Save $100 Million in Sourcing with GTC Software

GTC Software is not just about Compliance

MIC was recognized by Ford Motor Company as a top-performing global supplier at Ford’s 23rd annual World Excellence Awards. MIC is an experienced provider of global trade compliance software solutions. In ARC’s recent study of this software market, MIC was the largest provider of Global Trade Compliance (GTC) software solutions to the automotive industry.

GTC software solutions automate and streamline processes related to customs compliance and help importers and exporters obey complex sets of laws. But in some industries, automotive is a prime example, these solutions enable optimal decision-making with respect to the impact of customs on business operations. Using GTC to optimize operations is the next step, beyond just using these solutions to ensure compliance to trade laws and regulations.

Rainer Roll, the chief commercial officer at MIC, says that some of their automotive clients have achieved over $100 million in annual savings from their GTC software solution. Coming from a supplier of these solutions, this might sound like an exaggeration.

In the automotive industry, every vehicle rolling down an assembly line might have slightly different components to better match customer demand. Perhaps all the cars are Ford Mustangs, for example. But the first car is a sedan, the next car is a convertible, the next car has aluminum wheels, and so forth.

From a global trade compliance perspective, this adds a lot of complexity. The automotive provisions in the United States-Mexico-Canada Agreement (USMCA) can help illustrate this point. In order not to be subject to costly tariffs that make the vehicles pricey, there are several requirements. These include increasing the required North American content from 60%-62.5% to 75%, from past provisions. There are similar rules in other regions.

So how can automakers ensure that they follow these regulations? The simple way would be to look at all the bills of materials (BOMs) for all the Mustangs that Ford produces. The automaker would make sure that no matter what version of the Mustang is made, at least 75% of the content is from North America. But this way of meeting the regulations means Ford may not be buying the most economical component. An Asian component might be less expensive. But unfortunately, in some configurations, the use of that component would cause the car to be under the 75% threshold, so the supplier component is removed from all the configurations. This is what manufacturer calls a “flat” BOM.

What the MIC origin calculation module does is ensure that an automaker can select the best components and still adhere to the letter of the law. MIC allows for calculation of a “multilevel” BOM. In short, it allows for component flexibility across all product variants.

Such a solution needs to be scalable. For one automaker, MIC is performing calculations on 9 million product variants, and conducts calculations multiple times during the planning and execution process.

Perhaps most importantly, every car made must be auditable. The automaker needs to show the pertinent authorities exactly how every car was made and be able to show each car meets the threshold requirement. Each supplier part for each car must be certified and traceable. MIC supports multiple free trade agreements, not just United States-Mexico-Canada Agreement.

So, do I believe this solution could lead a company with over $100 billion in revenues to save over $100 million in a year? Easily.

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