Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Dana Gardner: Hi, this is Dana Gardner, principal analyst at Interarbor Solutions, and you’re listening to BriefingsDirect. Today, we present a sponsored podcast discussion about the new opportunities for small- and medium-size businesses (SMBs) to take advantage of overseas markets for their goods. The Internet has opened up many channels for sales and marketing, but there still needs to be the physical delivery of the goods.
We’re going to talk about customs clearance and some new efficiencies and digitization opportunities there. We’re also going to look at the flip side, of how returns are handled for goods and materials that are crossing borders, and how that can be managed and made more efficient.
Joining us to discuss this, we have an expert and researcher on these issues, Laurel Delaney. She is the founder and president of GlobeTrade.com. Welcome to the show, Laurel.
Laurel Delaney: Thank you for having me.
Gardner: We’re also going to discuss this with Stu Marcus. He is a director of new product development at UPS. Welcome, Stu.
Stu Marcus: Hi, Dana, thanks.
Gardner: Also joining us is Scott Aubuchon. He is also a director of new product development at UPS. Welcome, Scott.
Scott Aubuchon: Thanks, Dana. Thanks for having me.
Gardner: Let’s start with Laurel. Help us understand some of the issues facing small businesses, those seeking to expand their addressable markets and how they can start doing more business overseas.
Delaney: Actually, there are two forces at work right now for small businesses. One has to do with the issue of globalization. I think we all know the buzz that’s going on about going global that has been driven largely by Thomas Friedman with his book, "The World is Flat." He’s caused mainstream America and all small businesses to step up to the plate and consider the world as your market. The second force is technology, and technology is making it easier now to go global.
Gardner: So we have the opportunity, yet we still have the physical barriers. Let’s take another look at this through the lens of some other trends. There is the North America Free Trade Agreement (NAFTA), the Central America Free Trade Agreement (CAFTA), and the World Trade Organization (WTO) measures.
Have borders become more open or less open -- because we’re also talking about the post 9/11 era?
Delaney: NAFTA, CAFTA, and the WTO have absolutely enabled small businesses to go global far more easily. They've removed barriers, eliminated tariffs, and have softened the rules a bit for doing business internationally.
Gardner: Has the consolidation of currencies in Europe and also the value of the dollar in relation to other currencies made the desire for SMBs to look across their borders more financially interesting?
Delaney: It depends on who you are. What I mean by that is, if you're a Wal-Mart shopper, many of the products are made in China. The Yuan [China’s currency] is tied to our dollar, so there is very little effect on the price of goods. But if you are a worker at a Boeing plant, for example, a weaker dollar really means that foreigners can buy more of what you make.
If you’re an American tourist and you're vacationing in Paris, your dollar buys fewer Euros right now. So you’d probably end up spending $7 for a cup of coffee, or even $50 for a taxi ride.
A weak dollar can be good for the U.S. economy, though, because it makes American exports cheaper and therefore helps close the trade deficit.
Gardner: Let’s open this up to Stu and Scott. UPS recognizes a growing international opportunity here, and has created some services to help companies better deliver and return goods. What is it that prompted you to pursue this potential growth?
Aubuchon: As Laurel said, we've really seen the world become flat. International shipping is at an all-time high. The Internet is making it easier for SMBs to trade internationally. Many of the free-trade agreements have helped, as well. But there’s still a lot of complexity involved in shipping across borders, and that’s something that we at UPS are very interested in helping our customers deal with and overcome.
Gardner: What are the problems or hurdles that are preventing SMBs from looking to do business -- increasingly more business -- overseas?
Aubuchon: One common problem for everyone that ships internationally is just the documentation that’s required and associated with international shipping. For example, when you ship a package domestically, you simply put on an address label and off it goes.
For anything that’s not a document or a letter moving internationally, a commercial invoice is required to go with that shipment, in order to define what is contained in the shipment. So, for example, if you were shipping a cotton shirt, you’d need to document what type of shirt it is, where it was made, and what the fabric is. That process can be fairly complex and somewhat daunting, especially to folks who don’t do a lot of international shipping.
Gardner: How has this process changed in recent years, since 9/11, since the war on terror in the United States, and its active homeland security activities? Has it become easier, harder, or more complex? What’s been the change in the last five or six years?
Aubuchon: I am not sure I would say it’s become harder, but there’s definitely been a shift in emphasis. As we talked about, there have been a lot of free-trade agreements put in place, but the focus on international shipping has moved away from duty and tax to more of a security picture.
Back in the United States, the U.S. Customs Bureau used to be part of the Treasury Department. It’s now called U.S. Customs and Border Protection, and it’s part of the homeland security function.
So even though there’s freer trade, the documentation required for trade security purposes is still very important, and may be more important than ever. This is why at UPS we think helping customers with that documentation and the complexities of international shipping is a very important step for us to take.
Delaney: I want to add to that. U.S. Customs and Border Protection are scary words to a small business owner. The whole idea of simplifying the process is important, so that small businesses can go after this in a fearless fashion.
Gardner: All right. Let’s move into some of the solutions. If I am a SMB, and I have some robust growth, I recognize that the currencies are working in my favor, and I recognize that the Internet is giving me the opportunity to market -- to gather orders and process them across borders very easily at low cost -- how do I take the next step? What are some new solutions for customs clearance?
Aubuchon: One thing UPS is doing to help change the face of global shipping is to be first to market with a solution called UPS Paperless Invoice. This enables our customers to provide us with electronic data defining what’s in the international shipment -- that would be the commercial invoice data -- and provide that seamlessly and electronically, so that we can transmit it and use it for clearance on the other end. This eliminates the need for the customer to print and manually apply three copies of that document to each shipment.
Gardner: Explain in a little bit more detail how that works. Is this completely paperless, or is it streamlined? Walk us through the process, please.
Aubuchon: From the customer's perspective it really is completely paperless. They can take the data regarding the commodities they're shipping and either apply it within, or connected to, their shipping system. Then, when they prepare the shipment, they simply designate the commodities that are in the shipment, transmit that information with the shipment upload, and we will use that information at the destination to clear the shipment.
The customer doesn’t need to print and apply any paper at all in that process. This helps by saving them time, money, and paper.
Delaney: Let me jump in again. I just love the way that that sounds. For small businesses, I always like to cut to the chase about where can this be found. Where do they go right way so that they can instantaneously access this information? [See more on this solution at http://www.ups.com/simplify.]
Aubuchon: That’s a great question, Laurel. The answer is that in January our customers will be able to utilize UPS Paperless Invoice throughout our shipping system. If they happen to use our WorldShip shipping system, or do it over the Internet at our Internet Shipping site, they simply need to get set up as a paperless shipper.
This means they have to contact us and have one of our sales folks collect from them the initial information, which is an image of their signature and their invoice letterhead. From that point forward, they would simply apply that data to the shipment.
When they click "Ship," the data will go with that shipment information to UPS and be used for clearance at the destination port.
Gardner: I suppose another concern for businesses is not just getting it done at all, but being successful in global trade. What if they need to scale up their shipping rapidly? What if the volume increases rapidly? Are these services also something that can help them manage and automate batches or bulk deliveries? And how do you take this into a larger, automated volume play?
Aubuchon: That’s another great point. Certainly for SMBs, UPS Paperless Invoice will streamline their processes; reduce some of the complexity, and lend some consistency to the documentation required for international shipments. For those businesses that grow, or for larger enterprises, this is extremely valuable, in that it streamlines what today is really an exception process that needs to be done for each shipment -- printing and applying these paper invoices.
With Paperless Invoice, they can make their international shipment processing really seamless, and become the same as their domestic processing, which can eliminate the need for additional space and resources for that activity.
So, this is definitely something that will help someone to scale up or help someone already large to be much more efficient in their global shipment processing.
Delaney: So that means that we can move people off eBay.com in single shipments and get them over to this, right?
Aubuchon: Potentially, yes.
Gardner: Are there other software systems that you integrate or interface with? I suppose there are several invoicing and bookkeeping systems that are popular.
Aubuchon: Yes, and we do. In fact, our WorldShip shipping system allows customers to integrate through a number of different means to other databases or systems that they may use to produce this information. They can either enter it directly into the shipping system or they can link through technology and pull that information in. So, yes, it’s definitely an option for customers to use existing systems and data and to easily provide this information to UPS.
Gardner: You mentioned that this would come online in January 2008. You also mentioned being first to market. How does this compare to what's available through alternate shipping channels?
Aubuchon: If you look at the industry, whether it’s other small-package carriers that we compete with, freight forwarders, or freight companies, you’ll find that the process is really the same. They have to document the shipment by commodity and apply paper copies of that invoice to the shipment.
We’ll be the first ones in the market that will eliminate the need to take that step, and we'll use this information to seamlessly clear goods at any destination.
It’s only because UPS has a global reach and has the global technology infrastructure in place, that we can do this, starting from the touch point with the customer and their shipping system all the way through to our interaction with customs brokerages at the destination. So, we'll be the first to do this and we believe that will be a significant enhancement for our customers.
Gardner: Great. In addition to the customs clearance problem, there are also things like duties, taxes, and tariffs, which do vary from geography-to-geography and nation-to-nation. Is there anything that you’ll bring to the table to help expedite that, or is that still something that businesses need to address on their own?
Aubuchon: Those definitely are issues, as well. One of the keys to dealing with duties, taxes, and a proper treatment of shipments is, in fact, the documentation. So getting that commercial invoice data correct, and consistently applied to each shipment, will be a big help with that. UPS also does have other tools available at www.ups.com that can help customers with issues like determining compliance considerations for shipments as well as determining estimates of duties and taxes. That's called UPS TradeAbility.
Gardner: We’ve talked a little bit about the fact that the world is flat, that there is more opportunity for international trade, and that it’s probably never been easier to expand abroad both from a technological as well as a legal and regulatory standpoint. We’ve talked about the fact that there’s still complexity and that there are issues and problems with paperwork. Then we talked a little bit more about some solutions that you bring to the table.
Do we have any sense of what this is going to actually do for businesses? Obviously, they're going to be able to grow their top line of revenues if they can sell more goods in more places. But I'm interested in how this can impact businesses from the profit dollars-and-cents perspective. Stu or Scott, have you done any pilot projects or worked with some customers and gotten a sense of how impactful this is to profitability?
Aubuchon: Well, for a couple of our largest customers we've actually put in place a Custom Paperless Invoice solution. And for those two entities it’s been a significant help in terms of efficiency in their shipping process, of being able to apply resources more efficiently to other more meaningful paths.
Also, because the data is moving electronically at the speed of light to its destination, it's not susceptible to being marred or lost in transit, as a piece of paper might. It’s also helped them to get their shipments cleared more seamlessly. We've seen that for a couple of our customers -- and we expect that the same will be the case for our customers who start using UPS Paperless Invoice in January.
Delaney: I'm predicting that the more that you can save a small business time, money, and their sanity, the better off everyone is going to be, in terms of allowing them to really go global in the fashion they desire.
Gardner: Laurel, you’ve been in the business of helping small businesses better understand their global opportunities. Have you done any surveys or had discussions? How prominent are these customs and border issues when it comes to the SMBs considering whether to expand their business overseas?
Delaney: That's a great question. I have a funny story on what just took place a couple of weeks ago, when I was giving a presentation. No one in the audience knew me. They really didn’t know my background, and somehow they saw the title of the presentation which was, "The World is Your Market: Small Businesses Gear Up For Globalization."
After the presentation, a half a dozen people came up to me and said, “I was so relieved to hear your presentation and that you didn't stand up there and just talk about customs clearance, documentation, tariffs, and taxes.”
What that said to me is that this is a huge issue. A lot of small businesses stop dead in their tracks -- don’t do anything in terms of going global -- because of the hassle related to just beginning customs regulations and paperwork.
Gardner: They don’t know how or where to get started?
Delaney: Right. They do not know where to get started. So what's being offered through UPS is a godsend. It really is.
Dana, you asked about surveys that I’ve conducted. I actually haven't recently, but I am fully aware that UPS just released a study called the UPS Business Monitor United States. One thing that fascinated me about the study was one outcome that indicated that only one-third of U.S. mid-market firms conduct cross-border trade.
Think about that. Think about what a small number of businesses that is and how many more businesses are missing the opportunity to tap into more than six billion potential customers around the world. In the U.S., they're touching on maybe 300 million people, but when they go outside of their borders, they can tap into a larger percentage of the world’s population.
If you look at the latest world Internet statistics, you’ll see that more than one billion people are now online. So, just being online, having a Web site or a blog -- or this podcast -- gives you the capability to reach more than a billion people instantaneously. The potential is just enormous.
Gardner: Right, there are lots of upsides. Now, we have a great potential for growth in new business from the seller’s perspective. I would think that the customs folks would also be interested in this, because it's going to create more traffic across the borders, more opportunity for them to monetize and create services. Have you had much discussion with the customs people? How do they view this opportunity?
Aubuchon: We certainly interact with customs all over the globe every day, as we move shipments and serve as the customs broker. With the new UPS Paperless Invoice offering, we’ve definitely been in ongoing conversations to try to help customs officials understand what our goals are in helping our customers, and ultimately in helping them to get better information more quickly, and help them to more quickly clear goods.
In general, it has been very positively received. This is really the way, as we talked about earlier, that the world is going -- in that information is becoming digitized and moving much more quickly. So we feel like we’re really on the leading edge of using technology to help customs clearance processes become quicker and more accurate.
Gardner: The more commerce there is, the better it is for most of the parties involved, right?
Aubuchon: Absolutely. It's really a win-win situation both for the exporter and the importer when international trade occurs.
How to Return Goods Across Borders
Gardner: Let's move onto another problem set in this overall activity. It's great that I can move goods in one direction, but what if I need to move them back? What if there's a situation where a customer didn’t like the color, or perhaps the order wasn’t what they expected, or they would like to return and upgrade or get a replacement?
How do we deal with returns? We hear that for some 70 percent of international returns, there is no standard operating procedure. They’re just done on an ad hoc, exception-by-exception basis.
Let's go first to Laurel. How important is this return capability to the overall comfort level for these smaller businesses?
Delaney: Indicating to your customer that you’re ensuring some type of a guarantee is vital to the overall transaction. When small businesses sell to their customers, they want to ensure satisfaction – absolutely, positively. So, to answer your question, it’s very important to have this return process in place.
Gardner: Maybe Stu or Scott could explain what's involved. What has been the case up until now with returns when they need to happen across borders and come back through customs?
Marcus: I'll handle that. Laurel is absolutely right, and the research that we have done with our customers indicates that the most important reason customers want to have an efficient return process is for their own customer service. Exporting goods and shipping items globally is only one part of building your business. Offering customer service when things are wrong or customers need to replace items is really key to building customer loyalty and gaining additional business.
Customers know that, in the past, having items returned internationally was really a time-consuming and burdensome process. You have receivers who need to return items internationally, and they may not be familiar with shipping internationally. The shipper who sent it out really has a knowledge base in doing global commerce. Now, the receiver has these items and no way to efficiently get them back.
In the past, what shippers had to do was fill out a manual waybill and send it via mail or local post. It would take a couple of days or a week to get to the receivers. At times, they would just leave it up to the receiver to return these items on their own. That’s really not a very efficient process.
Customers have told us, especially small business owners, that because of this inconsistent process either they were afraid to do business internationally, or, when they did, there were times when they had to abandon their goods, because they just could not get the goods back to their own customers in a timely manner.
Gardner: The receiver wouldn’t even know where to get started if they wanted to return, right?
Marcus: That’s absolutely right. Receivers may not ship regularly or maybe had never shipped before. They're just receiving goods, and then they’re stuck with these items that need to be returned.
Delaney: What I love about this for small businesses is that it now gives them an extra little edge with their customers. It's a new promise that they can make to their customer, and that will set them apart and help them be even more competitive in the global marketplace.
Gardner: I know when I do returns, that it actually gives the seller another opportunity to engage me, perhaps on some up-sell or some additional value proposition.
Delaney: Absolutely.
Marcus: With UPS Returns, which we are expanding to 98 countries, UPS is going to be the first carrier to offer this type of solution to shippers. Now shippers can use the same UPS technology with which they export goods to prepare the return label and get it to their receiver to initiate the return process.
Gardner: This is going to begin in January 2008. What’s going to be different for the sender, and what’s going to be different or better for the receiver in terms of managing this international returns process?
Marcus: In January, UPS Returns will enable shippers to prepare a return label and also the commercial invoice, which can then be sent to the receiver in a couple of different ways.
First, they can produce it while they’re exporting a package, so they can just put a return label and an invoice in the package. Then the receiver, if they do need to return something, will have the label and the commercial invoice ready to go.
Another way is through e-mail. A shipper can now prepare a label and a commercial invoice and have it e-mailed directly to the receiver. Where in the past you would only be able to fill out a manual label and put in the mail, now the receiver can get it immediately, and then use the label and the invoice to initiate the return process.
In certain countries, we can have a UPS driver bring the label and commercial invoice directly to the doorstep of a receiver who needs to return something. All these options could be initiated through the normal UPS technology platform -- UPS WorldShip, CampusShip, or Internet Shipping.
Gardner: These are available through the Web, right?
Marcus: Yes, CampusShip and Internet Shipping are two Web-based platforms we have. UPS also has an XML tool, which is a shipping API, which can be integrated into a shipper’s internal process or their Web site in order to initiate this process.
Gardner: For those folks who are not software developers, this means they can use your Application Programming Interface (API) as a tool kit to integrate your software and processes with theirs?
Marcus: That’s right. To a receiver, it’s seamless. You just go right to the shipper’s Web site, and you can initiate the return.
Gardner: How does that strike you, Laurel, as a new opportunity to manage this returns process?
Delaney: It sounds fabulous. Some of this I already knew, and I’m being educated at the same time. What I’m always thinking is, where do I go and how do I take action? That’s the bottom line on this.
We've covered what the first step is for small businesses -- where they go online to start using this capability. Or, if they don’t want to access it online, whom they can call to get further information. [Learn more about the solutions described in this discussion at http://www.ups.com/simplify.]
Marcus: Laurel, this is one of the first times where SMBs will have access to this scope of global returns capability. In the past, the carriers were able to put together customized solutions, but that was mainly for larger customers. With UPS Returns this is the first time we will have a general service offering. There is no customer setup needed. The customer needs only to use our normal UPS Shipping Solutions or use Internet Shipping, and the capability will be right there.
Gardner: I believe there are a lot of direct and indirect cost savings involved with this aspect of the process. That is to say, the cost of a lost sale or a dissatisfied customer might be an indirect loss of future business.
If you can streamline the process, automate it, and scale it, I would think that the savings are pretty significant. Have you received any feedback from some of your early customers?
Marcus: One thing customers tell us is that they notice an improvement in customer service. The cost of setting up the returns process is negligible, and the transportation cost is in line with our normal transportation cost for exports. But none of that was a factor in our research. Building relationships and setting up a business to bring customers back for return purchases was really the most important factor of UPS Returns.
Gardner: So the logistical costs are low, if those long-term benefits include a recurring, happy customer. That really is the story here.
Marcus: That’s absolutely right.
Gardner: Does that ring true with your experiences, Laurel?
Delaney: The obvious benefits are greater efficiency and time and cost savings. I see additional growth now for SMB enterprises due to the ease of use on the paperwork side of transactions.
But two other things will occur as a result of this UPS Customs Clearance and International Returns benefits. This is an unusual way to look at it, but SMBs will be able to devote more time to innovation.
In other words, just by thinking creatively about going global, they can go global. That’s critical to remaining competitive, and it will allow them to spend more time on the strategic versus the tactical side of globalization.
Gardner: And then, therefore, focus on the marketing and not worry about the paperwork and all of the processes and the transaction.
I know you can’t tell us about products and services that haven’t been announced, but this strikes me as really not the end game. Perhaps it's just the first few steps into some more additional global trade value-added services and shipping expediency benefits.
Can you paint a picture for us about what might be happening in the next several years in terms of international trade in multiple directions?
Aubuchon: At UPS, we’re constantly talking to our customers and trying to identify the issues they face with shipping, and specifically international shipping. We’re continually in a conversation, trying to identify those pain points and to design solutions. UPS Paperless Invoice and UPS International Returns are two examples that will be coming out in January.
But as we move forward, rest assured that we will continue to evaluate other opportunities and deliver solutions for our customers to address other issues.
Gardner: For the small business that might have some ideas about what they need to achieve efficiency, can they send those ideas to you, COD?
Aubuchon: Oh, absolutely. The voice of our customers is very important to us, and anything they want to share with us, we’re more than happy to listen to and take into consideration and see what we can do to help them.
Gardner: Very good. I want to thank our group. We’ve had an interesting discussion, understanding some of the hurdles -- and now some of the new efficiencies -- that are being brought to cross-border commerce for SMBs.
Helping us to understand this opportunity and newfound efficiency, we have been joined by Laurel Delaney, the founder and president of GlobeTrade.com. Thanks, Laurel.
Delaney: Thank you.
Gardner: Also joining us has been Stu Marcus, director of new product development at UPS, as well as Scott Aubuchon, also a director of new product development at UPS. Thank you, gentlemen.
Marcus: Thanks, Dana.
Aubuchon: Thank you, Dana.
Gardner: This is Dana Gardner, principal analyst at Interarbor Solutions, and you have been listening to a sponsored BriefingsDirect podcast. Thanks for joining.
Listen to the podcast here. Sponsor: UPS. Learn more about the solutions described in this discussion at http://www.ups.com/simplify.
Transcript of BriefingsDirect podcast on international shipping efficiencies and UPS solutions. Copyright Interarbor Solutions, LLC, 2005-2007. All rights reserved.
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