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Outsourcing part or
all of the trade finance function—and the supply chain—can provide great
reward to the average corporate. Most big banks, along with many
smaller service providers and trade-related market players, offer such
services for corporates.
Companies are increasingly looking to hand off the parts of this function that are not essentially held in-house.
For
example, order management lends itself well to outsourcing. In this
case, banks or service providers handle the order process—receiving
purchase order data from the company’s ERP, over electronic data
interchange (EDI) channels, or through other channels; and managing the
process of connecting with suppliers—sending them the PO, handling
electronic invoice management with suppliers, matching the PO data to
the invoice, and so on.
Another
piece of the chain that it can make sense to outsource is document
preparation and management. The vendor or bank would then handle the
preparation of shipping documents, electronification of documents and
sharing across the supply chain, manage the legal and regulatory
differences in required documentation across different jurisdictions,
and so on.
Plus
there is cross-border compliance. Outsourced service providers can
handle checking against international trade regulations, export control
regulations, product classifications, tariffs, and the like.
In
addition, many providers are offering more specialized solutions, such
as the outsourcing of the entire letter of credit management, factoring,
or other trade finance process. In this case, the vendor would handle
end-to-end management of the specified trade finance product.
All of these are essential pieces of the trade process, and all take time, knowledge, and resources to manage in–house.
A
number of big banks are focusing more and more on inserting themselves
deeper into their corporate customers’ financial and physical supply
chains, and many are offering exactly these services. In addition, many
of these services began with players in international trade—such as
trade expediters, factoring firms, and the like.
As such, there are many options to be considered in looking at outsourcing pieces of the trade process.
It
would be nice if companies could just hand over the entire process to a
provider, and that provider could offer a fully-automated solution for
all aspects of trade and supply chain management.
At
some point, the market will develop to the point where companies can
look for an end-to-end outsourced, international electronic trade
management solution. However, that is still some ways away.
Meantime,
there are offerings out there that can reduce the many headaches and
bottlenecks that go hand in hand with international trade.
But,
as with any potential outsourcing, the process must be carefully
managed to determine the value to the company, and ensure the security
of data and information.
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