2. UNECE International Forum on Trade Facilitation Session III: Implementation: The Role of the Business Community Supply Chains and the facilitation of payments John Hammond Head, Supply Chain Services Standard Chartered Bank, Hong Kong john.hammond@hk.standardchartered.com Wednesday 29 May 2002

3. UNECE International Forum on Trade Facilitation… Session III Implementation: The Role of the Business Community Supply Chains and the facilitation of payments John Hammond Head, Supply Chain Services Standard Chartered Bank, Hong Kong john.hammond@hk.standardchartered.com Wednesday 29 May 2002

4. The Facts of International Trade - a US$7 Trillion Business With Huge Inefficiencies UN estimates that up to US$420 billion is wasted on inefficient processing, arising from: - Vast number of trading parties and service providers communicating with paper-based processes - Incompatible business processes and systems - Very little process integration - The high error rates from re-keying of data Companies involved in international trade require solutions that can streamline ‘end-to-end’ processing by use of e-commerce.

5. Business To Business Complexity BuyerSupplier Freight Forwarder Terminal at OriginTerminal at Destination Air Carrier Ocean Carrier Bank Air Express Terminal at Destination Terminal at Origin 1. Request for Quote 2. Quotation 3. Purchase Order 4. P. O. Confirmation 5. Shipper Order/Instr. + Invoice + Packing List 6. Ship Order / Instr. 11. Pre-alert / Arrival Notice 7b. Shipping Order Cycle (S/O, BoL) 7a. Ship Instr. Cycle 8. Gate-out/ gate-in 10. Bay Plan 13. Payment Order 14. Remittance 15. Import documents 16. Proof of Delivery 9. Bay Plan Capture gate movement (gate-out/in) Capture gate movement 12. Export documents 12. Gate-in/ gate-out 5. Shipper Order / Instr.+ Invoice 7a. Manifest

6. The Fragmented Process Translates into Inefficiency Data re-entry, errors Inability for right people to access right information at right time Can’t track entire transactions; analysis and reconciliation are difficult No cross sector process integration

7. The prize for fixing the problem is substantial Paperwork accounts for 5-10% of the cost of int’l trade a material impact on net margins Automation can reduce the cost by over half Other forms of collaboration can also yield significant benefit product design, inventory planning, etc

8. But Customer needs in international trade are unique Operating efficiency for existing trading groups Direct sourcing Accommodate all types of trading partners The SME in Asia to the MNC in the OECD End-to-end solution that is open Global access

9. Solutions that address these inefficiencies include… A collaborative channel for the products and services that make businesses more efficient. A paperless E- commerce environment where trade processes can be conducted electronically. B2B products and services that are web-based : - Trade banking services, LC, Open account, Payments, Collections etc - Trade document management - Customer Purchase order management services - Catalog services, public and private - Logistics, Shipping, Airfreight, Multi-modal, Inspection, Track and trace - Market intelligence - Management information reports - Third party service access

10. “EDI or Die” was the cry of the ’70s. It was Expensive Complicated & Difficult to maintain and is in it’s death throes today!

11. B2B e-commerce is the Solution E-Commerce Providers Freight Forwarders Air Couriers Carriers Terminals Banks Insurance Government ~ Customs Buyer Supplier ANY TO ANY MESSAGING EDIFACT,X.12 SWIFT, SAP, Notes Proprietary… EDIFACT, Flat file, Notes, Excel… Any to Any B2BeX Communication, standards and media conversion.

12. Building such a solution is expensive Conventional EDI has proved too difficult for many Significant up-front investment and resources/skills required Select B2B Exchanges will develop specialised supply chain / int’l trade solutions that are “rented” to customers

13. …the basic B2B Exchange Uses the Internet & “IP” - Internet protocol An open platform - any to any messaging Cost effective electronic business medium  ebXML replaces traditional VAN EDI  Provides for Personal computer browser access  Creates a secure environment for trade Builds a supply chain management tool  Provides for back office integration  Delivers an extensive range of on-line trade services Recognises the e - future of international trade

14. B2B Exchanges Facilitate Efficiency in Trade …. By Integrating Ancillary Services Trade related services and content from multiple parties Integration of sourcing, procurement, finance and logistics No re-keying or re-work MIS reporting across entire trade process Any-to-any messaging Communication in multiple formats PC browser access and / or integration with customer systems Single sign on, secure and reliable Low cost, user friendly and easy to implement for trading partners And the Banks and Insurers?

15. The Regulatory environment for Banking and Insurance Banks and Insurers are both Regulated Industries in most territories. Banks in particular are restricted in terms of the types of “non- banking” services that they are permitted to offer. As major players in the trade process Banks and Insurers can facilitate improved and therefore more efficient processes through deeper participation in the integration of services that are ancillary to banking

16. The “non –banking” Ancillary Services? Deemed by some to include… Sourcing Procurement Provision of e – Catalog’s Trade Document Creation and Management Logistics Inspection Insurance Customs and Regulatory Compliance Services Business Intelligence Services

17. The New Age Service Delivery Channel for … Bankers, Insurers, traders and trade service providers The Internet offers an extraordinary means to market with significant advantages in terms of cost and efficiency and provides an opportunity for global collaboration on a scale never before possible. The basic capability to gather and re-use data from multiple sources across multiple processes without re-keying; securely and with certainty, heralds a new age of trade facilitation. But not so easy for a Bank!

18. Legal and Regulatory Compliance The restraint Compliance with local regulatory requirements...the “Banking Act” Banks must build products and services to: Comply with the most stringent banking standards and multiple external “local country” banking regulatory requirements. Comply with local “e-commerce” legislation Avoid “non banking” services. All third party services shall be strictly trade banking related. Responsibility and liability must be clearly defined Partners should be “blue chip” and chosen in accordance with bank guidelines for reputational risk management, and “duty of care” policies. Know Your Customer principles must be applied –Money laundering –Fraud and malpractice

19. "Our supervisory approach towards Internet banking will have to evolve as the technologies and business strategies in banking themselves keep changing," said the Deputy Managing Director of the Monetary Authority of Singapore. "We want to maintain prudent regulatory oversight so as to preserve public confidence in the financial system, while encouraging financial institutions to take full advantage of new technologies to improve efficiency and competitiveness." The Singapore view of change…enlightened Legal and Regulatory Compliance

20. The Competitive World today Banks as with all businesses compete at all levels Price Quality Business process Technology Customer Service Logistics efficiency Speed of service, quality of service and flexibility Location Greater visibility means that all of these factors are readily assessed

21. Greater Visibility? The availability of trade data from Purchase Order to Delivery Order (“PO to DO”) Access to that data, and re-use of that data enables a bank to have more control of risk and to offer improved trade products and services The Product source data RFI Quote PO Invoice LC Application Inspection and Insurance and Logistics instructions to DO and the Customs declaration forex payment and settlement and collection…… and more Improved credit terms faster payments

22. Re-use and link data

23. Standard Chartered Bank - Trade Services Market Position Major International bank Rapidly growing business in providing value added trade services for its large and small customers Solution a B2B Exchange The Bank provides an online service that facilitates trade transactions & payments between its customers, logistics partners, SCB and other banks Trade Document Manager Facilitates standard and non- standard document (RFQ, Q, PO, PO Confirmation, SO, SO Confirmation, Dispatch Advice and Commercial Invoice) exchange Provides integration with the Bank ’ s internal system via XML Integrated with PKI to enable secure transactions required by the Bank Ensures Non repudiation Benefits Economic Extended Market Data – Information - Knowledge – Visibility Less risk

24. – B2BeX Home Page Logistics: Check Ship Schedules Book Space Customs Clearance Generate Documents Alerts Track & Trace Sourcing: Locate Suppliers/ products Private Catalogs Quotes PO Management Inspections

25. Standard Chartered B2BeX is about getting the supply chain basics right Ability to exchange “intelligent” trade documents and data, with anybody suppliers and buyers catalog services, logistics, banking, insurance, etc. all integrated with comprehensive messaging, and supported by solid infrastructure

26. with “industrial strength” infrastructure to support mission-critical processes Highest security message authentication, confidentiality, integrity and non- repudiation transaction and network security anti-virus, hacking, denial of service protection End-to-end high availability and disaster recovery 24/7 multi-lingual, integrated + “human” support

27. Yielding significant efficiencies for importers and exporters Reliable turn-key solution for local and int’l trade Reduced trade administration Automated transactions with trading partners Comprehensive, integrated MIS Access to other marketplaces and technologies

28. Summary The banking industry is committed to streamlining international trade processing and to becoming a participant in the global E-Trading movement That is a basic contribution to Trade Facilitation Automation, efficiency, straight through processing by involvement in and promotion of improved supply chain processes lead to… Cost savings Time savings Faster payment Improved return on investment –For banks and their customers

29. Thank you

30. UNECE International Forum on Trade Facilitation… Session III Implementation: The Role of the Business Community Supply Chains and the facilitation of payments John Hammond Head, Supply Chain Services Standard Chartered Bank, Hong Kong john.hammond@hk.standardchartered.com Wednesday 29 May 2002