world. Trade data is also volatile — something is changing somewhere virtually every day. The consequences of getting wrong or out-of-date data can be high. $24M is the average size of fines issued since 2009 by the OFAC (Office of Foreign Assets Control).4
Trade data that needs to be kept up-to-date includes things like:
- Denied/restricted parties lists — These are needed for all countries that a firm is doing business with. Governments are updating these lists constantly, adding and removing people and companies.
- Sanctions, licenses — Restrictions can be complex, involving only certain types of goods, for specific countries. These requirements and restrictions are constantly changing with the political winds.
- Duties and tariffs — These have been in the news lately and changing a lot more frequently than usual. The US in particular has introduced many new tariffs recently, inciting reciprocal actions from trading partners.
- Rule of Origin/FTAs (Free Trade Agreements) — Rules of origin impact duties and tariffs. These rules can be complex and there are increasing numbers of free trade agreements, with a lack of harmonization that has been characterized as the spaghetti bowl effect.
- Free Trade Zones/Export Processing Zones — There are several thousand FTZs in over a hundred countries, employing tens of millions of people. The geographic definition of these zones and the rules governing them need to be well understood and followed by the GTM solution.
- Trade regulations and import/export filings requirements — Countries often introduce new requirements or make changes to what is required for both importing and exporting goods. This may include requirements for electronic filing, new information requirements, specific formatting, and so forth. GTM solution platforms need to keep up with all of this.
- Import/export data — In many countries import and/or export filings are, at least in part, publicly available data. That data can be quite valuable for commodity managers and others trying to understand who is selling what to whom.
Maintaining Trade Data is Labor-intensive
Major GTM solution providers that maintain their own trade data require large teams of people monitoring, gathering, cleansing, normalizing, and updating their trade data and regulations databases continuously. Doing this right requires experts on the ground in many of the countries supported by the GTM platform. The experts need to be knowledgeable about the government and culture, have the right connections, and (as needed) have physical access and the ability to meet in person. The size, location, and expertise of these teams make a big difference in the robustness of the GTM coverage: what countries are covered, what data is incorporated, how often they update, and the quality of the data.
Only a handful of GTM solution providers have the resources to comprehensively gather and maintain trade data and rules. Comparing the breadth and depth of trade data and content between platforms is difficult because the depth of coverage is self-reported by the solution providers and they tend to bucket things differently and use different metrics for expressing their coverage. Having said that, Amber Road does have one of the largest trade data teams of any solution provider, with 180 dedicated trade content personnel, including lawyers, customs brokers, and trade compliance professionals, speaking more than 30 languages. In addition, they provide the following statistics about their trade data:
- 618 Restricted Party Lists
- 17M trade content updates in 2018
- 1.3M Dutiable records
- 10,716 GREQ codes (used for HS-based5 import and export controls)
- 503K HSFILTER records (HS list, with detailed information for each GREQ code)
- 420 active LREQ (ECCN6 licensing logic flow records)
- 170+ FTAs (free trade agreements) supported
- 1,884 preferential trade programs — FTAs and preferential programs for which preferential duties are maintained
The Value of Integrated, End-to-End Solutions
There are many ways that a GTM solution can be leveraged once it is integrated into a broader, cross-functional suite. For example, good total cost data can help sourcing professionals and commodity managers make smarter decisions. GTM data can be integrated into ecommerce platforms to provide online customers with instant and reliable information about the duties and tariffs they will owe. The GTM platform and the data it provides enable ecommerce platforms to do real-time denied party screening, to approve new buyers and purchases in real-time.
Salespeople can use analytics on publicly available import and export filings data for lead gen and finding new business opportunities. Marketing can use it to better understand the competition, who is selling to who. That same data can be used by sourcing personnel to discover new suppliers, learn which suppliers others are using, and diversify the supply base. Supply chain and logistics folks can use GTM to reduce risk and delays due to non-compliance.
All of this is possible when trade data is made available across functions, preferably integrated into the tools and workflows that the organization is already using. In this regard, E2open has a broad set of relevant capabilities and a record of rapid integration of acquisitions. We expect to see Amber Road’s GTM data and capabilities popping up in various places across the suite, over time, as E2open deepens the integration and their customers drive them to implement more value.
Expecting Novel Global Trade Capabilities from E2open
With the Amber Road acquisition, E2open has gained one of the broadest and deepest set of GTM capabilities in the market. They are integrating these capabilities into one of the broadest integrated supply chain suites in the market. Once the basic integration is done, we expect E2open to do deeper integration across the suite. The combination of the INTTRA ocean network, Cloud Logistics, and the Amber Road capabilities has fascinating possibilities. Beyond that, Amber Road’s GTM data and capabilities will very likely be used in other parts of the suite.
When capabilities that have never been combined before are put together for the first time, people invariably discover novel new use cases. Many of these may involve AI/ML, discovering patterns and relationships that provide high value to various users. We wouldn’t be surprised if we see this kind of innovation with the E2open/Amber Road combination. And E2open is not finished acquiring yet7 — so who knows what else the future holds?
1 There are still a number of niche standalone GTM solutions such as QuestaWeb, Panjiva, CustomsNow, and others. — Return to article text above
2 Estimates of the GTM solutions market are generally around $500M to $700M for the entire market. The space is fairly fragmented, with no single dominant player. — Return to article text above
3 In other words, to ensure ongoing compliance, denied/restricted party list checking should not be done only once at account creation time, but needs to be done every time a purchase is made. This drives companies to do that checking automatically, rather than via a manual check mechanism that can add a big delay to the ecommerce checkout workflow. — Return to article text above
4 For more on the magnitude of global trade non-compliance fines, see side bar “The Age of Mega-Fines” in Leveraging Global Trade — Return to article text above
5 HS = Harmonized Commodity Description and Coding Systems for classifying traded goods. — Return to article text above
6 ECCN = Export Control Classification Number, used to determine whether an item being exported from the US requires an export license from the US Department of Commerce. — Return to article text above
7 For example, it wouldn’t be surprising to see them acquire additional WMS, ecommerce platform, and/or distributed order management solutions, to name a few. — Return to article text above
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