Financial Supply Chain Digital Ecosystem

Financial Supply Chain System brings benefits and value into the industry. The solution is designed to adapt to already established businesses, by not changing or altering the existing workflow. Business flows are unique and cannot be limited, since a business is an agreement between two parties, anchor and member or buyer and seller and as long both parties commit to the agreement, a business will be established. Each industry has their own business scheme characteristics. SGO FSCM has been active for more than 10 years in the market, has already adopted those characteristics and has been market proven.

In some cases, for example, fresh food, vegetables, poultry and meats are driven by production and availability.  However, in terms of the product cycle, a short period expiry date can still result in a good margin. Cigarete products don’t seem to have good results in margin, yet they are market magnets and become must-have products in retail. Sellers market products such as top FMCG products, electronics, cements and constructions, telco airtime, automotive, gas, all contribute to a variety of business processes in the market

We conclude that there are 4 elements that SGO FSCM has to bring the ecosystem to life. They are:

1. Business Structures

Define the structure of sellers and buyers by determining who the anchor is and who the member is. We call it a community.

2. Business Processes

Define the structure of sellers and buyers by determining who the anchor is and who the member is. We call it a community.

3. Supply Chain Finance Schemes

Define financing schemes in the community,  including rates, fee, penalty, risk mitigation, etc.

4. Payment Channels

Different segmentations of customers with various technology and behavior traits lead to different ways of access.

Customer Onboarding

Various business processes, various types of customers, various schemes, will result in high implementation costs and timelines for the Bank, without proper strategy and solutions. In regard to the Financial Supply Chain market, the Bank does not have the luxury to push the product with predefined processes. This is not a push-product, however it is a pull-product. Pull-product means, the bank has to pull requirements from the customer, to observe what processes are already runing in the community. Then we define those processes into parameters and place it in the system. SGO FSCM will receive parameters such as business structures to identify the anchor and the members, to understand how the business is conducted, to find out what document could initiate the disbursement, and to determine whether there are any approvals required from the counterpart. This is done to check the financing schemes, to see the percentage from the invoice that can be financed, to reduce risk, and to determine whether the buyers are required to contribute to their own capital or  wheter it can be 100% covered by the bank for financing. The solution also provides risk management by discovering how the bank mitigates the risk to overview if new transactions are allowed or if there is an overdue loan, or if there is a sufficient limit for the transaction to be executed. All of these requirements are solved by the FSCM Eco System.

SGO Solution Key Differentiators to solve

SCF Characteristics vs Banking Challenges

TOP

SCF CHARACTERISTICS

SGO SOLUTION STRATEGY

1

SCI PULL Market Dynamic

Parameterized Business Process

2

Volume of SCF Transactions

SCF Financing Scheme

3

SCF Collaboration Process

Community Business Structure

Financial Supply Chain Management System (FSCM) & Electronic Invoice Presentment & Payment (EIPP) solutions.

        Community based business collaboration

     Integrating document flow and financial flow

Maximizing collectability with precission, trackability & efficient effort

Proven to be connected to various core bankings, loan systems and various loan products

Optional: integrated & built in function Corporate Cash Management & Internet Banking System

Risk management & mitigation such as hold balance, freeze accounts, escrow balance, auto grab, etc.

Multiple channel based on technology literacy of the communities web, sms, mobile and API integration to ERP

Optimizing Working Capital Performance through Supplier Financing & Financial Liquidity through Distributor Financing

Unlimited business processes with multiple approvals from counterparts including bank approvals for industries such as Retailers, Consumer Goods, Automotive, Airlines, Telecomunications, Construction, Mining & Commodity, etc.

Electronic Invoice Presentment & Payment provides document workflow, dispute management, and various multiple disburse & payment channels that are connected to networks of major banks in Indonesia using ESPAY Payment Gateway

Features

Multiparty Document Management

Enabling community interaction between sellers and buyers. Document approval exchange is very important to avoid dispute before proceeding to financing or payment. This process can be customized based on communities’ business process.

Transaction Workflow

In order to give authorization to release funds, there has to be an agreement between buyer, seller, and the bank. Some processes may authorize the principle to release buyer’s funds after certain thresholds automatically. Some processes may have multiple layers of authentication. This module provides flexbility in order to authorize the transaction.

Payment and Disbursement

Funds will be disbursed in an immediate and scheduled manner and also when there is an event that triggers this transaction such as when the goods have been received, etc. Risk-sharing percentage allows bank to share-risk with the customer in terms of the percentage of the invoice amount can be financed, also in terms of handling remaining cash funds, terms and tenures, risk management, penalty and charges, etc.

Loan Report

Provides a financial overview, which is very important in ther matter of principles, to see the customer’s power of purchase, or sometimes the liquidity risk. The Corporation can also access their loan exposure, due date, and status.

Settlement Management

In the event of settlement, banks will give feedback to FSCM to update the loan status. The loan status determines risk and buying power. In terms of risk management, new purchases may be prohibited, if the loan status hits certain conditions. Also if there is any policy regarding early settlement, this module will accomodate such process.

Authentication and Security

Security is the number one concern in the banking industry. This module manages role and responsibility, privilege, information storage sensitivity, two factors authentication, single sign-ons, CIF and account access, etc.

Connectivity

SGO FSCM is an “open” system that is very flexible and can be integrated to various systems within the bank. It uses industry API standards that allow to connect to the surrounding bank host environment. SGO FSCM also have Open-API to connect external systems with different levels of security procedures.

FSCM Studio

Allows banks to operate effectively with the customer. The FSC challenges are overcome by this module, through parameterized configuration. The bank can setup, monitor and mitigate the whole process in one platform.

FSCM Architecture

Cases from Developing Countries

In a developing country there are several layers in a business fulfillment. There are principle, distributor and retailer, and the period before the goods are consumed by the end user.

Models

DISTRIBUTOR FINANCING

The processes of goods are delivered from the principle or factory to the retailer and have unique supply chain processes within each layer. The Principle needs to focus on producing goods that meet the market needs through market surveys, research and development, and using all equipments for mass production, product packaging, marketing communication and brand awareness. The distributors are needed to ensure all the products are transported from the factory to the warehouse and finally to the market. The Principle needs to push the quantity to the distributors, and place payment terms that need to be fulfilled ontime. Among these payment terms are corporate deals. Distributors need to have large network of retailers through their regions. For FMCG their sales cycles are weekly. Eventhough they have low margin, they need to cycle the sales and collect the payment immediately.

The Distributor’s main focus is to push sales to the retailer and to manage logistics and delivery. The retailers somehow, are traditional, since they receive cash from the end- customer. Retailers also avoid to put their money in the bank, because it is a waste of time. They are unbankable. The challange from the bank to the Principle – Distributor is to fulfill the payment terms of the distributor, which is to achieve low margin, and to help the distributor collect payment from traditional retailers that owns cash, and settle payments frequently and fast. Some of the retailers are happy with the turnover so that they do not need additional capital. Formal financial deals such as banks and tax scare them. To gain sales, they need to shop for groceries more frequently, usually once to twice a week.

The Distributors

Are mostly needed if the country or area has very large geographical areas -or-when the principle is not present in the country/area. Distributors act as an extended hand to reach the retailer in the domestic area. Distributors also have the target to absorb the goods produced. Commonly the distributors are old players, and already know about their area, have a good relationship and are well known by the SME market and retail owners. The distributors also have a long and strong cashflow cycle. Their mission is to penetrate and distribute goods and services consistently.

The Principles

Can be factories or institutions that create and produce the goods or services. The principles’ goals are to research and to produce goods or services according to the market’s needs, to communicate the brand, and to market the products, so the market knows the solution. Their business demands high investment and high cost for manpower and R&D. They have to be creative and reliable to fulfill the market’s needs.

PARTIES PRINCIPLE DISTRIBUTOR RETAILER
Community Model Distributor Financing Distributor Financing Retail/SME
Institution Type Enterprise Corporation & SME SME & Home Business
Workflow Multiple department, standarized Multiple department, simple admins Simple admins, traditional
System and ERP Implemented Not Implemented Not available
Payment Schedule Scheduled and bound to the aggreement. Not scheduled. There are agreements but sometimes not bound
Term of payment Some of them COD and 30 days. COD, 7days, 14days.
Replenishment/ Sales cycle. Monthly, bi-monthly, high quantity. Monthly, bi-monthly, weekly, daily, twice a day depends on the industry – fast, more frequent, low quantity.

Supplier Financing

Modern retailers require a big capital in the market. They have bargaining power. Suppliers need them to make their product available everywhere. This is not just about sales, this is about mind perception, marketing and the brand. A lot of effort is put into the Principle’s products in terms of marketing and brand awareness programs. This is very important in order to make the products easy to find in the market. Modern retail has every power to penetrate and to be presented everywhere. Not only big players, but SME also needs modern markets to channel their products. Fast moving fresh products such as fruits, vegetables, poultry, meats, and seafood are supplied locally. Most of them are coming from corporations and SME, and not big enterprises with sophisticated cashflows. As a big enterprise, the retailer also has scheduled payments and conducts very strict processes towards the supplier. For the supplier with limited cashflow, this will be painful and could affect the production.

Supplier financing gives suppliers the opportunity to receive the payment ahead of schedule at a discount rate. Banks will trust the retailer as the anchor, so that any approved invoice will be paid on schedule. Based on this, the bank can disburse the payment earlier with a discount to the supplier. On the due date, the retailer will pay the supplier the amount that appears on the invoice. This scheme will be beneficial to both parties. The supplier will have enough capital to fulfill the production and the retailer has been given a guarantee from the supplier to fulfill the needs.

PARTIES

RETAILER

SUPPLIER

Community Model

Supplier Financing

Institution Type

Enterprise

Corporation, SME, Home Business

Workflow

Multiple department, standarized

Multiple department, simple admins

System and ERP

Implemented

Not Implemented

Payment Schedule

Scheduled and bound to the aggreement.

Term of payment

30 days, usually twice a month.

Replenishment

Monthly, bi-monthly, weekly

Financial Inclusive

Bankable

Bankable

Payment Channel

Transfer, Check/Giro

Technology

Computer Literate

Financing Purpose

On time working capital

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