Daily Archives: October 6, 2009

Just a Tiny Tax

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

In the September 24th New York Times, there’s an op-ed column advocating a “tiny tax” on foreign exchange transactions. The author, Phillipe Douste-Blazy, proposes a tax of one two-hundredth of one percent on foreign exchange transactions of the most-traded currencies. That small tax would raise $33 billion dollars per year. He proposes using it for global health improvement programs. The tax itself looks like a good idea to me, although there is a huge number of competing uses for the revenue. Just looking at global issues, there is of course also a need for money to address climate change. And each country involved has its own domestic needs. But let’s just look at the math for a minute.

He estimates global foreign exchange transactions to be 800 trillion US dollars per year. (That’s a U.S. trillion, one million million.). According to the World Trade Organization, total trade in goods and services was approximately 20 trillion dollars in 2008. That multiple–foreign exchange transactions are 40 times actual trade in goods and services– is in line with what I’ve seen in several places. Foreign exchange transactions dwarf international trade.

What do we traders get as a side benefit of this huge market? We get a very transparent market and really small costs to exchange money. This is a good deal. How much would a transaction tax reduce transaction volume? I don’t know, but even if it reduced it 50%, actual international trade would still be tiny compared to financial trade. We’d still get a benefit. And humanitarian projects around the world need the money.

Dick Locke, Global Procurement Group.

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Sourcing Innovation Welcomes Trade Extensions as New Lead Sponsor

Sourcing Innovation is pleased to welcome Trade Extensions, an innovative provider of negotiation and decision optimization platforms, as it’s newest lead sponsor. The Trade Extensions solution, which represents the next generation of on-line, real-time, sourcing and transportation decision optimization solutions, has been growing as rapidly in depth, breadth, and usability as the company itself.

Trade Extensions, which expanded into the UK with its Cambridge area office in 2007 and into the US with its Houston office in 2008, is rapidly becoming known as the leading player in the global sourcing decision optimization market, which, as we know, is quite small in both the strategic sourcing and transportation domains (with the other players essentially limited to Algorhythm, CombineNet, Emptoris, and Iasta in the former and APL Logistics, Axxom, Llamasoft, SCA Technologies, Schneider Logistics, and TC Logic and a handful of others in the latter). Despite still being relatively unknown to the North American mass market, it has already won over some very big players including AT Kearney, BP, Colgate-Palmolive, Dow, Siemens, and Schneider (who use their platform to power BidSmart) in addition to the dozens of other big name clients it has throughout Europe and, now, through the United States as well. This is probably because it is one of the few vendors with a platform that can handle extremely large events (with tens of thousands of lanes/items and hundreds of thousands of bids) and find optimal solutions in relatively short time-frames. (The recent CAPS Research Study took care to note that most of the solutions it reviewed could not handle extremely large events.)

Their solution, which I covered on The Eleventh Day of X-Mas, is a self-service SaaS platform that can be sourced on a per-event basis or on an annual basis. In addition to full-featured e-RFX, e-Auction, and project management, it’s negotiation platform just added contract management functionality and spend analysis capabilities. It’s bid forms are customizable, each item can have as many attributes and prices as it requires and prices can be in a matrix format, it can support arbitrary formulas in price calculations, and scenario rules and filters can be defined with Excel uploads.

Furthermore, it’s a true strategic sourcing decision optimization platform, meeting all of the requirements outlined in the wiki-paper. That’s one of the most impressive aspects of their offering. Many providers who have tried to integrate optimization into real-time auctions have either failed or cut corners. They did neither. Another great capability is their constraint, or rule, flexibility. Rules can be based on filters, act on any attribute, and be created as templates which can be saved and re-used across scenarios.

Trade Extensions is another innovative company that I suspect you’ll be seeing a lot of in the years ahead.

So join me in welcoming Trade Extensions as Sourcing Innovation’s newest lead sponsor.