The Far Side of the World

Wachovia's Global Trade Services Group, under the command of Hong Kong-based Steve Nichols, has deployed workflow and imaging technologies in order to master the complexities of the trade finance business.

Some maps of the globe look nothing like the Mercator Projection.

For instance, the worldview of Wachovia (Charlotte, N.C.; $388 billion in assets) has not been shaped for global coverage as much as to mirror its customers' precise business activities and locations. "As we've grown our trade business, we've focused on specific industries, and positioned ourselves geographically to be able to handle the transactions," says Steve Nichols, managing director, Wachovia. "For example, we're not a particularly active bank in fruit-so we don't have a branch in Nicaragua to do banana exports or coffee."

"But," he adds, "we are very active in retail and apparel market segments, consumer products, electronics and toys."

And these days, that means Asia. Indeed, Nichols oversees Wachovia's Global Trade Services group from the bank's Hong Kong office, where it provides corporate importers and exporters with various trade finance and outsourcing services. In addition, these services are offered to other banks facing similar problems with similar customers. Increasingly, these are technology-based services that address the need to streamline processes, eliminate paper and manual procedures, and generally help manufacturers and other clients cut costs and improve profitability.

Wachovia's industry focus stems from the organization of its investment bank into vertical business units. "Then, a horizontal matrix of products-treasury services, foreign exchange, trade, capital markets-are sold across those industry segments," says Nichols.

FAST FINGERS

Specific industry expertise helps to manage the differences between selling mittens and microchips. "The apparel industry tends to be pretty heavy in terms of the document requirements, given things like quota, extensive product descriptions, styles, colors and sizes," says Nichols, "as opposed to, say, semiconductors in the technology area, where it's much less onerous in terms of documentation."

Yet semiconductors have their own complexities, particularly with the logistics of air freight. But there's still a common thread: Wachovia specializes in industries requiring complex orders.

In many respects, the processing requirements of trade finance are as complex as a mortgage-and far more frequent. Plus, post-9/11 documentation requirements have only just begun to ratchet up the demands upon buyers, sellers, inspection companies, shippers, air couriers and customs officials.

That's where document imaging and workflow tools come in. Certainly, barriers to trade aren't just political. There's also producing and collecting invoices, packing lists, drafts, inspection certificates and ocean bills of lading, to name a few. To the extent these chores are simplified, it's a win not only for the vendor, but also for the inspection company, the shipper, the bank and the buyer. Indeed, for manufacturers, paperwork has been a major distraction from the business of making widgets. "More often than not, banks typically expect the vendor to deliver to them all of the documents required under a letter of credit, in paper form," says Nichols.

Thus, Wachovia has built an "e-vault" for participants in the "chain of trade" to collaborate on documents. "We don't want to force the vendor, or other parties to the trade chain, to have to make a paper presentation to us," Nichols says.

Unlike physical vaults, the e-vault also keeps track of what should happen next with each document. "It's proactively polling the various members of the trade chain, in the right sequence," says Nichols. "There's no point in asking the shipping company to deliver their bill of lading if the invoice and the inspection certificate haven't been produced yet."

For the most part, Wachovia's trade finance back-office engine has been the fruit of the bank's in-house development efforts. "The system has got to be adaptable to the various business practices in various countries," says Bill Fitzgerald, department information officer of Wachovia's international banking division. "There will be differences around the fees that can be charged and are charged, some of the other financial reporting to central banks, and some of the product features that are actually used in the workflow to process the transaction."

The common features are designed to optimize the workflow involved with trade documentation. To that end, the software contains "internal meters" that measure the workflows throughout the day. Upon certain triggers, the meters send "alerts" to supervisors, who can then redirect efforts to different work queues. "The trick is to eliminate the latency time by level-loading the workflow," says Fitzgerald.

LIFE ON THE MARGINS

For manufacturers with global aspirations, such optimization isn't an option-it's a requirement. That's because the largest retailers have put tremendous pressure on their vendors. "The large companies are looking for absolute transparency," says Nichols. "They're saying to the vendor, 'We're not here to negotiate whether we're going to pay you $7.00 for this item, or $7.25 or $6.75. We want to start from the premise of having our auditors come into your factory and do a cost analysis, and if we determine that your cost is $1.50, then we'll be talking about a margin on top of that.'"

As a result, vendors have been looking to their banks to lower their administrative costs, in no small part to keep the buyers' auditors happy. "The whole game has changed," says Nichols. "It's really becoming clear that these large U.S. companies are getting larger and larger, and using their size to really demand more and more not only of their vendors in the supply chain, but the logistics providers, the freight forwarders, the shipping companies, and indeed, the banks."

This means that banks, too, have to adapt to the retailers' way of looking at the world. "We can't go into their offices and say, 'Today's your lucky day, because we have this great product that you can sit down and enter all your data into,'" says Nichols. "They're going to say, 'We don't even want to see it. What we want to do is feed you a file.'"