Multi-Party and Multi-Tier Supply Chain Finance Digitalization

Multi-Party and Multi-Tier
Supply Chain Finance Digitalization

Problem Statement

Increasing stability, resilience, and transparency in supply chain is becoming critical for organisation looking at multi-tier financing.

The fragility of the existing systems with increased inefficiencies of global supply chains reflected in recent times is making companies seek help to keep prices low and cost of operations under check. Other issues linked to business transactions, such as adverse impact on the environment, unequal distribution of economic benefits, and the presence of child labour and human trafficking in supply chains, have been brought into sharp focus by the growing attention to environmental, social, and governance (ESG) concerns and sustainability issues.

Channelling financing to deeper tiers in supply chain is the defining feature of DTSCF (Deep Tier Supply Chain Finance). It differs from traditional SCF (Supply Chain Finance)/payables finance model, which is limited to Tier 1 suppliers. The key differentiation in DTSCF lies in leveraging the anchor client’s credit profile and integrating a mechanism to distribute financing to the lower tiers of suppliers. For a successful DTSCF model to function, a platform-based approach, digitally connecting all participants is recommended.

This approach addresses and resolves several critical issues related to deep-tier financing:

Anchor client gets an avenue to connect with and potentially gain visibility over their suppliers down the supply chain. This is key as global buyers tend to only interact directly with their Tier 1 suppliers with no clear view of deeper parts of their supply chain. Lower-tier suppliers requesting financing can be referred to the platform by higher-tier suppliers, be onboarded digitally, and get access to finance.
Ability to track the flow of capital throughout the supply chain, from request to delivery of capital to the original requester. This transparency acts as further security for the anchor client and the bank, and prevents duplicate invoice financing.
Generate data around the credit risk of onboarded suppliers and buyers, therefore from a risk assessment perspective increase the value of the digital operating model for DTSCF.
Enables reduction in operational costs and mitigates the risk of error. DTSCF digital operating model not just solely benefit suppliers in the lower tiers, the anchor corporate (buyer) and bank (financier) in the model stand to reap substantial benefits by participating in or enabling this form of financing suppliers with auditability, tamper-proof records and transparency

The Business Need

Evolving landscape in connected supply chain order fulfilment process involving exportation of goods to overseas market.

Challenges

Business Scenario

Organisations are looking for a solution to bridge the financing gap by opening new channels for suppliers to address their problems with accessing traditional trade finance.

Deep-Tier Supply Chain Financing process involving multi-party especially with multiple geographies is becoming a critical business requirement.

Buyers and sellers make commercial decisions about how they contract, finance, deliver, and settle their transactions.

The lack of visibility and transparency leads to inefficient supply chain, with collaboration issues and inability to enforce effective risk-free contracts.

The Deep Tier Supply Chain Financing process is a complex process covering multiple organization with heavy documentations and multiple contracts.

Current supply chain financing process involving multi-tiers is a time-consuming manual tasks and delays can significantly impact the business revenue and profitability.

dltledgers Can Help You

Our state-of-the-art blockchain-based platform, allows the anchor corporate’s (end buyer’s) credit profile to unlock financing for their multi-tier and strategically important supplier network digitally.

The accelerator enforces effective risk-free contracts with reduced cycle times and enhanced user efficiency eliminating time-consuming manual tasks. The accelerator also enhances greater real-time collaboration across multi-tier suppliers in a multi-party environment with tamper-proof record of transaction documents and data with auditability. It also helps to digitally fulfil KYC (Know Your Customer) Requirements. There is a substantial opportunity for all participants to contribute and track success in managing their sustainability and ESG commitments and responsibilities throughout the supply chain.

The modular framework offers excellent flexibility and can be easily integrated into all industry verticals, irrespective of the nature of the underlying sector.

The app also enhances greater real-time collaboration across stakeholders in a multi-party environment with tamper-proof record of transaction documents and data with auditability.

Solution

Solution Brief

Smart Contracts drive the supply chain digital network with predetermined, automated contract elements, shipping & customs documents, and global payment processing.
Enhance collaboration with multiple parties in multiple geographies with improved user-efficiency and end-user experience with multi-flow payments complimenting the settlements initiated through the SWIFT Network.
Enforcement of effective risk-free contracts across distributors/customers in multiple geographies, optimising and automating supply chain with digital integration with systems of records/ ERP systems.
Greater visibility and transparency across the digital network of multi-tier suppliers with tamper-proof records of documents/data exchanged with auto-matching and reconciliation and sharing on peer-to-peer basis in real time
A secure real-time information on the transaction with status flags ensuring that the digital network members can quickly and effectively triage a vast range of operational issues and enable optimised shipping of supplies.
Decarbonizing supply chains is a complex problem to solve and requires innovative solutions and collaboration across many parties. The anchor corporate has the potential to map their supply chain and measure performance across ESG factors
Accurate data and digital document repository with auditability across functional departments and ecosystem participants in multi-tier environment involving multi-geographies
Real-time reports and secure tracking of sourcing, chain of custody with verified documentations and certifications as tamper-proof digital records for future use and compliance

Benefits

Smart Contracts drive the supply chain digital network with predetermined, automated contract elements, shipping & customs documents, and global payment processing.
Enhance collaboration with multiple parties in multiple geographies with improved user-efficiency and end-user experience with multi-flow payments complimenting the settlements initiated through the SWIFT Network.
Enforcement of effective risk-free contracts across distributors/customers in multiple geographies, optimising and automating supply chain with digital integration with systems of records/ ERP systems.
Greater visibility and transparency across the digital network of multi-tier suppliers with tamper-proof records of documents/data exchanged with auto-matching and reconciliation and sharing on peer-to-peer basis in real time
A secure real-time information on the transaction with status flags ensuring that the digital network members can quickly and effectively triage a vast range of operational issues and enable optimised shipping of supplies.
Decarbonizing supply chains is a complex problem to solve and requires innovative solutions and collaboration across many parties. The anchor corporate has the potential to map their supply chain and measure performance across ESG factors
Accurate data and digital document repository with auditability across functional departments and ecosystem participants in multi-tier environment involving multi-geographies
Real-time reports and secure tracking of sourcing, chain of custody with verified documentations and certifications as tamper-proof digital records for future use and compliance.

“dltledgers uses blockchain for digitalising cross border trade contracts, providing a digital repository of transaction documents in multi-tier, with auditability, track and trace, sustainability, and integrating with the flow of money.”

– Raof Latiff, Group Head of Digital, Institutional Banking, DBS