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Introduction Supply Chain Finance (SCF) Lecture # 11

Introduction Supply Chain Finance (SCF) Lecture # 11. Jan H Jansen E-mail: jan.jansen@han.nl. Lectures period 2 or 4. Round # 4 The Cool Connection. Levels of SCF instruments.

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Introduction Supply Chain Finance (SCF) Lecture # 11

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  1. IntroductionSupply Chain Finance (SCF)Lecture # 11 Jan H Jansen E-mail: jan.jansen@han.nl

  2. Lectures period 2 or 4

  3. Round # 4 The Cool Connection

  4. Levels of SCF instruments Source: SCF, its practical relevance and strategic value, Boer de, R. et al, SCF Community, 2015 (adapted by the author)

  5. Conceptual model SCF for WCM in SMEs

  6. Potentialforimprovement O2C Firm buys inventory Firm sells inventory Firm receives Payment Firm pays for inventory Inventory Accounts Receivable Accounts Payable Cash Cycle Cash out Cash in Operating Cycle Payment of invoice Payment of invoice Order comes in Delivery / SendingInvoice Pre-Order comes in Pre-Order comes in Delivery / SendingInvoice Approval of invoice Approval of invoice Order-to-cash process Order-to-cash process Payment Term Payment Term Potentialforearlypayment: Fasterregistration in buyerssytem (processen) Byfasterapproval of invoice / ReducingDipsutes (processen) Byinvoicingoftenandfaster (processen) Bydecrease of late payments (processen) Byusing SCF tools like RF and DD (instrumenten)

  7. Lecture 11 Blockchain in Logistics Source: www.heineken.com

  8. Ronde Table SessionBlockchain Bron: www.medium.com Jan H Jansen E-mail: jan.jansen@han.nl VervoerslogistiekeWerkdagen 2018

  9. Source DHL Trend Radar 2018/2019

  10. A blockchain, originally block chain, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data.By design, blockchains are inherently resistant to modification of the data. Harvard Business Review defines it as "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way." For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority. Source: https://en.wikipedia.org/wiki/Blockchain

  11. What do we want to register usingBlokchain technology? Jane Gleeson-White

  12. Integrated reporting model (The IIRC, 2017)

  13. ExampleAnnual Report 2017Unilever

  14. ExampleAnnual Report 2017Philips

  15. Source: http://www.blockchain-lab.org/#publications

  16. Blockchain

  17. Hash code • Example: 6b1f6fde5ae60b2fe1bfe50677434c88 Source:https://en.wikipedia.org/wiki/Blockchain#/media/File:Bitcoin_Block_Data.svg

  18. General ledger of company X Liabilities Assets Accounts payable (A/P) Link to supplier Y Cash Accounts receivable (A/R) Link to customer Z

  19. General ledger of company Z (customer) Liabilities Assets Accounts payable (A/P) Link to supplier X Cash Accounts receivable (A/R) Link to customer …

  20. General ledger of company Y (supplier) Liabilities Assets Accounts payable (A/P) Link to supplier … Cash Accounts receivable (A/R) Link to customer X

  21. Lecture 11 Case study Source: www.heineken.com

  22. Source:https://www.google.com/finance?q=OTCMKTS%3AHINKY&ei=ARs6V4PzLca4U_WnlZAL

  23. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  24. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  25. Heineken’s supply chain (source:http://www.sustainabilityreport.heineken.com/2011/overview/brewing-a-better-future.html)

  26. Source:http://www.lasersharkbrewing.com/

  27. Hops & Barley Source: http://www.organicfacts.net/health-benefits/essential-oils/hops-essential-oil.html

  28. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  29. SCM (Flows of goods & services) & SCF (Financial flows) Source: Supply Network management as defined by Slack, A. et al. (Slack, 2011)

  30. Net Working Capital in Logistics / SCM / SCF Note that NWC is not the same as: Current assets - Current liabilities! Liabilities & Net Worth Assets Accounts payable (A/P) Cash Short-term debt Accounts receivable (A/R) Inventory Current assets Current liabilities NWC = ( A/R + Inventory ) - A/P

  31. Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • Debtors / AR • Inventory (on the fields) • Why is Heineken doing this?

  32. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  33. Credit Rating Heineken NV(Source: http://www.theheinekencompany.com/investors/bondholder-information/credit-ratings)

  34. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  35. Reversed factoring (Source SCF, EBA 2014) 8

  36. Invoice from Supplier to Buyer (e-invoicing via IT Platform) • Supplier transfer data to ERP system / IT Platform • IT Platforms communicates Invoice with the Buyer’s ERP system • Approved invoice by the Buyer via the Buyer’s ERP system to the IT platform • Supplier receives the confirmation of its invoice (see 4) by the IT Platform • Buyer waits 60 days • Buyer wants payment now (step 6) • Buyer ask the bank for earlier payment • Bank pays the Supplier minus a discount (in case of 5A) • Buyer pays the bank after 60 days

  37. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

  38. Dynamic discounting (Source SCF, EBA 2014)

  39. (Source SCF, EBA 2014)

  40. Questions • Plot the supply chain of beer in a supply chain diagram. • Which part of the supplier’s working capital is financed by Heineken? Explain your answer. • What is the Heineken’s credit rating according one of the 3 big rating agencies? • Explain – based on an example – how reverse factoring works as an instrument of supply chain finance. • Another instrument in the tool kit of supply chain finance is called: dynamic discounting. Explain – based on an example – how dynamic discounting works as an instrument of supply chain finance. • What creates additional risks in this supply chain of beer for the suppliers and the financial intermediaries? • What is your (grounded) opinion about Heineken? Is Heineken a focal company or not? Explain your line of reasoning.

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