supply chain - collyer consulting · 2013-09-27 · developing specific value propositions for...

(JJLSLYH[PUN�[OL�ÄUHUJPHS�supply chainSWIFT initiatives are supporting the global economy by helping corporates to trade quickly, cheaply and safely

At Sibos, the International Chamber of Commerce (ICC) and SWIFT announced their plan to deliver new rules and tools for trade finance that are already being implemented by major

importers and exporters in support of their physical supply chains.

The challenge: The physical supply chain has become significantly more efficient through use of new technologies and business models. By increasing efficiency, trading counterparties can accelerate processes in the physical supply chain, reduce handling costs and inventories, increase visibility and improve forecasting and planning. Some industries have shortened order and delivery processes from an average 20-plus days to same-day execution. However on the banking side, most of the global trade finance processes have not been optimised sufficiently due to paper-based practices slowing down key processes such as discrepancies handling. Now has come the time for the trade finance industry to link the delivery of financial services to what is actually happening in the physical supply chain in a more efficient way.

Collaborative supply chain finance: The co-operation between the ICC and SWIFT responds to that very specific challenge: to accelerate the financial supply chain in support of the physical supply chain. By combining the new Bank Payment Obligation (BPO) rules with SWIFT’s Trade Services Utility (TSU), banks can not only increase visibility of physical supply chain processes but also take faster risk and financing decisions to serve trading counterparties. Although supply chain finance solutions are now available from banks and third-party vendors, most are limited to the last mile of the financial supply chain, i.e. financing approved payables, rendering them merely a valuable baby step in the wider world of supply chain finance. With the BPO and TSU, banks can deliver supply chain finance services from the earliest stage of the trading process, i.e. the raising of the purchase order, and at every stage of the transaction lifecycle. This is a key difference for banks that wish to provide, for example, payment risk mitigation and/or pre-shipment finance in a secure, efficient and collaborative way.

Testimonials: In this edition, we provide more details on the ICC/SWIFT co-operation and illustrate it with examples of corporates implementing the Bank Payment Obligation so as to benefit from innovative risk mitigation and financing services. You will also be able to read corporate testimonials on innovations being progressed with regard to digitisation and automation of letters of credit, demand guarantees and bills of lading in a multi-bank world.

The closer the better: I hope you enjoy reading this edition of ‘Supply Chain on SWIFT’. To keep you continuously up-to-date, we have adopted a social media tool to gather feedback and maintain dialogue. Please join our new ‘Supply Chain on SWIFT’ LinkedIn group to follow the news and share your views. See you there!

André Casterman, head of trade and supply chain SWIFT

THE VALUE OF SWIFT TO THE FINANCIAL SUPPLY CHAIN ISSUE 7 Q1 2012

ContentsEditorial

Accelerating the financial supply chainSWIFT initiatives are supporting the global economy by helping corporates to trade quickly, cheaply and safely

page 1

SolutionsAll on board for the BPOThe International Chamber of Commerce and SWIFT are cooperating to establish the Bank Payment Obligation as a new technology-neutral instrument to support international trade in the 21st centurypage 2

ValueGetting paid on time thanks to

the BPOAs work progresses in the ICC to agree a fully-independent rule set, real-world trials of the Bank Payment Obligation are also

getting underwaypage 4

Case studiesCatching up with the physical supply chainSWIFT is working with Fonterra, the world’s largest exporter of dairy products, on a simple but effective solution for de-materialising the bill of ladingpage 6

Case studiesCA CIB pioneers electronic guarantees with Alcatel-LucentFirst live use of electronic guarantees based on MT 798, SWIFT’s de-

facto platform-independent standardpage 7

PerspectivesE-invoicing spreads its wingsTogether with SWIFT, technology service providers and banks are helping corporates to automate global invoicing processes based on the ISO 20022 messaging standardpage 8

Edi

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Supply Chainon SWIFT

2 Supply Chain on SWIFT Visit swift.com for more information about SWIFT and its portfolio. Join the dialogue at ‘Supply Chain on SWIFT’ on Linkedin or email us at [email protected]

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will be provided to assist banks with

developing their agreements with

corporate customers;

ISO 20022 Trade Services Management

(TSMT) open messaging standards will

be mandatory for inter-bank messaging

for the BPO. Banks may choose any

technology solutions using ISO 20022

messages and ISO 20022-based rules;

Participating banks will have to use

a transaction matching application

implementing the ISO 20022 TSMT

matching rules, and banks involved in

common BPO transactions will need

to be connected to the same matching

application; SWIFT’s TSU is presently the

only inter-bank messaging and matching

application implementing BPO;

Guidelines will recommend ISO 20022

messages for corporate-to-bank

messaging, but this will remain optional.

Best of both worlds

Taking characteristics from both the open

account transaction and the letter of credit,

the BPO offers the best of both worlds to

the customer – a fast process based on

technically possible for banks’ proprietary

supply chain solutions to support BPO-

related transactions.

Nineteen banks have said they will adopt

the BPO, including seven of the world’s

leading 20 trade banks. The first live

commercial use of the BPO was by Bank of

China in April 2010; now cross-border proof

of concept trials are beginning (see our report

on page 4) adding to the momentum behind

the BPO.

Statement of intent

A joint ICC/SWIFT working group has been

established and two corporations – global

petrochemicals group BP Chemicals and

mining conglomerate Vale of Brazil – have

joined the eleven banks represented on the

working group. The group’s legal stream is

currently drafting the new rules, with a current

timetable of Spring 2013 for submission for

approval by the ICC Banking Commission.

At its October meeting in Beijing, the ICC

Banking Commission BPO Working Group

confirmed:

The scope of the BPO rules will be limited

to bank-to-bank interactions; guidelines

he Bank Payment

Obligation (BPO) took

an important step on its

journey to international

recognition and use when

the International Chamber of Commerce

(ICC) and SWIFT signed a joint declaration

of co-operation at Sibos in Toronto in

September 2011. The joint goal is to

establish the BPO as a technology-neutral,

industry-wide market practice and to provide

a standardised environment, including

uniform rules and messaging standards.

This means adapting slightly the current

SWIFT Trade Services Utility (TSU) BPO

rules to make them independent of the TSU

itself. One advantage is that it will become

All on board for the BPOThe International Chamber of Commerce (ICC) and SWIFT are cooperating to establish the Bank Payment Obligation (BPO) to support international trade in the 21st century. The BPO offers a new technology-neutral ICC instrument for international trade powered by SWIFT’s Trade Services Utility

There is a misconception among some banks that they need to wait for the ICC Banking Commission to establish and endorse rules in order to use TSU/BPO. Nothing could be further from the truth.Michael Quinn, managing director, global trade, J.P. Morgan

Joint ICC/SWIFT declaration of co-operationSeptember 21, Toronto:

“Both the ICC and SWIFT

believe that by working

together and leveraging

their respective positions across the

trade finance community, the BPO

will have an important role to play

in supporting the development of

international trade in the 21st century in

addressing cost pressures in the face of

increased automation and changes in

the regulatory environment.”

T


Sol

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of the new instrument will not happen by

itself and has established an education

stream to promote the advantages of the

BPO as an alternative to traditional trade

finance products, and a commercialisation

stream to engage with corporations and

encourage the use of the BPO as well as

developing specific value propositions for

buyers and sellers.

Says J.P. Morgan’s Quinn, “awareness

and education are key drivers for creating

acceptance of the TSU/BPO. We don’t seem

to have a comprehensive understanding

of the features available in the TSU/BPO

within banks. As a result, we have not

communicated well to customers about what

is available to them. Now is the time for banks

to be engaging and enrolling customers,

as the migration away from traditional trade

instruments accelerates.”

Quinn also encourages banks to start

using the BPO with the TSU. “There is a

misconception among some banks that

they need to wait for the ICC Banking

Commission to establish and endorse

rules in order to use TSU/BPO. Nothing

could be further from the truth. Because

the transactions flow through the TSU,

the participants are bound by the TSU

rulebook and have a legally enforceable

commitment.”

So as the BPO moves along the road to

becoming a technology-neutral, industry-wide

instrument for trade with full international

recognition, it is already a highly relevant and

useful addition to the trade finance toolkit. By

the time of the next working group meeting in

Spring 2012, trials will be well underway.

The ICC Banking Commission BPO

Working Group will meet in Doha in Spring

2012. The working group is co-chaired by

Dan Taylor, vice-chair of the ICC Banking

Commission and executive director, J.P.

Morgan, and André Casterman, head of trade

and supply chain, SWIFT. O

standards that facilitates data exchange to

settle cross-border transactions,” he explains.

“Because it takes advantage of the SWIFT

network, the TSU/BPO enables participation

by multiple counterparties and banks and

provides a more comprehensive end-to-end

solution”. Quinn says the BPO will allow

customers to access risk mitigation and

financing within the same business process

as their open account activities. Over time,

the BPO is also likely to facilitate the eventual

convergence of e-invoicing initiatives with trade

transactions, he suggests.

Hiroyuki Watanabe, general manager, Hong

Kong, for the trade business division of the

Bank of Tokyo-Mitsubishi, agrees. “The BPO

looks to the future. It has further potential in

terms of speed and transparency, helping

banks to provide just in time service to their

customers,” he says.

Acceptance and adoption

For the immediate future, the working group

recognises that acceptance and adoption

purchase order and invoice data, but with risk

mitigation features.

J.P. Morgan has been active in the

development of the BPO from its early days.

According to Michael Quinn, managing

director, global trade at J.P. Morgan, the TSU

and the BPO provide an additional channel

through which customers’ needs in the open

account space may be met. “Although we

have proprietary open account solutions today,

the TSU/BPO is an open network with public

The BPO has further potential in terms of speed and transparency.Hiroyuki Watanabe, general manager, Hong Kong, trade business division, Bank of Tokyo-Mitsubishi

19 banks adopting BPO Including seven from the top 20 trade banks


Valu

e

benefits through less document handling (he

expects a saving of one hour’s processing on

every transaction) and reduced confirming

costs, which currently amount to up to

0.8% of transaction value. Total estimated

savings are up to USD 2 million per year, but

Vermylen believes even greater value lies in

more marginal income. “The BPO will allow

based on sending the original documents,”

he explains.

“With the BPO, the release of payment is

no longer tied to the presentation of original

documents,” says Guedes.

Substantial savings

Vale has calculated that moving all its L/Cs

at sight to BPO would result in a reduction

in days sales outstanding of about 10 days

(including internal processes efficiency gains)

with a financial gain of over USD 37 million/

year, freeing up USD 600 million of working

capital.

David Vermylen, global credit manager,

petrochemicals, BP Chemicals, says the

BPO offers a number of important efficiency

lobal petrochemicals

firm BP Chemicals has

signed up to test the Bank

Payment Obligation (BPO)

with some of its customers

in a proof-of-concept trial during the first

quarter of 2012. In the trials, selected data

from invoices and related documentation

for trade transactions will be electronically

matched, providing BP Chemicals with the

same level of payment assurance as with a

letter of credit ( L/C), but with a much simpler

and quicker automated process. Fifty per

cent of BP Chemical’s receivables are L/C-

based transactions, so using the BPO to

dematerialise document exchange and speed

up the supply chain promises very significant

savings.

Matching trade data

BP Chemicals will test the BPO with

customers in China, India and the Middle

East, working with a number of banks. The

participating banks will match the trade

transaction data for the BPO via SWIFT’s

Trade Services Utility (TSU).

Vale, the Brazil-headquartered global

mining group, is also considering the BPO.

Some 70% of Vale’s revenues are export-

based. According to José Carlos Guedes,

chief financial analyst, treasury management,

corporate finance department at Vale, a

major objective of the BPO is to eliminate the

delays that occur when buyers and sellers

are in different locations, time zones and

jurisdictions. “Given the distance between

Brazil and China, it typically takes around

10 days to reach the bank issuing the L/C,

Getting paid on time thanks to the BPOThe Bank Payment Obligation, the new electronic trade instrument, is gathering momentum. As work progresses in the ICC to agree a fully-independent rule set, real-world trials of the BPO are also getting underway

G

BP Chemicals case BPO based on invoice data

Supply Chain Finance for Corporates

Challenges � About 50% of exposure on secured terms � Competitive commodities market requires a

secure and cheaper alternative to L/Cs � High processing and confirming costs (0.8%

of transaction value) � Inflexible current LC way of working limits

commercial possibilities and weakens compliance under certain conditions

Company profile � 2010 Revenues of approx. USD 14 bn � Revenue created for approx. 50% in Asia � Trade account receivables of EUR 1.4 bn

(consolidated receivables only) � More than 600 clients worldwide

Key benefits � Get paid on time and avoid judicial proceedings � Reduce complexity – removal of paper trail � Limit to relevant trade information only � Reduce cost by removing vetting activities and

presentation assistance � Improve customer offer by allowing for flexible

options � Improve speed of handling � Reduce the risk of discrepancies � Reduce need for confirmation cost by being able to

tap larger pools. Free up banking lines. � Easy to exercise tool for liquidity � Easier access to banks to secure transactions � Possibility to spread the risk with multiple obligors

Gains up to USD 2 million through lower costs, but most of the upside lies in more marginal income

With the BPO, the release of payment is no longer tied to the presentation of original documents.José Carlos Guedes, Vale


Valu

e

us to offer our customers more flexibility, and

this will have an impact on the volumes of

sales we do with customers. Extra volume will

bring additional margin, of course. The BPO

plays a perfect role in advanced risk-reward

managed business – in sync with living in the

21st century,” he says.

Both companies have also become

members of the ICC Banking Commission

BPO Working Group. O

Buy

ers

of B

P C

hem

ical

s

Exporters

Multi-bank export for BP Chemicals Proof-of-concept

Supply Chain Finance for Corporates

lairtsudnI .oC rebif

Chemical fiber Co.

Textile & Garnement

Co.

retseyloP .oC rebif BPO Obligor

Bank branches

Belgium BPO Recipient Banks

Kuala Lumpur

HK

Zhuhai

London

Trade Service Utility (TSU)

The BPO plays a perfect role in advanced risk- reward managed business – in sync with living in the 21st century.David Vermylen, BP Chemicals

What is a Bank Payment Obligation?

A BPO is an irrevocable undertaking

given by one bank to another

that payment will be made on a

specified date after a successful electronic

matching of data according to an industry-

wide set of rules.

A buyer agrees to offer payment

assurance to its supplier based on agreed

criteria – for example, invoice data or

invoice and shipping data.

The BPO uses a standard set of ISO

20022 messages.

Matching of agreed data can be carried

out in SWIFT’s Trade Services Utility (TSU) or

equivalent transaction matching application.

Once the data is matched, the obligor

bank pays or is committed to pay the

seller’s bank on the due date.

Meet SWIFTDate Host Conference name Location

2-3 Feb EuroMoney Euromoney – The Supply Chain Finance Europe conference Frankfurt

14-15 Feb Exporta 9th Annual Middle East Trade & Export Finance Conference Dubai

23-Feb Exporta 8th Annual India Trade & Export Finance Conference Mumbai

8-9 Mar Exporta 6th Annual Africa Trade & Export Finance Conference Cape Town

13-15 Mar IPS International Payments Summit 2012 London

15-16 Mar IIBLP IIBLP Annual LC Survey New York

25-29 Mar ICC Banking commission Doha

7-11 May ICC ICC Austria – Trade Finance Week 2012 Vienna

13-15 May FCIB FCIB’s International Credit & Risk Management Summit Hamburg

30-31 May SWIFT SWIFT Trade and Supply Chain user group meeting London

w/c 4 June Exporta 2nd Annual Levant Trade & Export Finance Conference Beirut

w/c 25 June Exporta 9th Annual Trade & Supply Chain Solutions Conference Amsterdam

29 Oct-2 Nov SWIFT Sibos Osaka


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s proof of concept for import of containerised

shipments of Fonterra’s dairy products.

Once all documents have been received and

checked, and the importer’s bank is ready

to release payment, an electronic ‘surrender

BL’ through the INTTRA platform releases

the goods to the importer, achieving end-

to-end electronic document presentation.

Initially, the proof of concept, which began in

mid-December, involves parallel delivery of the

e-bill of lading and physical documents. Later,

a pilot will use only the e-bill of lading. China

Merchants Bank and Korea Exchange Bank

are also piloting SWIFT FileAct for transmission

and download of electronic documents.

Simplicity the key

Fonterra’s Fletcher sees the proof of concept

as a small step on a path to significantly

reducing costs and improving performance

– but the results will not be seen overnight.

“This is a strategic enabler: costs will never

be removed from the supply chain unless the

customer-bank space for trade documents

and finance is automated,” he says. He

sees the simplicity of the solution as critical

to winning confidence and acceptance

among banks and corporates, and driving

critical mass. Later, XML-based solutions will

offer electronic delivery of data elements for

electronic matching.

“It starts with small beginnings,” he says.

“Electronic document delivery and title

transfer, then electronic data delivery or a

combination of both.” Down the line, the

potential savings from straight-through

electronic processing and a faster supply

chain are likely to be considerable for all

parties. For Fonterra, a reduction of NZD

250,000 annual courier charges will certainly

be welcomed, but these will be counted as

just one of many savings achieved as a result

of a fully automated trade process.

Catching up

The e-bill of lading will be invaluable for intra-

Asia trade, where it is often the case that

goods arrive before the documents. As well

as processing savings, electronic document

presentation helps to shorten the supply chain,

reduced days sales outstanding and free up

working capital. Finally, the physical and financial

supply chains are beginning to meld into one. O

Multi-carrier, multi-bank

Fonterra turned to INTTRA, an ocean carrier

service provider, to develop a platform-

independent electronic bill of lading with the

necessary international and other approvals.

SWIFT is working to establish acceptance by

banks for the document, which is delivered

along with the other trade documents via

SWIFT FileAct. Result: a simple, multi-carrier,

multi-bank solution that has the potential to

be a strategic enabler and drive critical mass

for electronic trade.

“When working on a multi-party solution,

simplicity is the key to success. This solution

involves very little operational change for

trading partners and so is quick to deploy,”

explains Connie Leung, director, payments

and trade markets, Asia Pacific, SWIFT.

Fonterra is working with ANZ as its exporting

bank, while China Merchants Bank in China

and Korea Exchange Bank in Korea are

acting for importers in China and Korea on the

very day, thousands of

documentary trades

worldwide depend on courier

delivery of physical bills of

lading as the document

of title to goods, against which payment is

released. Now SWIFT, Fonterra, a group of

banks and INTTRA are working together on a

simple, multi-bank, multi-carrier, solution.

Fonterra, the international dairy group

owned by 13,000 New Zealand farmers, has

helped to drive the initiative. Fonterra executes

40,000 trade transactions per year with

customers in 140 countries and is committed

to reaching full automation of its trade

documentation processes by 2020. Gaining

acceptance for an e-bill of lading will be an

important step on the journey. “We do most of

our open account business electronically, but

not our documentary collections and credits,”

explains Clyde Fletcher, manager, Fonterra

documentation centre – group supply chain.

E

eBL

Buyer Seller

Carrier Port

Agent

1. Shipping Instructions

Third party eBL service

Exporter bank

Importer bank

4. eDocs presentation via SWIFT FileAct

8. Release

2. BL copy

3. eDocs

9. goods release

5. payment

Carrier

6. Surrender Notice

2. BL copy via SWIFT FileAct

-PN\YL��!�>VYRÅV^�MVY�LSLJ[YVUPJ�IPSS�VM�SHKPUN

Source: SWIFT

Catching up with the physical supply chainSWIFT is working with Fonterra, the world’s largest exporter of dairy products, on a simple but effective solution for de-materialising the bill of lading


Cas

e st

udie

s truly end-to-end supply chain finance

processes. SWIFT’s Trade for Corporates

standard supports the use of multi-banking

trade finance solutions, which are not tied

to any one technology or any one service

provider.

SWIFT offers MT 798 trade finance

messaging standards for guarantees and

letters of credits, along with connectivity

options such as FIN and FileAct.

Project challenges

Alcatel-Lucent – in cooperation with Crédit

Agricole CIB – followed a 10-month re-

engineering project to achieve improved

efficiency and scalability within its guarantees

process. The project covered first the

migration of existing guarantees onto the

new software and then the testing of the

communication with Crédit Agricole CIB

on guarantees events via SWIFT, over FIN

and FileAct. The resulting service allows the

parallel transfer of structured data into an

MT 798 message, along with one or more

scanned attachments.

The key project challenges were the

interpretation of the standard, the definition of

common practical rules and the reconciliation

between MT 798 and related attachments.

Next steps

A key factor in determining the ultimate

success of this initiative will be the successful

deployment of multi-bank trade finance

solutions based around the MT 798 standard.

Alcatel-Lucent and Crédit Agricole CIB are

taking steps to extend this new process and

standard to other business relationships

in order to maximise the value for their

respective organisations.

For Crédit Agricole CIB, this project is

the first step in a longer-term trade finance

strategy that includes the enrichment of its

product portfolio with import and export

letters of credit. The bank aims to roll out

its electronic guarantee service for other

customers, starting in Europe and then in

other global markets.

Alcatel-Lucent will also replicate this solution

with its other banking partners as the next

step in enhancing the efficiency and scalability

of its guarantees and financial oversight

processes. O

The multi-bank approach

Crédit Agricole CIB – a key banking partner

of Alcatel-Lucent – is a leading provider of

guarantees and letters of credit. The bank’s

core objective is to offer a multi-bank solution

to corporates that require guarantees and/or

import letters of credit or that are beneficiaries

of export documentary credits.

Crédit Agricole CIB committed to enhance

its single-bank offer with a multi-bank

solution, while at the same time automating

its back-office processes to deliver faster,

more reliable customer service. Crédit

Agricole CIB determined that SWIFTNet

for Trade was the right standard to help it

achieve these objectives. For the bank, MT

798 is more than a technological choice: it is

a business enabler.

Among the 22 banks adopting SWIFT’s

MT 798, Crédit Agricole CIB is the first

bank to offer their corporate clients the

management of guarantees using MT

798. “MT798 is the de-facto platform-

independent standard. More than a

technical choice, MT798 is a real business

enabler to access international markets,”

says Christophe Clévenot, head of product

development at Crédit Agricole CIB.

SWIFT was an obvious choice for

connecting Crédit Agricole CIB to its

corporates, as it allows each party to select

independent software solutions and supports

lcatel-Lucent has teamed

up with Crédit Agricole CIB

to establish an electronic

guarantees process for

the delivery of complex

projects. Based on the SWIFTNet Trade For

Corporates standard, this new process has

already achieved improvements in process

efficiency and scalability. Both organisations

see this successful project as the first step

toward establishing standardised, multi-bank

solutions to the needs of trade finance actors

across the globe.

Efficient and scalable

Like many global telecommunication

companies, Alcatel-Lucent faces a growing

demand to use guarantees to secure the

delivery and maintenance of complex projects.

Traditional guarantees typically rely on the

exchange and archiving of paper-based

information. While the system in place

offered reporting capabilities, treasury

managers often struggle to identify and

reduce redundant activities and to proactively

manage bank limits.

Because of these challenges, Alcatel-

Lucent chose to implement a new system

to optimise the entire process of issuing

and amending guarantees. Both the system

selection and the workflow re-engineering

project required the adoption of a standard

for structuring information, a solid tool for

providing online access to information,

and a cost-effective channel to connect

Alcatel-Lucent with more than a hundred

banks. Based on these requirements, the

company determined that MT 798 messages

represented the appropriate standard format,

while SWIFT connectivity would provide a

cost-effective solution.

CA CIB pioneers electronic guarantees with Alcatel-LucentFirst live use of electronic guarantees based on MT 798, SWIFT’s de-facto platform-independent standard

A

MT798 is a real business enabler to access international markets.Christophe Clévenot, head of product development, Crédit Agricole CIB


Per

spec

tive

s

service, the greater the number of corporate

clients that can exchange e-invoices using

SWIFT. Although the deployment is in its early

stages, she points out that the advantages

are significant, since SWIFT provides a

common technical standard for sending

messages that is widely recognised and

understood – eliminating any need to worry

about compatibility and differing formats. In

addition, the involvement of SWIFT provides

stability and peace of mind for participants.

“As we expand our interconnection network,

it takes time to build up relationships,” she

says. “It is an asset that everybody knows

SWIFT. This makes it easier to reach into new

markets and interact with customers and

other service providers.”

The benefits of the SWIFT network reach in

both directions, as Ujainen at Wärtsilä explains.

“When expanding into new markets, there

are hundreds of service providers in Europe

alone and not all of them are connected to

each other,” he says. “Previously, this meant

that we had to work on a case-by-case basis,

checking with the business partner if we can

use e-invoicing in each market. If not, new

contracts between Tieto and the business

partner’s service provider had to be created.

That takes some time, but Tieto’s cooperation

with SWIFT possibly helps us to speed things

up significantly.” O

implemented PDF-based invoicing services

which simply use PDF files as attachments

when sending invoices. This practice is only

marginally better than using paper, since the

data must still be manually re-entered on its

arrival at its destination. A better and true

e-invoicing solution, he says, is to move the

invoice data onto ISO 20022 XML files that

are exchanged between corporates and

e-invoicing service providers automatically, thus

removing the manual processes and leading

to significant cost reductions. It is this model

that Tieto delivered already earlier to Wärtsilä.

Now the solution has been complemented by

using SWIFT’s messaging infrastructure as an

additional distribution network.

“Ideally it is similar to a mobile telephone

system,” says Ujainen. “It doesn’t matter what

operator you and the receiver have – you only

need the address of the recipient. It is a pre-

condition of course that service providers are

connected and can manage interoperability

effectively. The rest of the process is

managed automatically. The value of using

SWIFT is indeed in the improved linking of

electronic invoicing service providers. This

will definitely drive faster increase of the

e-invoice penetration across the borders. This

will then deliver more tangible cost savings.

In principle, we can now quickly reach the

whole of our supplier base, through Tieto’s

connection to SWIFT.”

Ujainen is keen to see more service

providers join the network, pointing out that

the system will become more useful as more

participants join in.

Early birds

For Tuija Lompolojärvi, development manager

at Tieto, building up the network to achieve

critical mass is also a priority, since the more

banks and non-banks adapt to the new

hile e-invoicing offers the

prospect of increased

automation and savings

in both cost and time,

difficulties in harmonising

processes and linking technologies –

particularly cross-border – have hampered

adoption by corporates and their banking

partners. But 2012 may be the year when

large-scale cross-border e-invoicing truly

gains momentum. Financial technology firm

Tieto, for example, is migrating an existing

client, Helsinki-based power solutions

provider Wärtsilä, to a new solution that

leverages the SWIFT network and which

could pave the way for a more efficient

e-invoicing future.

In 2011, SWIFT approved Tieto as the

first e-invoice service provider to exchange

electronic invoices over the SWIFT network.

The first e-invoice exchange using the

network was carried out in September 2011

by Tieto, regional northern European bank

Nordea and US financial technology firm

Bottomline Technologies.

Cross-border e-invoicing is currently fairly

rare in most parts of Europe beyond the

Nordic countries, but Tieto is sufficiently

encouraged by feedback to the new

approach to predict strong growth in the next

12 months. For Johannes Ujainen, e-invoice

specialist at Wärtsilä’s shared service centre,

increased automation of payment-related

processes is a key strategic enabler that

supports the company’s growth objectives.

With a primary focus on Europe, the company

is re-engineering its global operations to

achieve cost efficiencies and time savings.

E-invoicing is a key contributor, as handling of

cross-border communications with suppliers

becomes quicker and less error-prone.

Today far too many corporates have

E-invoicing spreads its wingsTogether with SWIFT, technology service providers and banks are helping corporates to automate global invoicing processes based on the ISO 20022 messaging standard

WThe value of using SWIFT is in the improved linking of electronic invoicing service providers.Johannes Ujainen, Wärtsilä

supply chain - collyer consulting · 2013-09-27 · developing specific value propositions for...

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