Transcript
Speaker: Welcome to supply chain connections. I'm Brian Glick, founder and CEO of Chain .io. On this episode, you're going to get to hear two nerds really nerd out because we have Amy Morgan from Altana and Amy and I are both old school customs and trade compliance nerds. So we're going to talk about the application of AI in that space and some of the cool things Altana is doing and some of the
Speaker: cultural changes that we've seen across the trade compliance side. So for all of you supply chain people, here's a peek behind the curtain on the trade compliance world. Hope you enjoy the episode. Amy, welcome to the show. Thanks, Brian. So why don't we start with the basics? Tell us a little bit about how you got into the industry and how that led to Altana.
Speaker: Yeah, so that's a fun, very exciting story. But to tell it, I have to go back to the 90s to tell it how I got into this. So one of your previous guests said something that triggered something in me. Like I can't remember who it was, but they referred to themselves as like the Kevin Bacon of global supply chain. And that inspired me to think that
Speaker: I'm kind of like the forced gump of trade compliance because trade compliance really wasn't a thing until the mid 90s with the mod act in 93. And I got into trade compliance in the 90s and I've ridden that wave since then. So I was, you know, imagine it's 1996, you've got Amy in college studying political science with big political ambitions, took one political econ class that had to do with globalization, like a chapter on globalization.
Speaker: And it was a hot buzz term because of thomas friedman's book had just come out and i was hooked from that moment like the whole concept that businesses can be connected around the world in the spirit of producing one good and then that diverse like sharing that production process was actually less expensive and more economic.
Speaker: than producing something yourself just for some reason bloom online. So I just pulled that thread. I ended up interning with the World Trade Organization when they came to Seattle in 99, interned at the Port of Seattle. I did some work at the Seattle World Trade Center. I got my first .com experience in late 99.
Speaker: with an online transportation management company. So I just kind of kept going from thing to thing to thing, riding the moment where globalization was super hot and the new technology. The new technology was always coming out. I've just continued to walk through all those doors.
Speaker: So I got my first real trade compliance job at Nordstrom, where I assigned tariff codes to a pair on footwear. That was my job. That was it. And I'm really good at it too now, thanks to that experience. But it was Nordstrom took me to like, oh my god, this is super fun, but I want more. I go to Costco wholesale, also in the Seattle area.
Speaker: Costco is great. It got me exposure to more products. It got me exposure to Canada and Mexico. This is amazing. I need more. But then I go to Amazon. Amazon in 2009, 2010 was not the Amazon of today, but it was everything. If I wanted the world, I got the world. I got every product you can imagine, every country you can imagine. I got to create import operations into India, into Brazil.
Speaker: I mean, this was crazy. The experience was wild. But it was rough, as you can imagine. So let's fast forward to 2014 when all that stuff I saw at Amazon, like the rise of cross -border e -commerce and more small merchants wanting to do international trade activity. And I had my own idea. So I had a startup of my own for a second.
Speaker: I took this crazy geeky idea about how to automate trade compliance for everybody, how to democratize it. And I took it to a startup weekend, you know, those incubator events where you just kind of hack something out every weekend. And I ended up winning first place with my geeky little trade compliance idea, but I couldn't raise any money. So any CEO founders that have built companies and have successfully raised money, I have
Speaker: complete respect for you because that is so soul -crushing to hear that your amazing idea is not, in fact, a great idea to them. But through that experience of trying to raise money, I found out that right in my backyard was this tech company, Avalara. Some of your folks may know them. They're a tax software company and their focus at the time was on sales tax.
Speaker: but they wanted to do international sales taxes. So they wanted to support that rise in cross -border e -commerce as well. So I went to Avalara to build their cross -border business unit to create a landed cost calculator. And there's a whole bunch in that, but that's where I first built. I got to be the real CEO of that business unit and really create that product, sell that product, and push the envelope of trade compliance further on that e -com wave.
Speaker: And then I left there for reasons we can discuss some other time, and I wasn't going to do another trade thing. You and I, we weren't going to cross paths. I was going to go teach Pilates because, fun fact, when I left Avalara, I got certified in this very intense form of Pilates, and I was just going to go teach it. I said, I'm done. I'm hanging up my tariff schedule, and I'm going to go do this for a while. But the pandemic had other plans for everybody, right?
Speaker: During that time, I came across this Evan Smith at Altana with this really wild and incredibly progressive approach to how we can start thinking about trade compliance from an entirely different perspective and not just
Speaker: trade compliance. It was global supply chain all up. But I was completely amazed and it blew my mind. I'd never heard anything like it so much in fact that I had to be a part of it. I said, you're crazy. This is never going to work. But if it does, we will change an entire way people do international business. We can change how companies make choices about what suppliers
Speaker: they work with and what products they trade in and I'm leaving trade compliance better than it found me. So I had to do it. I had to join and it's been three years and I'm so glad I walked through that door. So I kind of took you on a journey, right? I started in big box retail, rode the ecom wave and now I'm in artificial intelligence and it's pretty awesome. So I really, as a fellow trade compliance nerd,
Speaker: Really just want to ask you about your opinions on some of the vagaries of IFI footwear invoices but instead because I feel like that might not be great for the rest of our listeners. Let's go through some basics first because you know in supply chain trade compliance as a topic is.
Speaker: deeply misunderstood. And I know if you walk into some companies, which trade compliance means, how do we figure out the lowest duty rate in others if they think it's part of ESG and it's all sorts of things to different people, right? How do you define trade compliance?
Speaker: I used to refer to it as the business of doing international trade activity. This is really generic, but it's interesting the way you put it. The way I would define it now is, how do I keep my company safe and make the world a better place?
Speaker: That might be a little controversial. I've never actually said that out loud to anybody. But if the last couple of years have proven anything to us, it's that trade compliance is more than just being an enforcer of the regulations themselves. Now, we're seeing humanitarian and environmental policies make their way into those regulations. So we have to enforce them. So it is regulatory. But in doing that, we are helping make the world a better place. We are
Speaker: doing our part to use trade as a vehicle for good rather than a vehicle for...
Speaker: it's bad for the earth and it's terrible for humans and it's just become this really ugly concept out in the world. And it doesn't have to be that. So that view of trade compliance, right? And it is compliance, right? So it does have this kind of regulatory function to it, you know, which I think day to day
Speaker: you know you think about how do i classify product you think about my doing my vendor audits you know am i dealing with the right people and i know that's a lot of what autana focuses on kind of. How does that interact with the general supply chain functions that your customers like how are those two things that used to be sometimes supply chain would report to the co and compliance which can port to the cfo and never the to show me.
Speaker: That's not the world anymore. How has that changed since when you were at Nordstrom's?
Speaker: I mean, you said never the two shall meet. Now I will make a quick correction that back in the day, in the olden times, although they operated in silos, supply chain needed compliance. Yes. It wasn't the other way around, right? Or well, it never was the other way around. Supply chain needed compliance because without compliance, your stuff would delay unexpectedly or costs would go up or you'd miss a particular manufacturing target. It would cause your entire process to break down.
Speaker: supply chain needed compliance. So they did meet there. Yes. I'll say though, what we've saw, especially it started before the pandemic, but really through the pandemic and all the things that broke down starting in late 19 2020, we've seen this convergence.
Speaker: of supply chain and compliance come together, where now they're working in tandem. In some cases, you see compliance is needed before supply chain. We see that with the UFLPA, where now supplier or a procurement... I'm going to pause you there. What's the UFLPA?
Speaker: So the We Are Forced Labor Protection Act, I apologize. I'm so used to doing these things with other compliance folks, I forget sometimes. So with this new legislation that requires that companies know who their suppliers are and who they do business with before they engage in activities with them requires compliance. It is a compliance function because that law and that requirement is something that your trade people are having to enforce.
Speaker: So, what I have seen in the last three weeks of customer calls, it's come up multiple times, where you have compliance departments that report up through supply chain. I'm shaking my head now for your listeners who can't see me. I can't help it. What you see happening now or back in the day, it was a conflict of interest to have a trade compliance report up through supply chain because you're enforcing
Speaker: with an agenda. And now that's really common because you need trade compliance to make supply chain work. If anything, maybe supply chain should roll up under trade compliance, but that's not going to be appropriate. Sorry. Maybe you guys spit out their coffee just now and that was a joke. Or maybe, or was it? Or was it? Well, actually it leads to kind of an interesting hypothesis that I developed in the last five seconds. So you tell me what you think about this.
Speaker: I would argue that the supply chain teams we worked with 20 years ago were Cowboys, right? Their job was get the product at the lowest cost, the place that needs to be damn everything else. There was no engineering to it. There was no discipline to it. It was just make the phone calls, kind of, you know, Tom Cruise at the beginning of Rain Man for anyone who's old enough to remember that and his issue was with customs. But, uh, that was kind of the attitude and that supply chain has grown up and matured.
Speaker: to the point where it can be trusted with compliance, though, because it's more about advanced planning and structuring and network design than it is about, I get a free pass to fly to China six times a year.
Speaker: It's an interesting hypothesis, right? I haven't worked for an importer -exporter enterprise since 2013, so I'm a little rusty, but sure, I can see it. I mean, there's a lot more rules and regulations now that do impact the supply chain, but that's just as evidence to what I pointed to earlier, in that with all these new rules and regulations, your trade compliance people are the one enforcing them, which means you gotta work really closely with supply chain anyway.
Speaker: So tell me a little bit about AI, not in a technical way, cause that's not either of our jobs, but sort of like, what does it mean to go from a world where the way that we did trade compliance was very procedural. It was very like you have a decision tree and a hierarchy and you classify the product based on an exact form that the buyer fills out. And it is very methodical and you do your vendor audits on a checklist.
Speaker: to moving to an AI based world where things are a little bit more emergent or fuzzy, you know, or like you're finding things, you're exploring, you know, you guys have this giant knowledge graph and you're exploring, you're encouraged to explore a graph and find new thoughts instead of just following a checklist and an SOP. Like how does that, how does that feel for you as a compliance person, for your customers?
Speaker: Yeah, so for me, when I first met Alton and I first was exposed to this concept, my first reaction as a compliance person, as a licensed broker was to say, no, that's not how you do this. A machine can't do this.
Speaker: But to be honest and to be very clear, I have built other types of models that have automated pieces of compliance before, like classification and such. But AI wasn't really a part of any of those solutions.
Speaker: Altana's approach to AI, this blew my mind. What blew my mind was that we can use a machine. We can teach a machine how to think like a compliance person. And I'm not saying replace a compliance person, but to think in the same way as a compliance person. And not only that, but we can use these machines to pull together billions of data points that a human can't keep in their head. And the machine can consume all of those data points.
Speaker: and identify patterns, identify signal, things that we may not pick up on with our checklist, right? An example, and I know that your listeners don't know all about the things that Altana does, but we've built this knowledge graph, and what that means is we've
Speaker: Take in public non -public private data trade data billions of data points we pulled it all together into a map we like to call it the google maps of global supply chain and what that means is i can see all the different parties in the world that are trading with each other what they're trading when they're trading and with the knowledge graph like that.
Speaker: If I know that I'm buying a particular product from a particular company, I can see not only the description and all the stuff on my checklist, just like normal, but I can also see what business that company that I'm buying something from or selling something to, what business they're in. And that can help inform a classification or a prediction. So all that context
Speaker: takes my checklist and like and blows it up right no longer my just subject to what you tell me on a piece of paper i can go look up a particular company and learn all the things that aren't on that checklist i can see beyond the description i can see what kind of components go into a product like that to help make a better choice to help make a better compliance decision.
Speaker: So if I'm talking about classification, or if I'm doing a country of origin verification, or I need to audit something, I can use all that information to tell me what I should be auditing, to tell me if my product truly does qualify for a particular trade program or if it doesn't. I'm working on something in my head right now about how to use that same data to help inform tariff engineering. So for those supply chain managers out there who do want to get the lowest possible duty rate at all costs, how can I enable you to do that using data as well?
Speaker: It just opens up this whole new way for trade compliance people to think beyond just what they're told. What I say when I talk to folks is, the role here, the way that we design this and are using this AI is not to replace a compliance person. It's to elevate the role of a trade compliance person so they can do more strategic work within their companies and they can be that partner that the supply chain team needs them to be.
Speaker: And that's what's most important to me. So I don't know. I hope I answered your question. I don't know. I think you did. I'll say that, you know, I, as a tech founder and not like say change a verse or risk a verse. And when I saw, you know, Tana and Evan showed me some very, very early things that you guys were doing, this is four years plus ago. It really did open up to me. I was like, this is cool. And this is very powerful, right?
Speaker: But I wonder, or I'm curious kind of, you're out there on the front lines now with trade compliance people who have been trained for their entire careers to be risk averse, right? Like that's literally the job is to be risk averse and keep those Cowboys over in supply chain from doing stupid things that are going to get the company and the washer journal. What's the reaction to asking them to rethink their job or their responsibilities a little bit?
Speaker: It's been a mixed bag. There are a lot of very forward -thinking freight forwarders and customs brokers and service providers out there who are desperate for automation. They are dealing with more volume, more countries than they've ever touched before, and there aren't enough humans. They can't hire enough people to do what's necessary to not only comply with the laws, but to also facilitate the movement of these things.
Speaker: They are looking for solutions that will help them. Enterprise, yes and no. They're going to hire people and then they're going to rely on their service providers. I'm seeing more and more reliance on their service providers. That's why I focus on the service providers in this case. When it comes to being risk -averse, I would go so far as to say the AI could actually help you be more risk -averse. If you can train a machine
Speaker: to get a high accurate result on something. And you trust that result to a certain degree. Like say, any HS classification prediction over 80%, let's just go with it. Anything less than that, I want my people to look at. So now your people can spend more time on the things that are likely to be risky than on what's not. And I use classification as an example, but you can plug in any favorite compliance activity there. That's the whole idea is to give
Speaker: compliance and give supply chain folks a copilot so that they can do more without just throwing bodies or money or consultants at the problem. AI doesn't sleep. Machines don't sleep, so they can continue to watch and they can look and they can seek out patterns and they can
Speaker: Evolve as the supply chain changes or as new rules get passed or as you know companies move they change their name Whatever the technology can see it and watch it track it monitor it over and over and over again Continuously showing you what you need to look at versus you know having to go Classify the same product 20 times because it's a different color or something like that. So I'm gonna ask you a Relatively pull us back to a higher level for a second
Speaker: You guys recently announced work that you're doing directly with US Customs. Big announcement, very important for your company. This is the first time in my career that I can remember a company bringing the same or a similar technology solution to both the enforcement agency and the parties that are being enforced.
Speaker: That you're bringing this graph to everyone, which theoretically is a win -win. But how do you guys think about it? Or how do your customers think about it? Or what's the conversation in the office? It's a win -win. It's a win -win -win, actually. It's good for the enforcer. It's good for the enforcer. And it's great for
Speaker: you know, Altana having the right technology, the right time for the right problem. And that's what we talk about with the enterprise folks as well. A lot of the events I've been to lately have to do with forced labor and that UFLP, the Uighur Forced Labor Protection Act and companies, there's a lot of anxiety around how to comply with it. One of the things they're most anxious about is not knowing what customs sees and what customs is doing when they detain incoming shipments.
Speaker: When we talk to an enterprise or we talk to these service providers, if everybody's working off of the same graph, now you know what customs is looking at. You have a good idea of what flags they're seeing. If you see any of those flags in your
Speaker: multi -tier network of suppliers. Maybe you can take steps to mitigate or get ahead of it before something bad happens to you. Both sides like it. Everyone's very sensitive about like, oh my God, don't share my data though. That's a whole different conversation about data security, but it's been really positive. It's seen as a good thing. So one of the precursors to that happening that I know you and I have talked about kind of on the sidelines at some shows and things is
Speaker: a real change in culture at customs over the course of our careers, right? And this idea that, you know, in the nineties and into the early two thousands, there was this attitude, I would say before September 11th, especially of, you know, customs is the boogeyman like the IRS, right? Their job is to just jump out at the bushes and find you. And they behaved it that way. They did not engage, like we save the trade now. I don't even think people use that word, right? In that sense of,
Speaker: There wasn't this outward reach for customs to participate in trade facilitation. They were an enforcement body. I know you have some thoughts on that, but can you describe
Speaker: what the difference maybe is since we got into this of how customs behaves without dragging customs. It's not negative from anybody. So I started my career in trade compliance just as customs was finding their footing about what this means to them as well. So I will agree that yes, they started out in an enforcement agency. That's their job. It was revenue protection, keep the homeland safe, all these things.
Speaker: Yes, 9 -11 happened. Then you've got revenue, now security on top of revenue. Now they're enforcing for security things, they're enforcing for revenue protection. Then the pendulum has swung back and forth a little bit after 9 -11 and swung back towards enforcement. We saw that with the China tariffs in the US, where CBP had to go right back into revenue enforcement mode to go make sure that those taxes were being collected appropriately.
Speaker: In recent years, we've heard about the 21 CCF. I don't know if the supply chain listeners on the phone are talking about the 21st century customs framework where they're doing compliance people, probably not. But this whole idea of modernizing customs to facilitate trade now, they can be an enforcement agency that enforces for revenue protection and Homeland Security, but they can also help facilitate
Speaker: the trade activity. So how, you know, they're looking at technologies that help them make better use of their resources, that help them target and make better risk -based decisions. So it's really been this public -private partnership really since I'd say the very first customs private sector partnership was the MOD Act, right? When they shifted the responsibility onto the companies. And then with CT -PAT and all of these security -related programs, again, those are partnerships with the trade for data to keep the homeland safe. And we're feeling it again.
Speaker: this time in the spirit of trade facilitation. So I see these things as all good things. I see customs, they're trying, their government agency stuff moves a little bit slowly, but I do see them trying. What in particular are you excited about, you know, that's coming up or that you see on the radar?
Speaker: So what I'm excited about when it comes to trade compliance stuff, I'm excited that I'm seeing and I'm a part of a narrative change. I'm excited that trade compliance is now working with supply chain folks. I'm excited that the business of international trade is now considered a strategic advantage and has a seat in the boardroom.
Speaker: I'm excited that the trade people are no longer the nerds they keep under the stairs and only bring out when they need to try to tariff engineer something. I was that person and that's okay, but I'm excited that this whole entire narrative around compliance, around trade, around global trade in general
Speaker: is changing and I'm inspired by the new attention or maybe at least the concentrated attention on environmental and social issues and how we can in fact use global trade as a vehicle for good rather than see it as a way to import cheap stuff.
Speaker: and exploit people and our earth and all of that. So these are things that I find incredibly inspiring. And with more use of technology and using more technology in our planning of our supply chains and who our suppliers are, I have to believe, Brian, that companies will ultimately embrace this technology and use it to make better choices. That is why I do this every day because I have to believe that that will happen. And I do agree with you because
Speaker: One of the paradigm shifts that I remember going through when I had my customs compliance software company, this was around the rise of Facebook and the very beginning of Twitter, but explaining to companies that a trade compliance issue was a brand issue. Certainly, the social media has been around long enough. This is probably just obvious now, but it wasn't obvious at a certain point in time that
Speaker: you know, having a factory that was non -compliant or getting hit with, you know, a multimillion dollar penalty in a foreign country for something that never touched the US whatsoever. You know, you brought something, you know, from China to Saudi Arabia and something happened or whatever the case may be, that that was going to be globally impactful to your company, you know, was a new concept.
Speaker: You know, and it's why a lot of brands bought their licensees back to get more control over that because it used to be, and a lot of people didn't know this at the time, but a lot of us brands, if you bought their products in foreign countries, you were not buying a product from that company. You were just buying a licensed product and it was manufactured separately and it was produced separately under different circumstances with different compliance activities. And the industry has sort of snapped back from that. That's not.
Speaker: as common a practice anymore, let's say. Everything was that way. On that note, I would venture a little bit to that. Some of that is probably because of rule changes, new regulations and things, but also just brand protection. Now, I'm not an expert in brand protection, but if I buy my running shoes here in the US, I have a particular brand I like, and then I go buy that same brand,
Speaker: in Canada somewhere else and it's like different quality, you've kind of lost me as a customer, right? So now that everybody, like the world is your market, I can shop from anywhere, right? With so much selection, you need to take that brand control back just to maintain your integrity. And I always used to say it as, you know, I'll try to not pick on any particular country here, but you know,
Speaker: Mr. X's licensing co of country Y buys a product that has a consumer safety issue and four people die. If your brand's on that, nobody at the Wall Street Journal is going to reference Mr. X's company Y in the article. That is not the headline, right? The headline is the logo. That's right. You know, if that country was a world away, that logo never hit us shores before. Now it's there before you know it happened.
Speaker: and that's trade compliance in the 21st century, right? Yeah. Cool. Where can people learn more about Altana? What do you guys have coming up?
Speaker: It'll be a busy fall for us. We'll be out in the world a lot. I mean, everyone can go to our website. I'm headed to GTech next week. So going to meet with some more trade compliance friends. I will be at the CSCMP edge conference coming up. I think that's October. Actually, I know a lot of your supply chain folks may be there. I pitched this idea for an AI panel about how supply chain leaders can use AI in practical ways.
Speaker: And I hope your folks come see us there. We're starting to get involved in some of the Gartner supply chain conferences. So we're getting out there. And of course, you can always find me on LinkedIn. I have an opinion on everything. So I'm out there making comments. Well, thank you for sharing some of those opinions today. And it was great having you on. This was a long time coming. Amy and I are kindred spirits of the industry. So again, thanks for being on the show. Indeed. Thank you. Thank you so much to Amy for what was just an awesome conversation.
Speaker: always great for me personally to get to dive back into my roots in trade compliance. And I hope everybody else enjoyed it as well. It's always really cool to hear about companies that are using exciting new technology like AI in a very practical way to solve real world problems. Be sure to check out Altana's information. We'll have the link in the show notes. And as always, check out the channel blog when you get a chance. Lots of stuff in there, including some stuff about emerging technology and AI for you to check out.
Speaker: So I'm Brian Glick, founder and CEO at Chain .io, and I will talk to you next time.
