Comparison of Supply Chain Facilities, Supply Chain Finance and the Octet Closed Community Concept
TradeBeam, Trade Card, the proposed SWIFT TSU web enabling documentation system and Wachovia Bank’s TradeXchange are very similar in concept.
The concept covers two areas:
- It is a structured B2B online trade transaction management service. Global Trade Management software and services companies, provide solutions that streamline global trading processes for enterprises and their partners. These integrated solutions provide import and export compliance, inventory management, shipment tracking, supply chain event management, and global trade finance solutions such as open account and letter of credit management
- From a financing side they generally provide a secure, Web-based messaging platform designed to provide greater visibility throughout the financial supply chain from purchase order delivery through invoice settlement" "including facilitating pre- and post-export financing, indemnities for buyer default, purchase order delivery/acknowledgement, document preparation, electronic document management and document compliance" The concept also leans towards the respective Banks financing their own secured SME clients, whether it’s an importer or exporter. Generally this is exactly what they advertise as per some extracts shown below:
"A secure, Web-based messaging platform designed to provide greater visibility throughout the financial supply chain from purchase order delivery through invoice settlement" "Including facilitating pre- and post-export financing, indemnities for buyer default, purchase order delivery/acknowledgement, document preparation, electronic document management and document compliance."
Octet is a closed community web based system that is geared solely around financing the Buyer (preferably a SME) on an unsecured basis. The portal allows us to ensure that the financing facility to the Buyer is based on a live actual working capital transaction. The portal is also set up so that the Buyer can switch hats and can in-fact become a Seller within the domestic market.
As far as the Octet portal is concerned it is not meant to be a document/message tracking system (something that would assist in the visibility of the purchased product to see when title to the goods passes).
Octet significantly enhances international trade opportunities between China and the rest of the world by offering a unique financing mechanism that provides significant benefits to both Importers and Exporters of products/services. Octet will thus greatly assist Sellers in China and Buyers in other countries who wish to transact business. These businesses are typically characterised as Small Medium Enterprises (“SME’s”) and would be looking to increase mutual trade and grow their business accordingly.
In addition, Octet web enables the entire bank Letter of Credit documentation process and provides real time interactive information on all aspects of the transaction. It firstly acts as an introducer and facilitator for the negotiation of a sales contract between the Buyer and Seller. It will also act as a financier to the Buyer through the provision of an unsecured loan. Once the purchase terms have been completed Octet will make immediate payment of approved transactions to the Sellers. Octet can also be used where the Buyer has its own source of secured finance available.
Octet Value Proposition
Buyer
- Unsecured facility
- Provides buyer with the opportunity of converting a cash trade arrangement into an open account facility
- The acceleration of the working capital cycle facilitated by OCTET enables both domestic purchasers and Chinese suppliers to expand their business activities and grow accordingly.
- Flexibility by providing an option to the Buyer of extending the repayment period if required
- Does not interfere with the payment arrangement that exists between the Buyer and Seller. If the existing arrangements involve LC or TT, this would continue.
- Buyer benefits from a VISA debit card reward program for all paid purchases
- Buyer is able to use the same communication system with numerous Chinese Sellers
Seller
- Benefits by receiving earlier payment.
- Reduces financing required from Seller’s internal or external backers
- More efficient process
- Broadens the net of potential overseas Buyers
- Removes need to renegotiate every sale
- Broadens the Sellers trading partnerships by offering up to 120 days credit terms instead of always demanding sight LCs and telegraphic transfers on production of Bill of Lading.
- Allows Seller the opportunity to deal in larger volumes with Buyers