Despite being in one of the toughest business environments for decades, UK business is continuing to waste over £170 million per annum on traditional Electronic Data Interchange (EDI). Traditional EDI, is an old network, developed originally in the 1980′s, is used between business’ to exchange data such as purchase orders and invoices.

An Office of Fair Trading report estimated the cost to UK business of traditional EDI at approx £170 million per annum. This consisted of £70 million of transaction costs, £50 million of managed service costs and a further £50million of software costs. Applied over a typical 3 years period for IT costs, we are looking at over half a billion pounds of cost.

Cloud based EDI provides an opportunity for UK business to make huge savings with relatively modest effort to switch. In the majority of cases this effort consists of simply sending and receiving data to lower cost cloud based services. Cloud services, operate using the latest technologies enabling much of the costs of traditional EDI to be removed.

Hauste Group, a world leader in cloud based services, provides secure commercial grade cloud services enabling business’ to migrate to the Cloud with minimal effort. Already thousands of businesses use Hauste services across Europe, and Asia benefiting from reduced costs and enabling opportunities for new efficiencies.

“Using traditional EDI is akin to using a donkey and cart to deliver good to stores. Sure it will get there in the end but your competitors may well overtake you on the way” comments Tony Duggan, Hauste CEO.

Contact us today to see if we can help cut your EDI costs.

^{*Source; Competition commission report http://www.oft.gov.uk/shared_oft/mergers_ea02/2010/GXS-Inovis.pdf Page 17}

The face of business intelligence is changing. Companies have experienced the frustrations of flashy reports and complicated graphs, which while impressive at first, often confuse the decision making process more than they help. Instead, trends are showing people are looking for something more from their BI solutions – in particular they’re looking for solutions that tell them concisely what they need to know, and most importantly when they need to know it.

Of course, there will always be a place for sales reporting and other types of retrospective statistics, but we are now entering the era of ‘actionable intelligence’. That is intelligent monitoring systems and analytics that spot business issues and risks that need a person to get involved and address issues before they escalate. For example, the difference between knowing how many of your deliveries were late last month, compared to knowing how many of your upcoming deliveries are about to be late can be vital to your supply chain and to your customer’s experience.

Gartner’s user surveys show that “improved decision making” is the top driver of BI purchases. Capabilities that will evolve BI from an information delivery system to a decision platform will increase the value of BI and drive its growth. According to Ian Bertram, managing vice president at Gartner “With ‘ease of use’ now surpassing ‘functionality’ for the first time as the dominant BI platform buying criterion, vocal, demanding and influential business users are increasingly driving BI purchasing decisions, most often choosing easier to use data discovery tools over traditional BI platforms — with or without IT’s consent.”*

Companies such as the Hauste Group are seeing opportunities to provide cloud based reporting to these business users – remving the need for a BI implementation to be an ‘IT project’, and keep the focus on quickly delivering the information the business needs.

“We’re finding more and more, customers are by-passing their IT department – who are often short on resource – in favour of cloud based BI. They send in the data, and we send them the analysis. That’s as simply as we like to keep it.” commented Chris Varga, Lead Solution Developer at Hauste Group.

Contact us today to discuss your reporting needs

^{*source: Gartner Forecasts Global Business Intelligence Market to Grow 9.7 Percent in 2011, http://www.gartner.com/it/page.jsp?id=1553215}

With over 4.2 million houses in social ownership, its rather surprising that a national web based house exchange service doesn’t exist to facilitate tenancy swaps. Therein perhaps lies the reason why there are only 200,000 tenancy swaps per annum, a move rate of less than 5%. This compares with an annual move rate of 30% in the private rented sector.

Key drivers to increase the frequency of moves in social housing are government efforts to assist people to move to locations where there are jobs. Another key driver are efforts to help align moves to lifecycle tenancy managements e.g. a retired person may move to a smaller property in a seaside area whereas a family may move to bigger house in an economically active area.

Tenant2tenant assists both objectives which fit very much with the soon to be launched Localisation Bill due in parliament in late 2011.

Social housing tenents will be able to use the service to search and exchange tenancies nationwide. The service is free of charge, of particular importance where incomes are low.

Traditionally government initiatives such as promoting housing mobility collapse on execution. With a high element of administration, and in these times of public service cutbacks any increase in house swaps and administration could rapidly end up running into quicksand. However Tenant2tenanT automates the administration for the respective landlords enabling rapid execution of house swaps.

The Hauste Group, a cutting edge provider of innovation solutions and cloud services, is pleased to mark its formal launch in Ireland today. Simon Coveney, Cork TD and Ireland’s Shadow Minister for Transport was there for the occasion. “The fact that Hauste Group has chosen Cork over other competing destinations to invest in and grow their business is a vote of confidence in the Irish economy and the Cork region.” Commented Mr Coveney.

The formation of The Hauste Group will provide a platform for new cutting edge technologies and ideas to be offered as a suite of solutions. While each solution compliments the next, they all in their own right deliver significant value to important business areas. Customer service and value to business will be at the forefront of Hauste’s thinking. “The technology’s important of course, but its how you use it that counts.” commented Mathew Godfrey, Hauste Operations Director.

Tony Duggan, CEO of Hauste Group went on to say “As a group we take a very entrepreneurial approach to business, and this is being received exceptionally well in the market-place where flexibility is vital. We are already delivering better operational margins than Facebook, and with new products coming online Hauste will exceed Paypal’s Europe Services’ 2008 profits in the coming 12 months.”

The Cork head office will be the base from which the Hauste group finalises development, marketing and support for a range of new business applications to be launched on both web and mobile platforms through 2011. These applications will significantly change how businesses manage their purchase to pay process, including the introduction of a new supplier finance platform.

The end-to-end trade processes of the financial supply chain (FSC) play a huge role in a corporate’s liquidity and working capital strategy. In his article, Drivers and Innovations In the Financial Supply Chain, Lionel Taylor, head of trade and supply chain from RBS, defines the financial supply chain as, “all financial activity in the purchase to pay cycle.” How treasury manages this process, in conjunction with other corporate departments and its banking partners, can greatly effect the company’s bottom line.

This is one of the reasons why interest in the FSC and a desire for knowledge on how to best manage it have dramatically increased in recent years. In his article, The Keys to Effective Financial Supply Chain Management, Fritz Philipps, director in Deutsche Bank’s global transaction banking division, identifies some of the key drivers in this growth of interest. “Interest has been driven by banks seeking to adapt their transaction banking product offerings to new market conditions, as well as buying corporates looking to squeeze added value from their existing procurement arrangements.”

As a result of this interest, treasurers are taking increasing control of their company’s supply chain. Treasury departments already have influence over key processes outside of their traditional remit that affect working capital and cash flow, by working in a consultative capacity to reshape payables and receivables processes, for example. The supply chain is the next logical step, as commercial open account and commercial trade transactions are also payables and receivables.

Mo Virani, senior vice president, treasury sales manager from Bank of America, refers to this phenomenon in his article, A Shared Vision of Supply Chain Integration. “The convergence of supply chain and treasury management and treasury’s increased stake also reflect the recognition that all flows within an ecosystem-including the physical supply chain-have inherent financial risk and therefore can impact financial performance.”

As part of their increased role in managing all areas of the supply chain, treasuries are increasingly being brought into contact with the procurement department within their organisation. In his article, RBS’s Taylor provides a list of ways that treasury and procurement can work together to generate supply chain efficiencies and savings. These include:

>>> The adoption of global sourcing strategies. Many have realised, however, that there is a balance to be struck between price, quality and logistics. Getting it wrong can have disastrous results in their ability to service their own customer base.

>>> Administrative cost reduction through the adoption of electronic procurement and document management platforms that reduce the use of paper in the transaction cycle, provide more immediate visibility to their trading partners and a level of document reconciliation platforms and reducing transactional costs.

>>> Transactional cost reduction through a shift from letters of credit to open account trading. For some this creates a challenge with their supplier relationships that, especially in developing markets, relied on the LC for access to pre-sales financing.

New Technology

As with all areas in a treasurer’s life, new technology and automation help create efficiencies and cost savings in the FSC. One example of this is e-invoicing. In his article, SEPA’s Impact on the Financial Supply Chain, Arjeh van Oijen, pre-sales manager payment solutions at TietoEnator, highlights research from the European Commission, which found that e-invoicing alone (which is just one element in the FSC) could save enterprises and government organisations in the EU in excess of €250bn a year. This research only considers Europe, so you can imagine the potential if this were to be applied on a global scale.

A change in payments regulation can also benefit FSC efficiencies. The introduction of the single euro payments area (SEPA) aims to make cross-border payments within the eurozone as easy, fast and economic as making a domestic payment. One of the instruments to allow this to happen is convergence to a single standardised payments messaging structure. Companies such as TWIST, SWIFT and IFX, have come together and merged their various messaging initiatives into one common standard, ISO 20022, also known as UNIFI. This is excellent news for all those who are involved in the FSC, which has previously had to handle an inefficient variety of different messaging standards.

With standardised messaging, the extra functionality can bring efficiencies to the FSC. At the originating side, for example, the new initiation messages can make a distinction between the debtor, the initiating party and the ultimate debtor. At the receiving end, a distinction can be made between the creditor and the ultimate creditor. “In the case of a direct debit, the sides of these roles are reversed,” notes TietoEnator’s van Oijen.

The SEPA Direct Debit is an interesting case, as it enables the settlement of cross-border trades within the SEPA zone via a direct debit instead of a credit transfer. This had previously not been possible. “In combination with e-invoicing, the direct debit can become a very useful and efficient payment instrument for trades within the EU,” says van Oijen. This instrument may be particularly relevant to SMEs that have not integrated their ERP systems in the financial supply chain to the same degree as large enterprises.

Clearly treasuries are becoming more sophisticated in managing the FSC, and many are already using the new initiatives mentioned earlier to have a positive impact on their bottom line. However, as Deutsche Bank’s Philipps points out, when it comes to offering solutions to corporates, banks should not forget that not all treasury departments are at the same stage. “Many corporates-in both the developed and developing world-will still be operating paper based systems for commercial documents such as purchase orders and invoices, and will be unable or unwilling to switch to electronic systems in the short term.” If banks only offer SCF packages on an electronic basis, they will be excluding large numbers of SMEs that would benefit from financing opportunities. Flexibility is going to be key when enhancing FSC processes, both by corporates and banks.

Risk Factors

Risk management is an area of the FSC that should not be overlooked, particularly at a time when interest and activity in the FSC is rising so quickly. In his article, Deutsche Bank’s Philipps notes that documentary supported trade (i.e. letters of credit) has been increasing at about 3% a year, which means that the majority of the increase in trade is occurring on an open account basis. This may be at a lower financial cost to corporates, but it can marginalise the banks and also increase the inherent risk of the trade. This growth means that there is a need for new approaches to mitigating risk and financing suppliers. Philipps explains that one way to address this is by, “taking an approach that looks beyond the strength of an individual supplier’s balance sheet and any associated country risk, and instead considers the strength and depth of the relationship between buyer and supplier, and buyer and bank.”

The rush to do trade finance on open account has in some cases seen banks relegated to being a corporate’s payment partner. There is also increased risk as the bank’s visibility of transactions usually associated with letters of credit no longer exists. In a bid to counter this problem, SWIFT established the Trade Services Utility (TSU). The TSU enables banks to offer supply chain finance solutions on a bank neutral basis. As Tony Duggan, chief executive of Tradocs, notes in his article, Keeping Up to Date With Financial Metrics, the TSU “provides a vital document checking role within the supply chain, ensuring that the corporate’s exposure to delays and costs caused by erroneous documents is minimised.”

Clearly it is not just treasurers that have become more sophisticated in managing the FSC, banks have to be just as flexible and responsive. The next generation of solutions for the FSC embrace the use of large volumes of data to reduce risk and, as Tradocs’ Duggan points out, new metrics are being introduced that add value to the supply chain. “The opportunity to embrace new value metrics such as CO2 emissions and elements of corporate and social responsibility provide a key insight into how trade finance metrics can and will change in the years ahead.”

Legal Considerations

As banks begin to generate solutions for today’s sophisticated FSC, they will need to bear in mind the huge variety of legal and regulatory frameworks around the world. This is a subject that Sanjay Dalmia and Sujit Chitale, CEO and project manager for CashTech respectively, cover in their article, Legal Aspects of the Electronic Financial Supply Chain: “While in some circumstances these laws may not be different from the underlying legal framework for offering the typical electronic banking services there are other aspects, specific to the trade business, which need to be considered while offering such services for the e-financial supply chain.”

Dalmia and Chitale highlight the following main legal areas that banks should pay particular attention to as being:

>>> Laws pertaining to electronic commerce.

>>> Contract act.

>>> Laws related to electronic evidence.

>>> Banker’s book of evidence act.

>>> Negotiable instruments act.

>>> Law of jurisdiction.

And these are only the main areas! Other areas that banks will need to have their legal teams investigating thoroughly, on a country by country basis, also include:

>>> Contract of carriage act.

>>> Banking regulations act.

>>> Sale of goods act.

>>> Assignment of receivables.

>>> Islamic laws.

>>> Insurance act.

>>> Customs and excise acts.

>>> Revenue and stamp duty acts, etc.

While, from one perspective, managing the FSC is becoming easier, there are still a number of areas where both banks and corporates need to be prepared to put in the time and money make sure they are operating within the law.

Conclusion

Today’s FSC offers corporate treasurers the chance to create efficiencies and increase bottom line profits. A flexible approach to this is vital for success. Treasurers will need to work closely with other departments in their organisation to ensure that the company has a cohesive strategy in this area. They also need to weigh up the preferences between the style of business they conduct within the FSC, balancing the need to enhance the bottom line against potential risks that these may entail. Banks and other financial service providers can offer good advice in these areas, especially those that have a global reach, as they are likely to have experience of specific legal environments. New technology is also aiding treasurers in the FSC, through developments such as e-invoicing. With a flexible approach to the tools they use and the partnerships they make, treasurers can have a positive impact on their company’s FSC and all the rewards that this brings.

Methods for corporates to improve their financial metrics and to lower their end-to-end costs have traditionally centred on the physical supply chain. These initiatives usually consist of better inventory management to improve working capital, incremental operational efficiencies such as better logistics or operations management, and major systems implementations aimed at delivering lower cost to serve. Overall, these ‘improvements’ have not only been extremely disruptive within corporates and their supply chains but have also delivered mixed results. In general, these approaches typically create a lot of noise within corporates with stock reductions, process efficiencies and systems implementations but proportionately less in terms of long-term cost reductions.

Supply chain finance (SCF) has the potential to deliver many of the same outcomes but without the negative impact on product availability and customer service, which has tended to negate any benefit delivered by re-engineering the physical supply chain.

SCF works by enabling information from the extended supply chain to be channelled into banks and other finance providers. These SCF providers can then leverage this information to generate offers of trade finance to suppliers at various stages within the supply chain. This process mirrors the ‘just-in-time’ approach used by large corporates to optimise inventory holdings. Not only is the SCF provider’s risk substantially reduced given the visibility of information throughout the transaction, but the finance provider is also able to leverage the credit rating of the buyer typically enabling supplier financing at lower rates of interest.

The major benefits seen by the corporate include the capability to increase supplier payment terms with the consequential improvement in working capital without the pain of major inventory or cost reduction initiatives. Equally, the supplier is in a much better position to accept longer payment terms without increasing costs or losing the vital cash-flow required for their business.

A ‘day in the life’ scenario would see a purchase order being sent from the corporate to the supplier with the information being passed automatically to a bank. The bank would analyse key data in the document such as the credit ratings of both the corporate and supplier and or the classification of the goods and then decide whether to generate an offer of trade finance to the supplier. The supplier can then decide to accept this offer electronically, at which point it becomes a rolling loan. This offer of finance would be for a specific purchase order, with additional offers of finance being generated as the transaction progresses.

From a technology perspective, there are some key requirements to make this happen. The corporate needs to electronically capture his trade documents to allow this information to be provided to the banks. Similarly, banks need to have the capability of processing data in multiple formats from corporates, suppliers, inspection agents, logistics providers, customs and other parties in the supply chain. Leveraging this information is the next most significant challenge for banks. For example, a corporate sending 50,000 purchase orders a year could generate as many as 350,000 documents with supplier information, customs codes and values that would need to be analysed by banks for risk or revenue generation purposes.

Leveraging the Opportunities

Today’s main industry initiatives to help corporates and banks to leverage these opportunities include the SWIFT Trade Services Utility (TSU) and an initiative from Intel.

SWIFT’s approach has been through its banking members who are becoming increasingly disintermediated from the supply chain as a result of the reduction in the use of letters of credit (LC) by corporates who are increasingly opting for open account as a lower cost alternative. Without a financial instrument in place, banks have been relegated to the corporates’ payment partner, with increased risk as the banks’ visibility of transactions usually associated with an LC/DC no longer exists. The TSU initiative enables banks to offer SCF solutions on a bank neutral basis. The solution provides a vital document checking role within the supply chain ensuring that the corporates exposure to delays and costs caused by erroneous documents is minimised. As with all banking programmes, the opportunities for revenue are greater for the early market adopters, with the TSU providing a service that can be leveraged to provide increased bank revenue in a stable international trading market unlike the current sub-prime mortgage situation.

Intel’s initiative is gaining an increased profile, as it brings together the main technology players required to enable SCF. The benefits of this initiative include a mass market global e-document solution which is low cost, multi-standard, and multi-language. Links to the SWIFT TSU are through the corporates’ preferred bank(s). The e-document solution provides a complete range of domestic and international trade documents that can populate the SWIFT TSU with the information needed for document matching to take place. This fully supports the requirements for corporates who want to move to e-documents in their supply chains to enable full SCF benefits.

Included within this initiative is a capability for banks to process the large volumes of data received from corporates’ supply chains and to generate trade finance offers to suppliers, thus delivering on one of the key objectives of an SCF programme. Given the ever increasing information requirements from government and regulatory authorities, Intel’s initiative also includes the capture of information relating to CO2 emissions and the increasingly important corporate and social responsibility (CSR) metrics on product origin.

Conclusion

Supply chain finance solutions are now moving rapidly beyond the world of simple factoring and invoice automation. The next generation of SCF solutions embraces the use of large volumes of data to reduce risk and indeed introduction of new metrics which add value to the supply chain. The opportunity to embrace these new value metrics such as CO2 emissions and elements of CSR provide a key insight into how trade finance metrics can and will change in the years ahead. In parallel to this, the benefits to corporates and their extended supply chains are significant and can be achieved with considerably less business disruption than that caused by implementing a new ERP system to achieve marginal net profit improvements.

It may have taken some 600 years for trade finance to advance from the last great invention with Francesco Datini’s Bill of Exchange, but SCF may finally be offering the next breakthrough in trade finance.