Global trade is serious business for Tremco, a multinational roofing and construction supply company with thousands of products moving through its three main divisions, Tremco Roofing & Building Maintenance, Tremco Commercial Sealants & Waterproofing, and Tremco Barrier Solutions.
Headquartered in Ohio, Tremco transacts with customers around the world. In addition to a large presence in the US and Canada, Tremco — an affiliate of RPM International, Inc. — also has affiliates in Europe, Asia, and Central and South America. Compliance with numerous trade regulations affecting its many thousands of stock-keeping units (SKUs) is paramount to the bottom line and to ensure that Tremco avoids unintended supply chain interruptions.
Until recently, Tremco had handled international logistics, including customs compliance, trade compliance, and export control, with a heavy dependence on manual processes and institutional knowledge. This took extraordinary effort to ensure that nothing was missed, a risk that increased as Tremco’s international dealings escalated. The company realized that an approach of dividing logistics responsibilities among various individuals would not be a sustainable strategy.
Keeping up to date with sanctioned party screening or North American Free Trade Agreement (NAFTA) preferences, for example, involved such tedious processes that compliance was sometimes achieved at the expense of filling orders in as timely of a manner as possible.
Kevin Riddell is Tremco’s International Logistics Manager overseeing all international trade functions, policies, and procedures. Having been involved with Tremco’s growing international business for many of his 20 years with the company, he is well-versed with the difficulties that can arise from lacking a coherent picture of the ever-changing sanctioned party screening lists. “Without an automated tool, we had to trust that before employees filled out a purchase order, they went to the relevant government website or consulted the right book on the shelf for the most updated list. That sort of process makes it challenging to be compliant,” he says.
The same held true with NAFTA preference criteria compliance. Each of Tremco’s thousands of SKUs has a bill of materials containing up to a dozen raw materials — each of which must be audited to confirm where the finished good falls under NAFTA’s preference criteria prior to completing the NAFTA Certificate of Origin form. Continuing to rely solely on institutional knowledge as Tremco increased exports could have put the company at risk of non-compliance and caused it to lose out on otherwise preferential tariff treatment opportunities. “It can’t be done effectively without an automated tool,” says Riddell.
One Solution Fits All
About three years ago, Tremco decided to seek out such an automated tool, and a thorough search led it to SAP Global Trade Services (SAP GTS). This decision was made easier in part because Tremco had been an SAP customer running SAP ERP since 1999. However, the fact that SAP GTS automates both sanctioned party screening lists and NAFTA preference criteria was a major factor.
“There are other tools that can plug into your company’s ERP system, but there aren’t too many NAFTA preference tools. SAP GTS was the only one we saw that could do both, in addition to many other international trade compliance functions such as export controls, license determination, import controls — all of which we were using — but not in one consolidated solution,” Riddell says.
Integrating seamlessly with SAP ERP systems, SAP GTS works almost as a fail-safe whenever a customer account is created or updated, checking sales orders or purchase orders against an updated sanctioned party screening list and flagging any issues it encounters. The application will also re-confirm an established customer’s good standing if any changes are made to a master customer account. If for instance a new sales order creates a new shipping address, SAP GTS will re-check the customer against the list. This prevents a customer number for an established customer from being used for an unapproved transaction.
According to Riddell, the real-time integration is one of the big advantages of SAP GTS. “Other applications will do a periodic screening of the customer base, offering a snapshot in time,” he says. “Whereas, integrating actual documents in real time gives you the peace of mind that you’re compliant at all times.” If the system flags a transaction, it will still allow the sales order to be created, but Riddell’s team will immediately receive an alert for remediation. Tremco can adjust the application’s sensitivity settings to trigger alerts based on a number of factors, such as a percentage of a mailing address or word strings, for example. During an extensive sandbox phase, Tremco configured the settings to arrive at what it thought was an optimal setting.
“We spent a significant amount of time during our implementation tuning the settings to make sure we wouldn’t have too many false matches, while also giving us assurances that we’d catch true matches when we needed to,” says Cheryl Capiccioni, Tremco’s Team Leader — Business Systems, Sales, and Logistics.
All Data Under One Roof
Another key part of the implementation was making sure the company’s SAP ERP data was being maintained properly. Maintaining consistent master data, such as material master data, was necessary to ensure accurate statements on the NAFTA Certificate of Origin form.
This, Riddell says, posed one of the bigger challenges to Tremco during the implementation. He describes the data cleansing as a learning curve; before even beginning the process, those involved had to first understand the importance of the various settings and comprehend the possible negative effects of failing to adhere to standardization. “It really affected us with NAFTA preferences,” he says. “Without maintaining key fields like procurement types, the system cannot succeed; I think we underestimated the amount of data cleansing that was required.”
To help with this knowledge transfer and the ensuing system configuration, Tremco turned to Krypt, a consulting firm that specializes in SAP GTS implementations. While Tremco knew precisely how it wanted SAP GTS to work for the organization, the consultants helped them get there with expertise regarding the configuration settings. “They had the knowledge base that we as an organization lacked,” Capiccioni says. “Without it, you can configure the system with that understanding of what it will do for you, but you’re not going to reap the true benefits without that business knowledge.”
To keep to the original implementation timeline, Tremco undertook its data cleansing effort in tandem with going live with some functionality of SAP GTS, such as the sanctioned party screening lists, and then brought the NAFTA preferences online later. In April 2012, Tremco went live with sanctioned party list screening functionality. By January 2013, the business had finished its data cleansing efforts and went live with NAFTA preferences. “By implementing SAP GTS, we are now in control of the risks that a company undertakes when trading internationally,” Riddell says. “We have a newfound confidence level that our trading is being done in a compliant fashion.”
By implementing SAP GTS, we are now in control of the risks that a company undertakes when trading internationally. We have a newfound confidence level that our trading is being done in a compliant fashion.
Kevin Riddell, International Logistics Manager, Tremco
With the success of the first phase of its SAP GTS implementation, Tremco began embarking on the next phase with a focus on automating partner communication to help streamline operations. One key initiative is the self-filing of customs declarations to replace the current manual customs declarations process. For each import, for example, a vendor is provided a Microsoft Excel spreadsheet and asked to fill in key fields related to the shipment. The form is then returned to Tremco, at which point it is emailed or faxed to a third-party customs broker and becomes the official import declaration document. With SAP GTS, Tremco will be able to drive all customs communications through the purchase order that originates in SAP ERP. The automation of declarations will impact exports as well. Every shipment leaving the US has to include an export declaration. Today, this process is performed manually, with someone having to go to the appropriate government website to input the proper codes and information.
In parallel with the second phase of its SAP GTS implementation, Tremco took the application international, when it rolled out SAP ERP in a new facility in Brazil. “Once you connect SAP GTS with SAP ERP, they are connected for life,” Capiccioni says. “So when we did our implementation in Brazil, SAP GTS was a part of it, and we’re running our sanctioned party list screenings there too, which seems to be working very well.”