The bottom line for Johnston: Vastera has speeded up delivery times on the company's shipments. For example, goods that Vastera ships by air now take half the time–1.4 days on average–to clear U.S. customs. "Obviously, we have happy customers because we're delivering on time," Johnston says. Internally, Johnston credits Vastera with providing Lucent with "very significant" savings from the faster shipments and from Vastera's vigilance at ensuring that Lucent takes advantage of trade preference programs and avoids overpayment of duties. "Vastera gives us a competitive advantage," Johnston says, citing Vastera's "ability to work across our supply chain and work with our other partners–brokers, forwarders–to ensure that we get material delivered to our customers in a timely and a compliant fashion."

Still paper-clogged and regulation-laden, the international trade complexity that confronts Lucent and every other major U.S. company with business outside the 50 states may be the last great frontier for automation in the finance area. A recent survey by the Aberdeen Group, a Boston-based technology research and consulting company, found that almost two-thirds of the 170 companies it surveyed were feeling "highly pressured" to improve the efficiency of their global supply chain, and another 62% say the amount of time that it takes to do business globally is interfering with their ability to react to market demands.

Where companies see a problem, vendors see a market, and banks and software providers are moving quickly to fill this growing need with an array of software, platforms and services that facilitate payments, keep companies informed on the details of a transaction, provide real-time tracking of the physical whereabouts of shipments and offer advice about all aspects of buying and selling overseas. "People understand that there's no way that they can have all the right expertise internally," says Beth Enslow, vice president of Aberdeen. "You can have great advice, but you have to get the documents and make sure suppliers fill them out correctly…You need the execution capability in place."

MAKE THE PAPER GO AWAY

One of the first problem areas to be addressed by new technology has been trade financing. A traditional method of financing overseas trade, letters of credit (LCs) are costly, time-consuming and involve huge piles of paper and frequent discrepancies. To the rescue: electronic platforms, which turn the piles of paper into electronic documents, making LCs easier to use.

Paul Simpson, senior vice president and trade, e-payables and card solutions business executive at JPMorgan Chase Treasury Services, cites a major JPMorgan customer that exports to a small country in Southeast Asia and was waiting 60 to 90 days to be paid for those goods. Just moving the documentation for the LCs to TradeDoc, an electronic document management tool, cut the company's wait to 10 days, he says. "It's still using the same instrument, the letter of credit, but applying transparency across the whole transaction."

But even that is not necessarily fast enough, and as a result, many companies are abandoning the use of letters of credit, especially when dealing with trade partners with whom they have long-term relationships. Instead, they are conducting trade on open account–transactions in which the seller ships the goods without having a document guaranteeing payment.

Again, electronic platforms provide both the speed and visibility necessary in a post-LC world. Among the most active platforms that specialize in trade payments are: TradeCard Inc., which processes transactions in 40 different countries for its 1,000 customers, and TradeBeam Inc., which does business in 100 different countries with 3,000 customers. Payment platforms that aren't specifically targeted at international trade also facilitate many cross-border payments. These platforms include: U.S. Bank's PowerTrack, which processed more than $4 billion in payments in 13 countries in 2004; Xign Corp., which processes payments for 30 large companies; Orbian Corp., which processes payments in 34 different countries; and PaySource, JPMorgan Chase's multicurrency payment platform.

Besides the partial abandonment of LCs, the existence of platforms also has opened up other new financing techniques that are possible only where electronic invoices are in use. For instance, Andy Kyte, a research fellow in London for Gartner Inc., expects that companies will increasingly adopt systems in which either the buyer or seller can propose early payment at a discounted rate, which he has dubbed "dynamic early-payment discounts." Kyte predicts that by the end of 2009, 30% of the Forbes 2000 will have adopted such methods for domestic and international trade.

He says that with interest rates at low levels, companies are likely to find it more attractive to use their cash to advance credit to their suppliers in the form of early payment than keeping the cash in short-term investments that are earning very little. "Fundamentally, what we're looking at here is the opportunity for self-factoring by buying organizations," Kyte says, referring to the traditional finance technique of factoring, in which a supplier seeking quicker payment sells the title to its accounts receivable to a factoring organization at a discount. Factoring companies charge "quite substantive premiums" for their services, Kyte says. From the buyer's standpoint, "the opportunity to get significantly better early payment discounts than standard terms from your suppliers in return for using your capital instead of the factor's capital is something businesses have to consider."

HAVE WE GO A DEAL FOR YOU?

PowerTrack from Minneapolis-based U.S. Bank allows either the buyer or seller to signal with the push of a button that it wants to settle up as soon as possible. If the buyer isn't interested in advancing money to the supplier, the bank will provide it. For vendors, "the standard [fee] is 1% to be paid as quickly as possible," says Bob Fleishman, a spokesperson for PowerTrack.

Orbian says that more than 90% of the thousands of suppliers on its network have tapped it for financing. "They're being driven to open account by buyers [and] they're looking for something to fill that space," says William Follini, Orbian's executive vice president of corporate development.

Follini notes that in the past, many suppliers used LCs to get bank financing. In the absence of an LC, suppliers "don't have all of the operational detail documented and in black and white for their financier," he says.

TradeCard, based in New York, just launched an early payment product in response to customer demand. The TradeCard system automatically offers sellers the opportunity to get paid earlier than scheduled by accepting a discounted amount. The money can come either from the buyer, if it has cash on hand, or a financial institution. In either case, the supplier benefits because the discount is less than the rate at which it could have secured financing on its own. If the buyer supplies the cash, the discount is more than the income it would have earned on the funds in the money markets. Kurt Cavano, TradeCard's CEO, notes that many U.S. companies are sitting on a lot of cash.

Burton Snowboards, a private company based in Burlington, Vt., has moved more than a dozen of its vendors onto TradeCard in the last couple of years and gradually discontinued the use of LCs. This year, Burton began rolling out TradeCard's early payment program. Tom D'Urso, Burton's treasurer, says that while the vendors appreciated the information that is available to them on TradeCard, the company wants to enhance their satisfaction with the TradeCard system. Burton has certainly increased its satisfaction: D'Urso says the early payment program is a profit center for Burton's treasury–"a zero-risk investment with an above-market rate of return."

And according to D'Urso, the program is a win-win. The company's vendors–located in Asia, Europe and Canada–"like us, because we're giving them a way to expand their credit availability," D'Urso says. "They click and [the payment] is there in 24 to 48 hours. The instant nature of it, the fact that it has expanded their facility, makes us good guys in their eyes."

Another key component of trade services is supplying companies with the information they need about trade rules, taxes and even post-9/11 security regulations in various countries. "A big part of trade services is having experts in the middle looking at documentation who understand [the various forms of] regulations," says Maggie Scarborough, a research manager for Financial Insights, an IDC company based in Framingham, Mass. She notes that while the trade regulations of the other industrialized countries are well known, "if you look at Asia… things are very different from one locality to another."

Lucent's Johnston says that Vastera's legal department keeps Lucent up to date. "They get the notices and are analyzing this stuff inside and out," he says. "They can identify new areas for compliance, regulatory issues, [or] programs that maybe we're not taking advantage of in the area of trade."

KEEPING TABS ON TRADE

Accessing such expertise can lead to considerable savings, says JPMorgan's Simpson. For example, the right advice could help an exporter get the proper licensing and thus avoid paying a fine or delay, or even cushion the company against the risk of not being paid by directing it to some form of insurance.

Scarborough says for banks, like JPMorgan, the potential profits in trade services are a welcome opportunity, given that so many cash management services are now commoditized and less profitable. As U.S. companies become less centered on domestic business and focus more and more on global opportunities, "I think you're seeing a recognition by banks that they have to play in international trade, because international trade is becoming trade," she says. For instance, before it bought Vastera, JPMorgan provided its customers with transaction transparency through its Trade Information Exchange, a Web-based information retrieval service for trade transactions. But the bank's customers increasingly wanted information about the physical side of the supply chain, Simpson says. "Vastera allows companies to manage to a minute detail their entire process in a very robust way," he says. "If I'm importing from China, I can see when [the shipment] hits U.S. customs, when it clears, what [duty] was paid."

Vendor attention to trade comes none too soon for companies that are clearly feeling significant pain. Aberdeen's Enslow says there are a number of ways in which companies can run up unnecessary costs when doing business globally: Some pay too much in duties and taxes, while others make errors in their paperwork that lead to delays and result in fines. Aberdeen's data shows that on average, the cost of trade logistics as a percentage of revenues total 6% for goods purchased overseas, and more than a third of the companies in the firm's survey reported costs as high as 11% of revenues or more. These statistics compare to costs for domestic trade of less than 3% for best-in-class companies.