One of the largest US drugstore chains has signed up to TradeCard, the Web-based alternative to letters of credit (L/Cs).

Rite Aid's trade transactions with approximately 200 international suppliers - from purchase order delivery through payment - are currently in the process of being automated according to an announcement by TradeCard.

Visibility

Rite Aid's senior vice president of category management, Jerry Cardinale, says the company evaluated a number of solutions from banks and technology vendors, and eventually settled on TradeCard's web-based platform because of its visibility.

"With minimal capital investment, Rite Aid and its suppliers can see the status of their transactions in real time. We expect our savings to be significant," he says.

Elimination of L/Cs

Rite Aid operates 3,400 drugstores and is ranked number 128 on the Fortune 500. According to TradeCard, the benefits for the company include streamlined procurement processes, the elimination of L/Cs and improved supplier relations.

Around 85 of Rite Aid's international suppliers are already able to transact via TradeCard while the remaining suppliers will be connected over the coming weeks.

Facilitating trade finance

Through its Web-based platform, TradeCard automatically creates, routes, matches and stores trade documentation - such as electronic purchase orders, supplier invoices, freight receipts, and other information - with the aim of facilitating payment and financing.

Each party may view and amend documents as a transaction progresses. Payment decisions are automated based on supplier compliance to purchase order terms and conditions. Discrepancies are flagged and managed online.

Advantages

Cardinale explains what he perceives to be the advantages of the TradeCard system over L/Cs. "We have to open up an L/C for our international suppliers, so that they can go into production," he says.

"This requires preparing documents, resolving discrepancies, and going back and forth with banks and suppliers. It's a costly, labour-intensive process - both for our organisation and our suppliers. All those inefficiencies trickle back into the cost of goods," he adds.

Credit lines

Other advantages of TradeCard over L/Cs according to Cardinale are that Rite Aid does not tie up its credit lines or take on more administrative work.

"TradeCard is permanently removing costs from our supply chain," he suggests.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.