World Trade - November 2008 - (Page 35)

into your pocket to support that elongated supply chain. So essentially, you are ﬁnancing trade at your weighted average cost of capital.” What is it worth to use trade ﬁnance vs. average weighted cost of capital? “It could be as much as a thousand basis points, the difference between 8 percent debt rate and 18 percent averaged weighted cost of capital,” says Vukas. “We show this as the value proposition and ask ‘what does it cost you to put money into your business?’ Then we say, for example, ‘okay, if we can save you thousands of dollars on ﬁnancing, this should be considered when selecting who manages the shipment of your goods.’” Then there’s the matter of being able to negotiate better terms with suppliers. “A strong importer in the U.S. can force the Asia supplier to bring product in and keep it in the Asian company’s warehouse until they pull it, obliging the supplier to ﬁnance those goods all the way through. A small guy, who’s going global because they’re forced to get their prices down, is in the opposite situation. A small importer goes looking for a supplier in China and China has all the leverage, it can dictate terms. The buyer has to take ownership at the port in China. “What we’re saying is that if we manage the transportation of those goods, why can’t we step in, provide the visibility and shipping management services and provide the associated information to help ﬁnancial institutions? We know that we’ve got information regarding the loca- UPS Capital President Bob Bernabucci and Chris Vukas tion of the goods—they exist—so there’s less of an issue with fraud. So if you bring in an intermediary that can provide financing at debt rates rather than weighted average cost of capital, you can have the small importer say to the supplier, ‘I just had my partner UPS Capital provide you with earlier ﬁnancing so now I would like you to provide me with a discounted price.’” The buyer, of course, is vital to the program but equally so is the channel partner, the ﬁnancial institutions, since the business model is based on them providing the bulk of the ﬁnancing. UPS is putting up the seed capital to launch the service. The idea is to demonstrate the effectiveness of the program to ﬁnancial institutions, WTM11084Schenker1.indd 1 WWW.WORLDTRADEMAG.COM 10/14/08 2:18:36 PM 35 http://www.dbschenker.com/yes http://WWW.WORLDTRADEMAG.COM

Table of Contents Feed for the Digital Edition of World Trade - November 2008

World Trade - November 2008 Contents Unexpected Responses to Unanticipated Change Reading the States of Risk in Today’s Global Economy Supply Chain Watch Tradewinds Failed Promise: Mexico and NAFTA, 15 Years Later The Short Tale Marrying Trade Finance and Transportation into a Single Transaction Trucking Gets a Double Whammy Are We Safe Yet? Logistics Resurrects the Rust Belt Keep on Compressing

World Trade - November 2008

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