COMMITMENT TO THE TRADENET IDEA

Transcription

1 Part II Case Study TRADENET Singapore's Computerization of International Trade* INTRODUCTION Singapore, a tiny island with a population just under 3 million, is the seventeenth largest trader in the world (over US $200 billion in 1994). At any given time there are more than 800 vessels in its port, the busiest in the world. Changi international airport is the largest and busiest in Southeast Asia. Located in the southern tip of the Malaysian peninsula at the entrance to the Malacca Straits, Singapore is used by many traders as a hub for trans-shipping goods among vessels and among aircraft. The country provides an ample free tax zone to attract international traders. Over 700 shipping companies do business in Singapore. Since trade is a significant component of Singapore s economy, the government decided to support trade by providing the most efficient services to the international trading community, at competitive prices. In order to attain this objective, Singapore is using the most sophisticated information technology (IT) applications. For example, the intelligent systems of its port are considered to be among the most innovative in the world. However, the best known IT system, and the one that plays a most significant role in Singapore s trade, is TradeNet. TradeNet is an EDI system that links over 12,000 traders (an increase from 1,000 in 1990), support companies, and government agencies that are involved in Singapore s international trade, for the purpose of exchanging trade documents electronically. Through TradeNet, companies and agencies can submit, directly from their computers, documents such as trade declarations, which state the nature, source, and destinations of products, and permits, which are needed to be approved by government agencies. A document can be sent to all relevant bodies and returned with approvals in about 15 minutes. This process *Source: Neo, B. S., Managing New Information Technologies: Lessons from Singapore s Experience with EDI, Information & Management, Vol. 26, 1994, pp Modified by the author. Reproduced by permission of Information & Management and the author. once took between two and four days. The documentation-processing cost has been reduced by more than 20 percent and, in some cases, by as much as 50 percent. Overall, TradeNet saves more than $600 million a year. And it is only the beginning. At the end of 1995, TradeNet went interactive. This reduced the processing time to about 2.5 minutes. The interactive system allows documents to be processed in real-time, instead of being collected and sent out later in batches, as was the case until But TradeNet is much more than just a vehicle for improving transfer of documents. It is a facilitator of international trade and a foundation upon which several national networks are constructed. COMMITMENT TO THE TRADENET IDEA International trade is characterized not only by the physical movement of goods across national boundaries, but also by the unwieldy, voluminous, and costly paperwork that accompanies it, containing data that facilitate the physical goods movement (e.g., destination), show ownership, and describe attributes of the goods, including whether they meet governmental requirements (e.g., whether they are high-technology goods that may be prohibited from export to certain countries). A 1985 study by the Swedish Trade Procedures Council showed that the costs of trade processing and documentation were between 4 and 7 percent of invoice value. For trade-dependent Singapore, the opportunity was obvious: one-half percentage point cost reduction in trade paperwork would mean a saving of almost U.S.$1 billion annually! In Singapore, the government requires that trade documents be prepared and submitted to a number of agencies for clearance before goods may be imported or exported. There are 20 government agencies requiring documentation for specific categories of goods, although up to three agencies approvals are the norm for any one commodity. The trade documents were in paper form, and were often hand-delivered to, and collected from, government agencies in many geographically dispersed locations. Furthermore, although there was substantial overlap in the type of information required, each govern- 1

2 2 TURBAN / INFORMATION TECHNOLOGY FOR MANAGEMENT, 2E FIGURE 1 Typical document flow for import and export. ment agency had its own document with its own format. This meant that a trader often needed to enter the same data in different formats in several documents to satisfy the requirements of various government departments and agencies. The number of trade documents averages about 10,000 per day. The complexity of document flows required for international trade in Singapore is illustrated in Figure 1. From the traders view, the clearance of documents was endured as a necessary evil, slowing down the movements of goods and tying up labor that was in short supply in the tight Singapore labor market. From the view of the government agencies, the handling of trade documents was tedious, with one agency having as many as 100 clerks to process, key in, and approve the documents. This trade documentation problem led several government agencies to initiate a search for solutions; this inevitably pointed to IT as a major option. In 1984, the Port of Singapore Authority implemented a system to link port users to it for the purpose of submitting and clearing sea manifests. In 1985, the Civil Aviation Authority of Singapore initiated a study to examine trade clearance for air cargo, and recommended the development of a common computer system for the air freight industry. In December 1985, the Ministry of Trade and Industry implemented a new trade processing system that computerized the front-end data entry for trade documents and speeded up the reporting of trade statistics. In the same year, the Telecommunication Authority (responsible for all telephone networks), together with AT&T, conducted a market study and concluded that there were opportunities to exploit value-added networks, especially in facilitating international trade. These attempts were largely confined to areas within the ambit of each agency s charter and expertise. The solutions that were proposed or implemented were not linked, and by themselves did not constitute, an adequate solution to the trade processing problem. Recognizing the need for a coordinated effort to resolve the trade documentation problem, a multi-agency Committee for the Integration of Documents and Procedures was formed in February 1986 to look for solutions to simplify and integrate trade procedures in order to speed up the clearance of cargoes and to generate accurate and timely trade information. The committee submitted its report in June 1986, and recommended the development and implementation of an online community trading system called TradeNet. With this, multiple

3 PART II CASE STUDY 3 FIGURE 2 Document flow in TradeNet. trade forms would be consolidated into a single document, which would be submitted electronically to the relevant government agencies. In contrast to the paperwork web, the proposed document flow scheme in TradeNet is simple, as illustrated in Figure 2. The potential of TradeNet in enhancing Singapore s international competitiveness was highlighted as a strategic goal. There was considerable excitement about the possibility for a trader to make a single electronic trade document submission that would be routed to as many agencies as required. By providing fast turnaround and making it easy, convenient, and cost effective for traders to do business, Singapore would be able to attract more companies to make investments as well as set up their regional headquarters within her borders. TradeNet was seen as a new way of doing business in the global arena, and Singapore would be among the pioneers in simplifying trade processing (other countries, like Hong Kong, had proposed similar ideas but progress toward implementation had stalled). The issue of how Singapore may be more internationally competitive had caught the attention of the nation at that time, because Singapore was suffering its first major economic recession since independence and was experiencing negative growth for the first time in twenty years. There was much public and political debate on ways to reduce costs to make Singapore more competitive. The government s commitment to the strategic project was underscored when the Prime Minister announced a deadline of January 1989 for implementation, allowing two years to develop the system. Four major lessons may be drawn from this: 1. The trigger for Singapore s consideration of new IT solutions was a specific business problem. It did not result from a general scanning of new IT developments. Such a problem-directed search process improves the likelihood that the new IT would be relevant in meeting business needs. 2. Sustaining a strategic IT effort requires a vision that goes beyond the original problem that triggered its consideration. TradeNet evolved into an idea that would enhance the global competitiveness of Singapore as a trading nation. 3. The TradeNet solution requires the cooperation of multiple government agencies and an integration of their efforts. Having a strong sponsor like the government was important but not sufficient for success. Earlier efforts by individual government statutory boards did not result in an acceptable solution. In today s competitive environment, interorganizational collaboration is often required in major strategic moves, including the adoption of new IT.

4 4 TURBAN / INFORMATION TECHNOLOGY FOR MANAGEMENT, 2E 4. The government s approval was given for the TradeNet idea, and not a particular technological platform. The public announcement focused on the conceptual solution without a premature commitment on any particular technology. Coupling a technological platform to a proposed solution may stifle creativity in finding more appropriate technologies to meet the business needs. This was important in TradeNet s case, because the recommended technological platform initially was not EDI-based. THE TECHNOLOGICAL DECISION After the approval for TradeNet was given, an executive committee, comprising the CEOs of various government agencies, trade associations, and major user firms, was set up to gather support for the system and to oversee its progress. A project team was also formed to define, develop, and implement the proposed system. The team completed the functional specifications for the system in February 1987 and began the search for a technical solution. The prior solution involved a large mainframe computer with online linkages to traders to allow the submission of trade documents for clearance. The search for alternative solutions took two forms: first, a request for information (RFI) was sent to prospective vendors to find out the products and services available to meet the requirements of the functional specifications; second, the project team visited several seaport and airport installations in Japan, Sweden, Holland, the UK, and the United States. They saw both online and EDI-based systems. On their return, and on studying the 23 responses to the RFI, the project team proposed the adoption of an EDI-based approach. At the time that the project team was considering the technical solution, the number of trade documents processed was about 10,000 per day. As immediate approval for import/export permits was not required, an EDI-based solution seemed to best meet the operational requirements at an acceptable price: the cost of providing online service to handle the peak workload would have been prohibitive. The project team submitted a technical paper to the executive committee recommending EDI for TradeNet. As illustrated in Figure 3, a trader would fill an inward declaration document on a local terminal or personal computer. Once completed, the TradeNet computer is accessed via a modem and telephone line and the form is transmitted to the system. The Trade Development Board retrieves the form and approves it by entering a password and then transmits the form back to the TradeNet system. This then becomes the import permit for the trader, which can be retrieved from TradeNet. The inward declaration is also automatically forwarded to Customs for retrieval and approval, and then transmitted back to the trader. The same information may therefore be retrieved by all authorized parties who need it for operational or reporting purposes. A planned educational program was launched to expose the business community to EDI. Seminars for managers and executives were organized periodically, with key government leaders and prominent CEOs of government agencies invited to give the opening speeches. EDI success stories from other countries were highlighted. The press was fed with information on a regular basis to keep the public informed. Four major lessons may be drawn from the decision to invest in EDI as a new technology for Singapore: 5. Adopting new IT requires exposure to new information and new ways of doing business. The RFI and overseas visits were instrumental in confirming the match between Singapore s processing requirements with the features of EDI technology. 6. An influential person who would champion the new IT is a critical factor in its adoption. TradeNet had two influential champions. 7. Once adopted, the new IT must be marketed to the intended clientele and users. A carefully planned and coordinated publicity and educational effort was instrumental in preparing the trading community to accept the new technology. 8. The adoption of a new IT is facilitated when users can apply it immediately and inexpensively to resolve a business problem. The business community could see its value immediately. THE DELIVERY ORGANIZATIONAL STRUCTURE Once the approval for the TradeNet project was given, there was a need to determine an appropriate organization to develop and implement the system. Which government agency should be responsible for TradeNet? The Trade Development Board (TDB) was championing the simplification and integration of trade procedures and documentation, but did not even have its own computer services department. The National Computer Board (NCB), the lead agency in government computerization, had the technical expertise, but did not have knowledge of international trade transactions. At that time, the CEOs of both TDB and NCB met and decided to join hands. They shared similar views on the importance of the proposed TradeNet project. According to one, we knew each other well and we could work together. Breaking away from past practice, the government assigned the TradeNet project to both TDB and NCB collectively. The

5 PART II CASE STUDY 5 FIGURE 3 Electronic trading through TradeNet. TDB-NCB partnership was born, with TDB s CEO chairing the executive committee and coopting the key government agencies and trade associations to support the project. The NCB provided the project team, and worked with key users to define the system requirements. During 1987, consensus was building toward setting up a new private company to run TradeNet. It could give all major interested parties a stake and provide the needed incentives to ensure TradeNet s utilization and success. Also, EDI technology had potential beyond trade processing and the new company could spearhead development of other applications. Finally, the company could be a vehicle to ensure financial accountability. Approval for a new company to operate TradeNet was given after an internal feasibility study in early 1988 showed that it was financially viable. In March 1988, a new for-profit company, Singapore Network Services (SNS), was set up, with an initial capitalization of S$24 million. TDB took 55 percent ownership, with the remaining shares taken up by the agencies responsible for the port, civil aviation, and telecommunication network, each owning 15 percent of SNS s shares. Three important lessons are: 9. Partnership between business and IT people is critical for the successful development of strategic systems. Each party will not have the requisite knowledge and expertise to proceed successfully by itself. The importance of the TDB/NCB partnership to TradeNet s success was recognized when the Society for Information Management gave its Partners-in-Leadership award to TradeNet in An integrated system requires the cooperation of interested parties within the delivery structure to ensure its support and success. Each major interested party should be given a stake. The executive committee and the formation of SNS were important delivery mechanisms in TradeNet s success. 11. The focused effort that a separate business organization could give to the exploitation of a new IT would speed up its application and diffusion. The formation of SNS was instrumental in the rapid growth and development of other EDI applications in Singapore. EDI applications are now available for the medical, legal, and other business communities.

6 6 TURBAN / INFORMATION TECHNOLOGY FOR MANAGEMENT, 2E SELECTION OF A VENDOR The decision to adopt an EDI-based system narrowed the number of qualified vendors. After careful scrutiny of the 23 responses, only three vendors were qualified: IBM, McDonnell Douglas Information Systems, and GE Information Services. IBM and McDonnell Douglas had also proposed strategic ties with local software houses for the project. All three were already operating EDI networks in other countries. A Request for Proposal (RFP) or tender was provided to the three shortlisted companies in mid After the responses were received in August 1987, there were intensive discussions with the three vendors, including on-site overseas visits by the project team. IBM, with a local software house, Computer Systems Advisers (CSA), as subcontractor, was selected as the vendor for TradeNet. A U.S. $10 million contract was signed with SNS in April IBM, departing from its normal practice, agreed to license its proprietary EDI system, the Information Exchange, to SNS and to adapt it to meet the requirements. It also agreed to allow SNS to operate it as a value-added network (VAN) service provider in Singapore and provide all necessary support toward that end. IBM and CSA worked out an acceptable plan that would implement TradeNet in phases. The tender price was not the primary criterion in SNS s selection of IBM. Two further lessons may be added: 12. Specific criteria must be set in selecting vendors for critical systems. The vendor must be able to meet the firm s strategic objectives. IBM met both SNS s objectives of timing and technology transfer, and was awarded the contract. 13. In adopting new IT and embarking on major critical system projects, vendor selection is a major policy decision. Once a vendor is selected, organizational dependence on it tends to grow as personnel develop skills and expertise around the vendor s platforms and products. IBM and CSA were able to obtain substantial advantage from the publicity given to TradeNet. CSA s growth was boosted by the TradeNet contract, and in 1990, IBM formalized its strategic relationship with CSA by taking up equity interest in this local software house. RESULTS OF SINGAPORE S EDI IMPLEMENTATION The impacts of the active management approach to the adoption of EDI in Singapore can be assessed by examining three areas: project management, user adoption and business productivity, and diffusion of EDI applications. Project Management TradeNet performed extremely well from a normal project management criteria: time and cost targets. TradeNet went live in January 1989, on time. There was little variation from the cost estimates of the feasibility study, based on the contract awarded to IBM. In terms of system performance, 97 percent of all trade documents processed through TradeNet are now approved by the relevant government agencies within 15 minutes of submission, compared to the two-day turnaround time needed previously. User Business Productivity User trading firms have reported substantial savings in labor and inventory holding costs, with 20 to 30 percent savings in documentation overhead. TradeNet s round-theclock operation and pre-clearance procedures allow traders to process the necessary trade documents prior to the physical arrival of their goods, which could then be moved out of the air or sea ports immediately without going through a warehouse pending clearance. Trading firms that were already computerized could transfer the necessary data from their own systems directly to TradeNet, eliminating duplicate data entry and reducing errors. Diffusion of EDI Applications in Singapore SNS has since built new services on the basic EDI engine; these cater to the diverse needs of other industry sectors, including MediNet for the healthcare community, LawNet for the legal community, and other generic services for interorganizational linkage between manufacturers, retailers, suppliers, and financial institutions. For example, hospitals are now able to transmit medical claims electronically to the Central Provident Fund for approval; manufacturers and retailers can transact by sending quotations, purchase orders, invoices, and tenders electronically, and settle their payments through the electronic payment system offered by the banks. International links to the United States, Europe, and Japan are also provided. There can be no international trade on a proprietary system, and therefore the internationally accepted EDI-FACT standard was adopted for TradeNet. Now, global business connectivity is a reality for EDI users in Singapore via GEIS (General Electric Information Services), providing access to more than 5,000 users worldwide; SITA (Societe International de Telecommunications Aeronautiques), providing access to more than 25,000 airlines, freight forwarders, and custom administrators; and Fujitsu, providing access to 18,000 users in Japan. Links to other international networks are being negotiated. Instant access to information for decision-making is also available to TradeNet subscribers. Databases are pro-

7 PART II CASE STUDY 7 vided through third-party connections (e.g., linkage with PortNet provides freight forwarders direct access to shipping and vessel schedules and makes it possible to book port services directly through the same terminal connection). The StarNet community system at the air cargo complex in the Changi International Airport also provides for efficient cargo tracking and communication between airlines, cargo handlers, and freight forwarders. A firm can now integrate its trade processing requirements with other business communication requirements. In Singapore, EDI is no longer exclusively associated with trade documentation, it is seen as an enabling technology for communication with business partners anywhere in the world. LATEST DEVELOPMENTS TradeNet is a mature technology providing the Singapore port and airport with a competitive edge. Since its inception, EDI technology continues to improve, reduce processing time, and increase the number of users. Communication with government agencies has been streamlined and costs have been reduced. Recently (summer 1997), an investigation began to consider connecting TradeNet to the Internet. CASE STUDY QUESTIONS 1. Review the advantages of EDI (Chapter 6) and justify the use of EDI here over Why is TradeNet superior to the prior solution (a large mainframe with online linkages to traders)? 3. How does TradeNet enhance the competitiveness of Singapore in international trade? (Relate this to Chapter 3.) 4. Identify the factors that facilitate the success of TradeNet. 5. Why was cost not considered a major factor in awarding the contract? 6. Is the process of selecting EDI in line with the process of system development suggested in Chapter 14? 7. What have you learned from this case regarding the process of new technology adoption? 8. Review the reasons for the vendor s selection. What are the major lessons provided by the case? Do you agree or disagree? Why? 9. Explain why TradeNet is no longer exclusively associated with trade documentation, but is seen as an enabling technology for communication in international trade. 10. Some people argue that a problem-directed approach (Lesson 1) is inferior to a search for problems using proven technologies. The logic is that the latter helps organizations discover problems that they were not aware of. Debate. 11. Identify political, economical, and cultural factors cited in the case and assess their impact on TradeNet. 12. Is TradeNet an implementation of electronic commerce? Why or why not? 13. Access the Web site of TradeNet ( and identify some of the latest capabilities and developments. Prepare a report.