SITPRO Simplifying International Trade The Cost of Paper in the Supply Chain Malcolm McKinnon CEO,...

SITPROSimplifying International Trade

The Cost of Paper in the Supply ChainThe Cost of Paper in the Supply Chain

Malcolm McKinnon Malcolm McKinnon

CEO, SITPRO LtdCEO, SITPRO Ltd

Presentation to UN/CEFACT PlenaryPresentation to UN/CEFACT PlenarySeptember 2008September 2008


Presentation ObjectivesPresentation Objectives

• To present SITPRO’s “Hermes” report To present SITPRO’s “Hermes” report • To demonstrate potential benefits from To demonstrate potential benefits from

implementing straight-through data processing = implementing straight-through data processing = “ STP”“ STP”

• To explain how we are going forward in the UKTo explain how we are going forward in the UK• To reinforce case for international trade data To reinforce case for international trade data

standardsstandards


About SITPROAbout SITPRO

• Who we areWho we are: : UK’s trade facilitation organisation – UK’s trade facilitation organisation – world leader in our fieldworld leader in our field

• MissionMission:: To make international trade easier To make international trade easier• HistoryHistory: : Established 1970:Established 1970:

– simplified trade documents simplified trade documents

– better border regulation better border regulation

– international standards international standards

– capacity buildingcapacity building


Objectives of researchObjectives of research

• ConfirmConfirm scale of perishable food scale of perishable food import and export marketsimport and export markets

• Identify and valueIdentify and value documentary documentary issues arising in this marketissues arising in this market

• Assess potential benefitsAssess potential benefits from from replacing current documentary replacing current documentary systems with integrated paperless systems with integrated paperless trading (straight-through trading (straight-through processing = “ STP”)processing = “ STP”)


UK Perishable Food ImportsUK Perishable Food ImportsMeat14%

Fish7%

Dairy6%

Flowers3%

Vegetables10%

Fruit12%

Coffee/Tea2%

Other46%

Estimated Market Size: £26 billion 2005

(of which bulkfoodstuffs = 30%)


Perishable Food Supply ChainPerishable Food Supply Chain

2005 UK perishable food imports/exports = £37 billion


Supply Chain CostsSupply Chain Costs

• As a percentage of the wholesale product price a key As a percentage of the wholesale product price a key supplier has assessed the costs of his supply chain as:supplier has assessed the costs of his supply chain as:– 64% of berries from Chile64% of berries from Chile– 70% of tomatoes/bell peppers70% of tomatoes/bell peppers– 80% of apples80% of apples

• Spoilage rates vary from Spoilage rates vary from 5% to 30% 5% to 30% and can reach and can reach 50%50% for soft fruit for soft fruit


Market and DocumentationMarket and Documentation

• Substantial UK market with significant supply chain costsSubstantial UK market with significant supply chain costs

• No single company sees or manages the whole movementNo single company sees or manages the whole movement

– some activities, transactions and costs invisible or some activities, transactions and costs invisible or hidden to participantshidden to participants

• Little realisation of true costs of documentation Little realisation of true costs of documentation

– many companies focus on just-in-time deliveriesmany companies focus on just-in-time deliveries

• Paper documentation Paper documentation isis a major administrative burden on a major administrative burden on business and governmentbusiness and government


Scale of DocumentationScale of Documentation150150 Documents in a typical single complete consignment Documents in a typical single complete consignment

transaction from grower to retailer (= up to 225 pieces of transaction from grower to retailer (= up to 225 pieces of paper)paper)

1 billion1 billion Pieces of paper generated Pieces of paper generated eeach yearach year by UK perishable by UK perishable food imports supply chainfood imports supply chain

30%30% Data entered more than onceData entered more than once

189 million189 million Duplicate consignment entriesDuplicate consignment entries

Over 90%Over 90% Paper documentation subsequently destroyed – much Paper documentation subsequently destroyed – much non-recyclablenon-recyclable

0.5%0.5% Consignment cost savings from each day saved in Consignment cost savings from each day saved in supply chainsupply chain


Incidence of Missing/Delayed Incidence of Missing/Delayed DocumentationDocumentation

Country of OriginCountry of Origin TransportTransport % of key documents missing% of key documents missing ChileChile Air/SeaAir/Sea 6%6%

PeruPeru Air/SeaAir/Sea 8.5%8.5%

USAUSA AirAir 19%19%

South AfricaSouth Africa Air/SeaAir/Sea 24%24%

GhanaGhana AirAir 29%29%

EgyptEgypt Sea/truckSea/truck 54%54%

BrazilBrazil SeaSea 62%62%Source: Consultants’ research of over 500 consignments

1.4 million incidences annually


Impact of Missing/Delayed Impact of Missing/Delayed DocumentsDocuments

• Impacts on both government and businessesImpacts on both government and businesses – Personnel and time spent in:Personnel and time spent in:

• obtaining and verifying priority documents obtaining and verifying priority documents • processing deferment claims to recover overpaid dutyprocessing deferment claims to recover overpaid duty• recovering missing documentationrecovering missing documentation• physically tying together overall documentation and physically tying together overall documentation and

storing final document setsstoring final document sets– Environmental impact of paper documentsEnvironmental impact of paper documents


Impact of Missing/Delayed Impact of Missing/Delayed DocumentsDocuments

£126 million £126 million annuallyannually

Cost to importers of documentary Cost to importers of documentary exchange process of original copies exchange process of original copies without delayswithout delays

Over £1 billion Over £1 billion annuallyannually

Cost Cost with delayswith delays


Impact upon Country of OriginImpact upon Country of Origin

• 7-10 days7-10 days typically required to assemble documents typically required to assemble documents • 4 government agencies and 5 logistics providers4 government agencies and 5 logistics providers

(fruit from analysed African countries)(fruit from analysed African countries)• Impacts upon product shelf life and reduces revenue Impacts upon product shelf life and reduces revenue

including to exporting countries – many developing including to exporting countries – many developing countriescountries


STP savings evidenceSTP savings evidence

• European Electronic Invoicing report (2007) states European Electronic Invoicing report (2007) states €€ 243 Billion savings by adopting E-invoicing alone across 243 Billion savings by adopting E-invoicing alone across EuropeEurope

• Gateway Sweden, Finland, Korea all introduced various Gateway Sweden, Finland, Korea all introduced various STP systems with substantial savingsSTP systems with substantial savings

• Australia – cane sugar now STP based saving 4.4% of Australia – cane sugar now STP based saving 4.4% of total valuetotal value


ConclusionsConclusions

• Current documentary systems cost perishables supply Current documentary systems cost perishables supply chain more than £1 billion annually chain more than £1 billion annually

• Consumers pay more than necessary Consumers pay more than necessary

• Development of perishables trade from developing Development of perishables trade from developing countries inhibitedcountries inhibited

• Potential savings of over £700 million from straight-Potential savings of over £700 million from straight-through processing through processing


International requirements for STPInternational requirements for STP

• Business process mapping (by trading partners)Business process mapping (by trading partners)• Identification of data to be exchangedIdentification of data to be exchanged

(Export data import data)(Export data import data)• Common data definitionsCommon data definitions

(UN/CEFACT data standards)(UN/CEFACT data standards)• Interoperability of data communicationInteroperability of data communication

(UN/CEFACT message standards)(UN/CEFACT message standards)


Hermes Research ReportHermes Research Report

SITPRO LtdSITPRO Ltd

www.sitpro.org.uk / reports / hermes.pdfwww.sitpro.org.uk / reports / hermes.pdf

SITPRO Simplifying International Trade The Cost of Paper in the Supply Chain Malcolm McKinnon CEO,...

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