Post on 03-Feb-2022
CASE STUDY
EXECUTIVE SUMMARY
Anticipating a dramatic growth in its Asia-Pacific business, the
chemical division of a global petroleum company was seeking to
reengineer its export letter of credit (L/C) process in the Pan-Asia
market from a largely manual operation to an electronic process.
Throughout a rigorous 16-month timeline, Bank of America
Merrill Lynch demonstrated its capabilities as a full-service provider
with the global network, people, skills and technology needed to
streamline the process, improve reporting and management visibility,
and enable the company to manage its supply chain more efficiently.
TAblE of ConTEnTS
Transforming a global export letter of credit process: from reactive to proactive . . . . . . . . . . . 2
Moving from a high-volume, manual process . . . . . . . . 2
A pitch-perfect proposal . . 3
Implementing an innovative solution . . . . . . . . . . . . . . 4
The right technology . . . . . 5
Looking ahead . . . . . . . . . 5
Reengineering an Export letter of Credit Process Accelerates Cash Conversion
SEPTEMBER 2012
Global Integrated Energy Company
REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 2
TRAnSfoRMInG A GlobAl EXPoRT lETTER of CREDIT PRoCESS:
fRoM REACTIVE To PRoACTIVE
one of the most common challenges faced by exporters is the inherent
inefficiency of the paper-intensive process of export letter of credit
documentation and negotiation. Recently, a global leader in the petrochemicals
industry, anticipating a 15 – 20% growth in its Asia-Pacific business, was seeking
a solution that would align with its growth requirements. They needed to
streamline their entire export L/C model — migrating it from a largely manual
process to a more timely and accurate electronic process.
MoVInG fRoM A HIGH-VolUME, MAnUAl PRoCESS
Costly and cumbersome, the company’s incumbent export L/C process involved
an extremely high volume — up to 7,500 presentations annually supporting USd
1B of sales turnover — and a level of discrepancies in third-party documents as
high as 35%. “The documents the company was receiving from buyers were not
coming in the order they wanted,” says Sonal Priyanka, vice president in Trade
and Supply Chain Sales at Bank of America Merrill Lynch. “They would always
need to follow up with amendments and modifications. There were also multiple
charges from correspondent banks that had a major impact on their margins.”
When the company worked with their buyers and buyers’ banks with the incumbent
provider, there would be delays in the processing of their export documentation
because of the disparity in L/C formats. data was not standardized and the
entire process was decentralized. As a result, the company needed to reduce
correspondent bank charges and delays in processing export documentation.
“At a very high level, they were looking to accelerate cash conversion — through
both timeliness and accuracy of the expert letter of credit documentation
collections handling,” says Bruce Proctor, managing director and head of global
Trade and Supply Chain finance at Bank of America Merrill Lynch. “They needed
to be able to provide and deliver compliant documents as quickly as possible to
secure payment and accelerate cash conversion.”
REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 3
A PITCH-PERfECT PRoPoSAl
In 2010, at the company’s headquarters, corporate banking and sales executives
from Bank of America Merrill Lynch proposed our participation in a global pilot
project. “People, technology and processes are our strength, and we were quite
pleased to join the pilot to help consolidate the company’s trade processing to
achieve economies of scale and eliminate paper and turnaround of compliant
documents,” says Robert Ingersoll, managing director and senior corporate
banker in the oil & gas group at Bank of America Merrill Lynch.
once the company agreed to the pilot, Ankur gupta, vice president, Regional
Sales – Asia for Bank of America Merrill Lynch, set out to put processes and
procedures in place that would demonstrate the bank’s end-market expertise
to handle the client’s export needs in all the markets in which they do business
throughout Asia. “We demonstrated that we had the people on the ground, the
banking relationships, and the ability to confirm letters of credit in established
and less established markets in the region,” gupta says.
Bank of America Merrill Lynch worked with Trade Technologies, Inc., a global
leader in trade payment document solutions, and the company’s customers
and their banks to help execute and test best practices for driving paper out of
the process and standardizing L/C formats and templates. They also leveraged
the USd clearing relationships that Bank of America Merrill Lynch has with key
issuing banks in Asia — and all the major banks engaged in the company’s
business — to influence those banks to use Bank of America Merrill Lynch as the
reimbursing bank and to reduce the charges from corresponding banks.
The Bank of America Merrill Lynch export L/C processing arrangement included
advising, document preparation and examination, and credit confirmations
in eight countries. By eliminating paper wherever possible, Bank of America
Merrill Lynch is able to provide electronic straight-through processing wherever
appropriate. Standardizing the form and formats of L/C templates promises to
help the company achieve a higher probability of getting required data in a way
in which they can identify and address discrepancies more quickly. And real-time
performance reporting enables them to manage the supply chain more efficiently.
“We demonstrated that we had not only the right technology and platform,
we had the individuals in market to work with the company’s buyers and
their buyers’ banks to drive this uniformity,” says Chris Bozek, Product head,
global Trade and Supply Chain, Bank of America Merrill Lynch.
“ We demonstrated that we had
not only the right technology
and platform, we had the
individuals in market to work
with the company’s buyers and
their buyers’ banks to drive
this uniformity.”
Chris Bozek Product Head Global Trade and Supply Chain Bank of America Merrill Lynch
REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 4
IMPlEMEnTInG An InnoVATIVE SolUTIon
The Bank of America Merrill Lynch proactive approach to reengineering the
company’s export L/Cs featured an innovative document preparation and
presentation solution. With Trade Pro® functionality, Bank of America Merrill Lynch
is able to receive L/Cs and contact the company within 24 hours — via email,
fax or SWIfT — and streamline the flow of information between the company,
the buyers and buyers’ banks.
Throughout the implementation of the solution, there was consistent
communication among all of the groups involved — with the Bank of America
Merrill Lynch Asia and U.S. teams working in lockstep in their approach. Every
step of the way, the local Bank of America Merrill Lynch team in China was
engaged with the company’s local team on the ground. “More than streamlining
the process, our focus was on maintaining consistent communication and how
well we understood the client’s culture,” says Carrie Moore, managing director in
the Energy & Power group at Bank of America Merrill Lynch. “The way our culture
complemented the clients was very compelling.”
THE SolUTIon: oPERATIonAl flow AnD DoCUMEnT MAnAGEMEnT
“ More than streamlining
the process, our focus was
on maintaining consistent
communication and how
well we understood the
client’s culture.”
Carrie Moore Managing Director Energy & Power Group Bank of America Merrill Lynch
What the Trade Pro
platform does:
y Provides customized settings,
data mining and reporting for
specific global business needs
y Enables importers to automate
purchase order details into L/C
transactions
y Provides online images of
related paper documents or
electronic data elements for
additional transaction-level
insight
y Provides exporters with access
to web reporting to view export
L/C transaction details and
presentation discrepancies
y Integrates with CashPro for a
more holistic approach to
treasury and trade
The Company(as Seller)
Trade Pro®
Issuing Bank(as Buyer’s Bank)
1. Issue L/C
3. L/C review & checklist against L/C template
5a. Shipment details
2. Advise L/C
11. Present docs for payments
5. Order details
4. Arrange shipment. Issue L/C
6. Courier original BL & other third-party docs
2b. L/C copy
10. Advise discrepancies & follow-up
9. Print & collate other third-party docs for checking against L/C
8. Transmit completed docs
Freight Forwarder or
Other Third Party
Freight Forwarder (as Doc Prep
Service Provider)
7. Prepare docs against L/C
Trade Pro®
(as Advising L/C and Nego Bank)
“ Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed. ©2012 Bank of America Corporation
REEngInEERIng An ExPoRT LETTER of CREdIT PRoCESS ACCELERATES CASh ConvERSIon 5
THE RIGHT TECHnoloGY
The team leveraged Trade Pro — the Bank of America Merrill Lynch electronic
trade finance platform used by organizations worldwide to enhance their trade
and financial supply chain operations — to provide online functionality for the
company to manage its global trade and treasury coordination electronically,
in real time and to improve its ability to optimize working capital. Accessible
via CashPro® online, the Bank of America Merrill Lynch global client portal, Trade
Pro includes new tools for data mining and reporting, multi-language capability
customized for each user, and a fully integrated trade and treasury view.
In this case, Trade Pro enabled the standardization of processes in order to
gradually cut the need for manual processes and increase electronic processes.
The Bank of America Merrill Lynch team added value to the solution with
suggestions about how the close integration between Trade Pro and CashPro
online would enable the company to achieve a combined treasury and trade
view of their transactions, from initiation through final settlement.
“In fact, a lot of what we brought to the table was advisory to the client and their
multiple freight forwarders,” says Bozek. “We demonstrated how Trade Pro works
and how it can provide better and more timely data to help manage the supply
chain. We showed them how we can build the electronic interfaces between us
and all the members enabling the transaction flow — the company, the freight
forwarder, the buyers and their issuing banks.”
looKInG AHEAD
Today, the company is able to manage its global trade and treasury coordination
electronically and in real time — improving its ability to optimize working capital.
At every step, the Bank of America Merrill Lynch provided transparency, exhibiting
a focus not only on the company’s immediate needs but also looking ahead to
the future. “This is a journey, not an event,” says Bozek. “over the next couple of
years, we will be up and running with a sustained commitment from both parties.
We’ll continue to drive paper from the process, with all parties in the process,
enabling straight-through electronic processing wherever possible.”