Suppose you have an international apparel company that manufactures and sells shirts. But let’s focus on just one shirt to start. Following common industry practice, you have the shirt manufactured in one country. The raw materials for manufacturing come from another country. And when the shirt is completed, it’s distributed to a third country to be sold in a store.
When raw materials, components, or finished products move between countries or regions, they’re subject to customs in each country/region. Items (raw materials to finished product) must be classified according to the World Customs Organization (WCO), each receiving a different classification number to clear the gate.
Classification gets even more complicated
A shirt usually comes in multiple sizes. So, a classification number needs to be maintained (in the system) for each size. Add to the other classification numbers for location, materials, components, and the finished shirt. The result? You have a vast amount of parts and numbers to deal with, eating up time and energy. And that’s just for one shirt.
Now, imagine a company such as VF Corporation with millions of products under 13 brands, including The North Face, Timberland, Jansport, Dickies, and Vans “Off the Wall,” requiring classification across six jurisdictions/regions. Seasonal products add more than 1 million revised, updated, or new products each year. Consider the number of classifications that must be made and recorded for all regions, products, raw materials, components, factories, and distribution centers worldwide. If that’s not enough to make a head spin, government regulations are constantly changing, with tariff schedules for determining classification updated regularly. Those updates must be noted and acted upon as well.
It all adds up to companies spending lots of time and energy staying up to date and compliant. And the consequences of failure can be significant. Incorrect or missing global trade classifications can lead to overpayment of duties or even worse to fines imposed by customs authorities or products rejected by customs, potentially affecting a company’s supply chain and causing reputational damage to your company.
Outfitting its operation with a Deloitte solution
VF Corporation was looking to improve its global process to deal with the high volume of trade classification requests. The company needed a solution that could accelerate the process, increase compliance and auditability, and ensure accurate results.
At the time, it took an average of one minute to store a classification result in VF Corporation’s system. Times the minute by just 100,000 items, and you can see that even a partial number of requests could keep employees extremely busy storing instead of thinking about and optimizing the company’s operation.
The solution needed the capability to handle approximately 50 attributes that impact global trade classification and be flexible enough to accommodate variants such as different product sizes. It had to be scalable and deployable for global use, integrate with the company’s SAP Global Trade Services (GTS) environment, and be easy to use. Deloitte Belgium’s TradeClassifier solution provided the perfect fit.
Made to order
Headquartered in Brussels, Deloitte Belgium is an affiliate of Deloitte NSE LLP, offering audit, risk advisory, accounting, tax and legal, financial and legal, consulting, and financial advisory services. Deloitte decided to build its TradeClassifier solution on the SAP Business Technology Platform (BTP) based on the platform’s easy deployment and integration with artificial intelligence (AI) technology, as well as its scalability.
The integrated solution, which includes Amazon Web Services (AWS), automates classification and reclassification in case of product changes or updates. Users can quickly and easily perform tasks with a smart, end-to-end workflow.
Suiting up to fly
With TradeClassifier, VF Corporation can process a substantially higher volume of classifications—performing more work with the same or fewer resources. It takes only two full-time employees to efficiently and accurately handle 3.1 million classifications annually, close to 1,000 per hour during operation.
In addition to the increased number of classifications, the total lead time for each classification has decreased. As a result, processing can start up to 24 hours earlier than before to be more proactive.
Recognized for its design
With the success of TradeClassifier, Deloitte received a classification of its own: Finalist in the 2023 SAP Innovation Award, now celebrating its 10th anniversary. Check out Deloitte’s Innovation Awards pitch deck.