SAP has integrated its risk management application with its Global Trade Services software, a move analysts say
will help customers better manage supply chain risks associated with international trade.
The vendor has also integrated its Transportation Management application to Global Trade Services 8.0 , as the new release is dubbed. This is significant because compliance and freight business processes are integrated more tightly, which will be important for complex international shipments, according to Gartner research vice president C. Dwight Klappich.
Companies continue to purchase international trade software despite the recession, according to AMR Research vice president John Hagerty. Automating these activities can reduce the number of employees needed to manage the process manually, leading to long-term cost savings, Hagerty said in an email.
"Adding in the risk element is an interesting angle," he said. "We see significant interest in identifying and mitigating risks in all aspects of the supply chain -- be it in supplier management, sourcing, transportation or planning."
SAP's announcement also marks an extension of its GRC product line outside of the financial industry to supply chain management, according to Narina Sippy, senior vice president of SAP BusinessObjects GRC.
The new release will be an upgrade for existing customers. It includes functionality to ensure adherence to International Traffic in Arms Regulations (ITAR), which regulate export and import of defense-related articles and services. It also includes functionality that recognizes whether an unplanned border was crossed during a shipping route.
"It really shows how we've taken the unified GRC framework and extended it ... to deliver an end-to-end supply chain and tie risk to compliance," Sippy said. "[It brings] new visibility to customers on what exactly the state of processes are."
A relatively small number of companies have international trade software in place now -- Klappich's rough guess is that there are fewer than 1,500 enterprises that holistically manage it internally. SAP says it has 650 customers using its Global Trade Services software.
Most companies continue to outsource all or part of their compliance to a third-party broker, because trade compliance is viewed as important but not value adding. Few companies have ever gained a competitive advantage through the performance of superior trade compliance, Klappich said in an email.
That is changing, however. More sophisticated, large global organizations are looking to take control over all areas of the global trade process. There's keen interest in retail, consumer goods, high tech and automotive import, and pretty much across all export industries other than retail, Klappich said.
Some companies still use the brokers to file paperwork, he said, but they also deploy the software to ensure that they have more oversight over the process and are properly following regulations.
Risk management may not always be the sole trigger to buy software, but it is a justification for investment in these areas, Hagerty said. Companies can be compliant with external laws and regulations as well as with company policy and procedure, all the while identifying activities that might introduce an unexpected level of risk into the supply chain.
Companies buying the software are concentrating in areas such as restricted/denied/sanctioned party screening, which is the most prevalent and in demand, Klappich said. There's also increasing interest in export and import compliance software.
SAP's existing supply chain management (SCM) customer base will be most interested in this application, analysts agree. Customers looking for these applications tend to go with their primary vendors, Klappich said, because it's not considered differentiating software and it's easier to integrate.
Yet few companies are at the point where they manage all compliance (import and export) as a common shared service.
"What we continue to see more often is compliance focused on either the import side or the export side," Klappich said.