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Sep 23
2010

What are companies outsourcing in international trade?

Posted by dbedell in trade financetradesupply chainRiskoutsourcingletter of creditfactoringcomplianceCash

dbedell

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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