International trade volumes over the past 10 years have nearly tripled. With this rising flow of imports and exports comes growing supply chain complexity, as a single shipment may involve more than a dozen parties, ever-changing regulations, multiple languages and various modes of transportation.
Yet a recent survey indicated that 70 percent of the respondents still use spreadsheets for global trade management (GTM).
Many companies involved in global trade have a dedicated (and costly) staff to keep track of and comply with detailed, country-specific regulations. Transportation rates and schedules need to be analyzed; shipments must be screened against 200 lists containing an aggregate of more than 250,000 restricted parties.
Not properly managing this complex web of global trade results in poor supply chain performance, increased costs and exposure to fines/penalties. This sounds like a segment primed for some cloud disruption.
Trading Across Borders
The market for automated GTM solutions is estimated at $6 billion. The penetration rate today is only 6 percent. Founded in 2002, Amber Road is a small, cloud-based GTM solutions vendor trying to build market share. The company offers a full suite of solutions to improve the way companies conduct global trade, automating import and export processes to enable customers to move goods across international borders in an efficient manner.
Amber Road sells its solutions to both enterprises (companies with revenue over $1 billion) and mid-market players. At the end of last year, Amber Road had 463 customers, up from 399 at the end of 2012 and 351 at the end of 2011. Some of its largest accounts: General Electric, Monsanto, Tyco International and Wal-Mart Stores. In fact, Wal-Mart deployed the Amber Road platform to fully automate its entire import operation, taking costly middlemen out of the equation.
For suppliers, Amber Road’s solutions take purchase orders coming out of an enterprise resource planning (ERP) system and deliver them electronically to an overseas vendor, then keep track of goods in production before they get ready for shipment.
Once the goods are ready to go, the transportation module optimizes the shipping process by identifying the correct carriers and routes, then books the transport in the most efficient manner. Amber Road’s visibility tool allows customers to track the exact movement of goods into and out of the supply chain, constantly updating the ETA.
Handling Complex Regulations
The export module checks to see if an export license is required (depending on the countries involved in the shipment), allows customers to screen for parties in a transaction that may be on a government blacklist and creates all shipping documents.
The import module calculates correct duties and taxes, checks to see if an import license is required, fills out all necessary customs entry forms and files the forms with the proper government agencies. The trade-agreement solution enables customers that are in compliance to participate in duty-free programs to reduce duties and taxes.
With China now the world’s largest trading economy, Amber Road has been expanding its presence in that country. Last September, the company acquired EasyCargo, a Chinese provider of cloud-based GTM solutions. The founder of EasyCargo is now the managing director of Amber Road’s Chinese operations.
Amber Road has a dedicated module to automate trade in China and help customers take advantage of Chinese trade incentives, including exemptions on certain import duties and taxes tied to the operation of Chinese-based manufacturing facilities.
Tracking Data Worldwide
Integrated into the Amber Road platform is Global Knowledge, a proprietary trade-content database containing the most up-to-date regulations, transportation rates, schedules and information on free trade agreements. Amber Road has a staff of more than 100 trade specialists and attorneys keeping track of all of the latest data; in 2013, more than 13 million new records were added to the database. All of this unstructured data is translated into actionable content for the Amber Road platform.
The company, which went public in March at $13 a share (the stock is now trading around $14.60), is an emerging player, with revenue last year of just $52.5 million. Revenue in the first quarter rose 29 percent to $15 million, and in the latest quarter was up 32 percent to $15.8 million. For the year, Amber Road expects revenue in the range of $63 million to $63.6 million, representing growth of 20.5 percent at the midpoint.
The company benefits from fairly high visibility, as generally 75 percent of revenue comes from recurring subscription fees (contract lengths are usually three to five years). The recurring revenue retention rate is a healthy 102 percent.