Magazine article Business Credit

Automating the Financial Supply Chain

Magazine article Business Credit

Automating the Financial Supply Chain

Article excerpt

"Discovery consists of seeing what everybody has seen and thinking what nobody has thought."

-Albert Szent-Gyorgyi, biochemist and Nobel Prize winner 1937

Looking back at notes made during a workshop that I was chairing in 1996, it was interesting to once again re-read my conclusions:

* In Trade Services we need to make the quantum leap from paper-based transactions to electronic data;

* Trade is hampered by an evergrowing demand for paper administration;

* Electronic trading is bringing advantages to many industries, but electronic trading within international trade has been slow to take off mainly due to impracticability of handling negotiable documents by electronic means;

* Product innovation and development is essential; and

* Electronic commerce will lead to a lower cost base and less staff involved in paper administration.

Viewed with hindsight, this is not exactly earth shattering. However, at the time, there were very few tools available with the capability of implementing such solutions. In the current world of constant change, it is essential for anyone in a service industry to be aware of new developments; if not, one runs the risk of disintermediation.

Pre-Requisites for a Bank Solution

Electronic automation is not something to enter into quickly or poorly prepared. It is not only essential to obtain senior management support, but also to ensure a willingness and commitment to follow through. Mistakes can (and will) be costly, as can pursuing wrong directions. Despite this, a company should be prepared to make mistakes; it is almost inevitable yet helps along the learning curve. Any planned project should be looking to reduce and alleviate risks and dependencies on which the project is based. The aim is to achieve customer penetration and satisfaction, while enhancing profitability and trade reputation. Critical mass and ROI will drive the business forward.

The initial key to undertaking such a project is to initiate a period of research both internally and externally. Past experience and knowledge of the market will help to understand potential pitfalls. Examination of recurrent problems both in internal processing and within the supply chain as a whole will assist in identifying the paths to pursue. Appreciating the particular characteristics of the market under review will help to decide whether or not there is a sector bias that should be concentrated upon. It is normally sensible to focus on specific products rather than try to fix everything. Critical factors include assessing the fit-to-strategy to long-term plans, how soon the solution can reach the market, and the criteria for selecting pilot clients and optimum markets.

Assessing Risk

We are moving from a paper world to an electronic world but, as much as many may wish, this is unlikely to happen in a "big-bang" scenario. There will be an interim period wherein a paper/electronic hybrid status will exist. Evaluating regulatory issues and technological development becomes an issue at this stage. It is necessary to analyze workflows and business processes, examine trading patterns, consult with, and if possible integrate, third parties such as logistics companies. New workflows will develop from these assessments, and requirements for interfaces will produce numerous challenges. The aspiration will be to enhance straight-through processing by utilizing and leveraging upon electronic alert mechanisms and exception processing. The skill is not in directly converting paper processes to electronic means, but in thinking with a new mindset and applying change management techniques. The ubiquitous advantages of the Internet-speedier, cheaper, and more efficient-have allowed us to examine business processing in a very different way. The basic data that we have historically had access to becomes ever more wide-ranging and re-usable as pure electronic information, providing us with the ability to manage and enhance knowledge management tools for all parties in the traditional trade supply chain. …

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