Excerpt:
Internet Extends Reach of EDI
Web Forms Popular With Smallest Companies; Web Services Coming Soon
By Maria Trombly
(Business Credit Magazine, Oct. 2002)

Two years ago, International Playthings Inc. was doing business the old fashioned way-faxes, letters of credit, and a great deal of sitting around and waiting for various documents. There weren't a lot of examples yet of companies that successfully moved their supply chain to the Internet. "It took a lot of faith to change the way we were doing business," says Holly Harrington , purchasing manager at the Parsippany, NJ-based company, which sells educational toys to toy chains like FAO Schwartz and Zany Brainy.

"But I can't imagine going back to the way we used to do it," she says, now that the company has moved most of its vendors to TradeCard and is in the process of getting its largest buyers online as well. "I can't imagine why anyone wouldn't want to use this.

So far, International Playthings has save d $50,000 in invoicing and payment processing fees. In addition, the vendors are willing to give the company a discount in return for faster payment of invoices-in some cases, vendors are getting their money 10 days faster than they would have with letters of credit.

"The boss is really happy that we're getting better terms," Harrington says.

Now, the entire procurement process is automated. Purchase orders, invoices, packing lists and cargo receipts are all tracked, and once all the documents are in place and the invoice is confirmed against the purchase order, payments are triggered automatically.

For many users, electronic invoicing cuts down on dispute resolution times, as customers and suppliers are able to work out problems online (see sidebar). But for Harrington, going with TradeCard actually made dispute resolution possible. "We never we re able to resolve these types of problems before," she said. "With a letter of credit, you either accept it or you don't .

And we never rejected a shipment because it was going to be a big hassle for the vendor. " Today, if there's a problem with a shipment, she can ask the supplier for a discount or a payment extension. "We enter what we would like to do and the reasons, then the vendor gets notified that there's a dispute and they either accept our proposal or make a counteroffer," she said. "Once the two parties agree, it's finalized. It can take two minutes.

Currently, 21 vendors out of 25 are using the TradeCard system, most based in Asia. For them, it offers substantial savings because they were paying about $400 per letter of credit, as opposed to around $120 for a TradeCard payment. The other four, based in Europe, will also have to move to TradeCard soon, Harrington says, even though as wire transfer users, they won't have the same cost savings.

"We'll just tell them that this is the only way we're transacting anymore," she says.

The next step is automating International Plaything's own billing process. The first TradeCard-based order ships in mid-August, Harrington says. It's the supplier who pays for the cost of using it, but it's worth it even if there aren't letter of credit-related savings, she says.