SITPRO Simplifying International Trade The Cost of Paper in the Supply Chain Malcolm McKinnon CEO, SITPRO Ltd CEO, SITPRO Ltd Presentation to UN/CEFACT Plenary September 2008

SITPRO Simplifying International Trade Presentation Objectives To present SITPRO’s “Hermes” reportTo present SITPRO’s “Hermes” report To demonstrate potential benefits from implementing straight-through data processing = “ STP”To demonstrate potential benefits from implementing straight-through data processing = “ 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 standardsTo reinforce case for international trade data standards

SITPRO Simplifying International Trade About SITPRO Who we are: UK’s trade facilitation organisation – world leader in our field Who we are: UK’s trade facilitation organisation – world leader in our field Mission: To make international trade easier Mission: To make international trade easier History: Established 1970: History: Established 1970: – simplified trade documents – better border regulation – international standards – capacity building

SITPRO Simplifying International Trade Objectives of research Confirm scale of perishable food import and export markets Confirm scale of perishable food import and export markets Identify and value documentary issues arising in this market Identify and value documentary issues arising in this market Assess potential benefits from replacing current documentary systems with integrated paperless trading (straight-through processing = “ STP”) Assess potential benefits from replacing current documentary systems with integrated paperless trading (straight-through processing = “ STP”)

SITPRO Simplifying International Trade UK Perishable Food Imports Meat 14% Fish 7% Dairy 6% Flowers 3% Vegetables 10% Fruit 12% Coffee/Tea 2% Other 46% Estimated Market Size: £26 billion 2005 (of which bulk foodstuffs = 30%)

SITPRO Simplifying International Trade Perishable Food Supply Chain 2005 UK perishable food imports/exports = £37 billion

SITPRO Simplifying International Trade Supply Chain Costs As a percentage of the wholesale product price a key supplier has assessed the costs of his supply chain as:As a percentage of the wholesale product price a key supplier has assessed the costs of his supply chain as: – 64% of berries from Chile – 70% of tomatoes/bell peppers – 80% of apples Spoilage rates vary from 5% to 30% and can reach 50% for soft fruitSpoilage rates vary from 5% to 30% and can reach 50% for soft fruit

SITPRO Simplifying International Trade Market and Documentation Substantial UK market with significant supply chain costs Substantial UK market with significant supply chain costs No single company sees or manages the whole movement No single company sees or manages the whole movement – some activities, transactions and costs invisible or hidden to participants Little realisation of true costs of documentation Little realisation of true costs of documentation – many companies focus on just-in-time deliveries Paper documentation is a major administrative burden on business and government Paper documentation is a major administrative burden on business and government

SITPRO Simplifying International Trade Scale of Documentation 150 Documents in a typical single complete consignment transaction from grower to retailer (= up to 225 pieces of paper) 1 billion Pieces of paper generated each year by UK perishable food imports supply chain 30% Data entered more than once 189 million Duplicate consignment entries Over 90% Paper documentation subsequently destroyed – much non-recyclable 0.5% Consignment cost savings from each day saved in supply chain

SITPRO Simplifying International Trade Incidence of Missing/Delayed Documentation Country of Origin Transport % of key documents missing ChileAir/Sea6% PeruAir/Sea8.5% USAAir19% South Africa Air/Sea24% GhanaAir29% EgyptSea/truck54% BrazilSea62% Source: Consultants’ research of over 500 consignments 1.4 million incidences annually

SITPRO Simplifying International Trade Impact of Missing/Delayed Documents Impacts on both government and businesses Impacts on both government and businesses –Personnel and time spent in: obtaining and verifying priority documents obtaining and verifying priority documents processing deferment claims to recover overpaid duty processing deferment claims to recover overpaid duty recovering missing documentation recovering missing documentation physically tying together overall documentation and storing final document sets physically tying together overall documentation and storing final document sets –Environmental impact of paper documents

SITPRO Simplifying International Trade Impact of Missing/Delayed Documents £126 million annually Cost to importers of documentary exchange process of original copies without delays Over £1 billion annually Cost with delays

SITPRO Simplifying International Trade Impact upon Country of Origin 7-10 days typically required to assemble documents 7-10 days typically required to assemble documents 4 government agencies and 5 logistics providers (fruit from analysed African countries) 4 government agencies and 5 logistics providers (fruit from analysed African countries) Impacts upon product shelf life and reduces revenue including to exporting countries – many developing countriesImpacts upon product shelf life and reduces revenue including to exporting countries – many developing countries

SITPRO Simplifying International Trade STP savings evidence European Electronic Invoicing report (2007) states € 243 Billion savings by adopting E-invoicing alone across EuropeEuropean Electronic Invoicing report (2007) states € 243 Billion savings by adopting E-invoicing alone across Europe Gateway Sweden, Finland, Korea all introduced various STP systems with substantial savingsGateway Sweden, Finland, Korea all introduced various STP systems with substantial savings Australia – cane sugar now STP based saving 4.4% of total valueAustralia – cane sugar now STP based saving 4.4% of total value

SITPRO Simplifying International Trade Conclusions Current documentary systems cost perishables supply chain more than £1 billion annuallyCurrent documentary systems cost perishables supply chain more than £1 billion annually Consumers pay more than necessaryConsumers pay more than necessary Development of perishables trade from developing countries inhibitedDevelopment of perishables trade from developing countries inhibited Potential savings of over £700 million from straight- through processingPotential savings of over £700 million from straight- through processing

SITPRO Simplifying International Trade International 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) Common data definitionsCommon data definitions (UN/CEFACT data standards) Interoperability of data communicationInteroperability of data communication (UN/CEFACT message standards)

SITPRO Simplifying International Trade Hermes Research Report SITPRO Ltd / reports / hermes.pdf