Product Switch

From Supply Chain Management Encyclopedia

Russian: Товарный свитч

Product Switch (Simplified Flow Chart)^[1]

LEGEND:

In case of the product switch (participants: Company А = United Kingdom; Company В = Sri Lanka; Company С = Russia) the switch is developed as following:

• 1) Company В has found a seller, Company A, of the tea processing and packaging equipment in United Kingdom, but the Company А, prepared an appropriate contract agrees to receive a payment in hard currency only (in UK pounds, preferably).
• 2) Company В has found a buyer, Company С, for a compensating product (Ceylon tea) to pay the export contract prepared by Company A. In Russia, where after the USSR collapse (the main tea consumption in the USSR was provided by the Georgian tea) the tea became a rather high liquid product. Besides, due to exporting oil, gas, and weapons they buy hard currency in Russia without problems,
• 3) Russian Company С pays the export contract prepared by Company A delivering the tea processing and packaging equipment from United Kingdom and, as the compensating product, receives the Ceylon tea delivery from Company В (Sri Lanka). Settlements for such transactions are often effectuated using an intermediary playing a role of a transaction guarantor.

References

1. ↑ Черенков В.И. Внешнеэкономическая деятельность предприятия: основные операции (серия «Высшее образование»). Ростов-на-Дону «ФЕНИКС», 2007 - с. 97-102. (с авторским изменением дизайна)