The basic import settlement methods have remained largely unchanged for decades, and are geared fundamentally on risk, with consignment and open account presenting high risk to the exporter, low risk to importer, through to documentary credits, which balance the risk between both, and pre-payment, which puts risk at importer side. In-between these, exist methods such as documentary collection, and so forth, which (again) have different risk profiles. To say which method is best, is impossible, as different exporters, different countries, and variable market conditions mean that the method must suit the desired end result. At Swiscot, we import from companies around the world, including India, China, Pakistan, Turkey, and many of our nearer EU countries. In each case, our supplier contract and settlement methods vary, with a lot of established suppliers giving us open credit (in many cases with greatly extended terms), and some newer suppliers using the balanced Documentary Credit approach. We are also more involved now with luxury products, where the net value of the goods (eg: real gold yarns) is far higher, introducing far more risk for both sides (for us in not receiving the goods of we make payment, and for the exporter to not receive payment for such massive raw cost). In these situations, the documentary credit approach gives, again, a balanced risk profile. On bulk goods (such as greige fabrics, yarns, and so forth), we often work on relatively open terms, with long payment schedules, to cover the 'payment gap' for stock utilisation. Crucial to a business like ours is a strong import administration team who are able to fully utilise the toolset of settlement methods for the best interest of us, our suppliers and customers. In many cases, for example, we utilise three or four different methods, with the same supplier.
As a company, I feel that we do well with our import practices. We rarely get complaints and, if anything, we get an overwhelming number of positive elements of feedback from customers who thank us for the quality of service, availability of product, and quality. Truth be known, many of our competitors come to us on a fairly regular basis for product (eg: commodity textiles), to cover their own import shortfalls, and supply chain failures.
Our customer profile ranges from distributors, wholesalers, retailers, and industrial users, spanning most of the EU countries, middle east, and some in N. America. For our customer base, quality is important, whether we consider "base fabrics" or even our 22ct gold luxury bedding. Inspections therefore must be thorough, occurring at both manufacturing and receiving end, combined with many random testing strategies with independent laboratories, and testing houses. Quality, though, does now extend further to include areas of social and environmental responsibility, all of which are dealt with in the same thoroughness, both domestically, and using our agents abroad.
Import is a very fluid business, and one which has numerous elements of risk, a good way of assessing this is to look at each part of the supply chain, and ‘war-game’ potential failures, from the extreme (political problems in supply countries, natural disasters, container ships sinking, suppliers going out of business) to the relatively easily conceivable (bad weather at ports, late deliveries, missed connections, delayed documents). In this sense, problems are inevitable, especially when dealing with global supply chains, for us, the trick is to ensure that we are proactive in our stocking and import approach (ie: thinking WELL in advance, and having the finance to do so) along with a robust multi-country failover strategy for all our product lines, giving us viable alternative supply points to cope with demand fluctuations, and international events which are often outside our control. Along with this, we operate many methods of stabilising our own risk, including using state of the art information systems to give us a "heads-up" on global events, and partnerships with leading companies in foreign exchange, and insurance risk. The key is to stay informed, and have the tools, finance, and support at ones immediate disposal to quickly mitigate these risks (even to the extent of having manufacturing cover for “force majeure” events where possible).
Whilst every firm would like to mitigate all these risks and have “foolproof” import & supply infrastructure, this rarely is the case, especially as in many cases (particularly in very value-added products, and luxury products) there simply is not the availability of failover manufacturers, and (in some rare cases such as our gold bedding) the global supply of the raw materials needed is so rare, that delays are an unfortunate inevitability. In such cases, rather than making “false promises”, our team are always advised to relay the realistic risk profile of the supply chain to the end customer who is then far happier to accept any problems, rather than retrospectively being told about the existence of risks AFTER a problem has occurred. In many cases, the communication element is more critical than importers perceive, most industrial and commercial customers operate very lean systems (eg: J.I.T), and for their own planning purposes, the risk profiles of each material in the supply chain must be factored into their strategies.
Importing is a growing phenomenon, as trade dependency between nations has become the norm. The crucial thing firms need to realise is that the supply chain is such a mission-critical element of their business, that it does require a great deal more attention than many would give it. Another factor is to not ‘play above ones level’ financially and get tied up in knots which cant be resolved with the limited resources the firm in question has (something I have seen so many times with our counterparts).
Pervasive and powerful communications and information sharing have made the process of importing, and mitigation of risk far easier, though, and this is certainly contributing to the increased diversity of products which can now be found on sale in countries worldwide.
Click to read full article...