Newsletter
TradeCard News - September 2004
Financial Supply Chain Automation - The Hosted way to Procure-To-Pay
Welcome to TradeCard's monthly e-mail newsletter - a summary of the latest news from TradeCard.
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Be sure to check out the second installment of "Principles of Global Trade." Each month's principle is
based on our members' experiences.
We'd also love to hear from you. Send trade tips, suggested topics, or questions for our management team to
sales@tradecard.com
PRINCIPLES OF GLOBAL TRADE: THE INTERNET - DEVELOPING YOUR STRATEGY TO MOVE TOWARDS E-PROCUREMENT
NOTES FROM THE ROAD: BRAD SCHELLER DISCUSSES HOW EARLY PAYMENT PROGRAMS ARE DRIVING A/P
AUTOMATION
HEADLINES: RECENT ARTICLES THAT HAVE FEATURED TRADECARD
EVENTS: UPCOMING TRADESHOWS, CONFERENCES, WEB SEMINARS AND MORE
PRINCIPLES OF GLOBAL TRADE * PRINCIPLES OF GLOBAL TRADE * PRINCIPLES OF GLOBAL TRADE
This is the second installment of our ten-part series.
PRINCIPLE 2:
Developing your strategy to move towards e-procurement
Every trading company should now be preparing a strategy to extract the maximum advantage from electronic
technologies that contribute to trade efficiency. The requirements of a specific trading company must depend on
the circumstances, but it is important to bear in mind the strengths and limitations of the available options.
ERP systems are major investments in computerization that can provide great benefit to corporate management. The
question is, does it make sense to extend an ERP approach to the financial supply chain, given the availability
of hosted, web-based technologies?
As companies that have implemented ERP systems know firsthand, the implementation period for ERP modules can be
very long. Another challenge is that ERP systems were built to automate management control of internal operations - not extra-enterprise collaboration with trading partners. However, ERP systems can interface with EDI systems.
EIPP, available from third party providers and some leading banks, replaces paper with electronic clearing on a
local basis. It should be assessed on the basis of short-term cost-effectiveness, rather than as a step towards
e-trade in general.
Electronic letters of credit are similarly, a short-term fix. The main benefit of electronic L/Cs is to
familiarize your staff with working electronically and some cutting down on paper documentation.
Web-based hosted services for automation of complete trade transactions from purchase order through to payment are
a basic building block of future e-commerce. Among the criteria to look for are:
- Low up-front cost; use of Internet rather than a dedicated network;
- Use of XML, HTML and other standard technologies rather than proprietary technologies;
- High level of security; use by an existing community of traders;
- Large reduction in transaction cost compared with paper based trading;
- Use of system by all supply chain participants, including logistics providers, consignment inspectors,
financial sources of trade capital and payment guarantees
NOTES FROM THE ROAD * NOTES FROM THE ROAD * NOTES FROM THE ROAD
In this month's column, Brad Scheller - TradeCard's vice president, global sales and marketing - discusses how
early payment programs are driving AP automation.
In the past, stretching out payments to vendors was considered a tenet of proper cash management. The idea was to
slow down AP and pay suppliers as late as possible - and in turn, preserve cash and improve returns.
If that's still the case, then why are so many buyers automating their AP, speeding up their process and paying
early?
Take a recent Aberdeen Group survey of 700 companies. 98% of them reported that a focus on the back portion of
the order-to-pay process has received, continued or increased focus over the past two years.
One factor behind this shift is process savings. According to Aberdeen Group, buyers can reduce per invoice
processing costs by 50 to 60 percent - just by switching to electronic invoices. But there is an even bigger
driver. It is the dramatic returns buyers earn in early payment programs, which offer shorter terms to suppliers
in exchange for a discount off invoice. Some buyers garner .50% - 2.00% discounts off invoice value.
Early payment is predicated on quick accounts payable processes. For most large buyers, this requires a solution
for automating electronic invoice and other trade documents' receipt and reconciliation; payment decisioning and
scheduling; and integrated money movement. The capability to programmatically offer and manage different
discounted payment rates to different vendors and regions is also important.
Of course, some buyers do not have the working capital to fund early payment. If your company is in this
position, look for a solution that can integrate third-party financing directly into early payment transactions.
An added benefit of this approach is that it preserves your existing cash flow - while improving the cash flows
of your suppliers.
HEADLINES * HEADLINES * HEADLINES * HEADLINES * HEADLINES * HEADLINES
Recent TradeCard headlines with some article excerpts:
- In Depth: Global Supply Chain - Making Global Supply Chains Work, Supply & Demand Chain Executive, August
2004 issue
The article contains a case study of longtime TradeCard customer Wolverine World Wide:
Wolverine, founded in 1883, is based in Rockford, Mich. Last year the company had 889 million in revenues.
Wolverine sources about 25 million pairs of shoes in the Far East each year, along with 3 million pairs
elsewhere, and it imports about half the total, or 14 million pairs annually, into the United States.
Roy went looking for a way to streamline Wolverine's payment process and shift its primary trading relations to
open account terms. A local representative of Comerica Bank introduced Wolverine to TradeCard, which offers
solutions to automate trade transactions from procurement through payment. In short order, after some
customization work on TradeCard's part to meet Wolverine's interface and process requirements, the footwear
company began a two-month pilot of the solution with its largest Far East trading partner, which accounted for
about 20 percent of the shoes that Wolverine sourced.
Currently, Wolverine is putting more than $300 million through the TradeCard system, covering, according to
Roy's estimate, about 22.5 million pairs of shoes. The company's savings have been both hard - trading a triple-digit LC fee for a double-digit transaction fee through TradeCard, handling increased business while not having
to add staff to process the greater number of financial transactions - and soft, with Wolverine finding that its
trade finance processes simply run more smoothly now.
Other TradeCard headlines included:
- Towards Seamless International Trade - July 2004, Hong Kong Industrialist
- Burton Snowboards Puts the Freeze on procurement-to-payment Costs - Retail Systems, August 23, 2004
- How CFOs (and Aspiring CFOs) Impact the Supply Chain - Asia Treasury, August 2004
- Putting Finance and Operations on the Same Page - Frontline Solutions, August 2004
- A Whole New Trade - CFO Asia, September 2004
EVENTS * EVENTS * EVENTS * EVENTS * EVENTS * EVENTS * EVENTS * EVENTS
In the coming months, TradeCard will participate in:
- BRESCIA, ITALY, October 7. Senior executives from TradeCard and The World Trade Centers Association Italy
will participate in an introductory seminar about TradeCard's services. The event is organized by the
WTCA network Italy.
- CANCUN, MEXICO, October 13-15. AAPN Annual Meeting - with TradeCard participation.
- BURLINGTON, October 13-15. AAFA Supply Chain Leadership Meeting - with TradeCard participation.
- HONG KONG, November 3-4. 4th Annual Supply Chain Management CEO Summit organized by the Hong Kong Article
Number Association. TradeCard will have an exhibition table and function as moderator at one of the
summit sessions.
Be sure to check our web site for updates on where we'll be next.
This newsletter can also be viewed at the Hong Kong General Chamber of Commerce website at
www.chamber.org.hk/hknewsletters/
