Introduction to basic knowledge of supply chain finance

1. Understanding supply chain finance from the perspective of enterprises and banks

Supply chain finance involves financial institutions (banks, insurance, guarantees, etc.), core enterprises (one or more), Member companies (suppliers, distributors, logistics, etc.), the benefits of improved capital efficiency are reflected in every participant. However, the position of understanding this financing model is not the same for banks and enterprises.

From the enterprise side, supply chain finance emerged in response to supply chain management, and the former concept is closely related to global outsourcing activities at the end of the last century. In short, more and more ancillary enterprises appear in the form of outsourcers rather than business divisions of core enterprises. Although it brings efficiency and cost advantages, it also leads to a corresponding increase in financing nodes and the inflow of funds within the supply chain. Operational complexity. From the perspective of (core) enterprises, supply chain finance is a systematic financial management solution that aims to simplify the uneven financing pattern of various nodes in the supply chain and avoid unexpected financial bottlenecks.

From the bank’s perspective, the supply chain is not only a capital flow, product chain, and information chain, but also a credit chain. However, the credit levels between nodes vary greatly and will affect each other. Core enterprises are not only strong in the supply chain, but also have irreplaceable financing capabilities. However, looking at this business chain driven by core enterprises, the strong credit of core enterprises has not been fully utilized. First, external input funds are concentrated in core enterprises. It is impossible to form an optimal allocation plan for the entire supply chain; secondly, excessive funds are deposited in core enterprises, which also reduces the bank's gaming capabilities and capital gains. To change this situation, we must rely on the credit of core enterprises to re-evaluate the credit of the supply chain and reasonably allocate external funds as needed, which will be more effective in maintaining the credit stability of the supply chain. Therefore, banks’ interpretation of supply chain finance is actually the expansion and reuse of high-quality credit (core enterprises).

2. The Origin of Supply Chain Finance

The emergence of supply chain finance has its profound historical background and market demand. It originated in the 1980s and was developed by world-class financial institutions. Corporate giants seek to minimize costs by outsourcing global operations and derive the concept of supply chain management. The overall financing cost problem of the supply chain caused by global outsourcing activities, as well as the "barrel shortcomings" effect caused by capital flow bottlenecks at some nodes, actually partially offset the efficiency advantages brought by division of labor and the labor cost depression of outsourcing enterprises. The resulting cost savings. As a result, core supply chain enterprises have begun the process of value discovery in financial supply chain management, and the international banking industry has also carried out corresponding business innovations to adapt to this demand. Supply chain finance gradually emerged and became an eye-catching financial innovation.

3. Current Development Status of Supply Chain Finance in China

In the second half of 2001, Shenzhen Development Bank began piloting survival financing business (full name: chattels and goods rights) in two branches in Guangzhou and Foshan Pledge credit business?), the credit balance at the end of the year will reach 2 billion yuan. Utilizing the installment redemption model under specific pledges and using bank acceptance bills, the total settlement and margin deposits exceeded 2 billion yuan. After that, from pilot to system-wide promotion, from self-reimbursement trade financing, 1 N supply chain financing, to systematic refining of supply chain financial services, the bank took the lead in launching the supply chain finance brand in the domestic banking industry in 2006. Since then, commercial banks such as China CITIC Bank, Shanghai Pudong Development Bank, Industrial Bank, China Minsheng Bank, China Merchants Bank, and Bank of Communications, and even the four major state-owned banks have been involved in this area, and many banks have achieved remarkable results. From a practical point of view, although the supply chain finance models launched by various commercial banks are basically similar, each bank implements supply chain finance from different perspectives based on its own actual conditions and has formed its own brand.

4. The difference between supply chain finance and traditional credit

Although they both meet the financing needs of enterprises, compared with traditional credit, supply chain finance is not just a "personalized solution" "The marketing slogan is different in ideas, implementation models and management methods. The evaluation of traditional credit focuses on a single enterprise node, and loan quality is basically determined by the enterprise's operating conditions. The key risk of supply chain finance lies in the stability of the chain. The evaluation of the supply chain is not only prioritized, but also more complex. For example, whether the relationship between supply chain nodes is "healthy", this factor beyond operating data is crucial in supply chain finance. In other words, the contribution or destructiveness of a single node's credit to the supply chain is not as important as the business connections between nodes, because a good transaction model coupled with a strict monitoring process can absorb the credit fluctuations of a single node.

In terms of implementation model, traditional credit assessment is the comprehensive credit of enterprises. This dynamic indicator is relatively difficult to grasp, which is why asset-backed financing has become mainstream. However, supply chain finance emphasizes transaction certainty and fund closure, requiring strict correspondence between funds and transactions, transportation, and goods sales. The degree of control over the supply chain information flow determines the feasibility of the supply chain finance solution. Traditional credit relies on statements and cargo rights, and dynamic information must be added to supply chain finance because risks have moved up the supply chain from a single node.

Compared with one-to-one traditional credit, supply chain finance also adds the variable of core enterprises. Their willingness to cooperate and the binding force on member enterprises are also important indicators that affect the quality of the supply chain. In other words, since supply chain finance integrates the credit of the entire chain, the risks of a single node will therefore be more complex.

From the perspective of customer groups, traditional credit pays more attention to asset value and does not have strict requirements for the characteristics of the industry. In comparison, supply chain finance has more stringent requirements for industry operation models. According to the stability of the supply chain, the update progress of product market demand, the binding strength of core enterprises, and future market development trends, the "health" of supply chains in different industries is very different. The promotion of supply chain finance at this stage should be carried out in stages. conduct.

5. Benefits of supply chain finance

Supply chain finance has developed rapidly because it can not only effectively solve the financing problems of small and medium-sized enterprises, but also extend the in-depth services of banks. win-win effect.

First, new channels for corporate financing

Supply chain finance provides solutions to the conceptual and technical bottlenecks of small and medium-sized enterprise financing, and the credit market for small and medium-sized enterprises is no longer out of reach. For many financial executives of large enterprises, supply chain finance, as a new channel of financing, not only helps to make up for the traditional working capital loan quotas that have been compressed by banks, but also introduces financing facilities through upstream and downstream enterprises to maintain their own working capital needs. decline.

Second, new channels for banks to open source

Supply chain finance provides a new channel to enter and stabilize high-end customers. Through a package of solutions for supply chain system members, core enterprises are ?Bind? At the bank that provides the service.

Through supply chain finance, banks not only deal with a single enterprise, but also with the entire supply chain. The information they have is relatively complete and timely, and bank credit risks are much less. ?Under the service and risk consideration model of supply chain finance, since banks pay more attention to the trade risks of the entire supply chain, the assessment of overall trade transactions will bring more small and medium-sized enterprises into the bank's service scope. Even if a single enterprise fails to meet certain risk control standards of the bank, as long as the business relationship between the enterprise and the core enterprise is stable, the bank can not only conduct an independent risk assessment on the financial status of the enterprise, but also conduct an independent risk assessment on the business. grant credit and facilitate the realization of the entire transaction.

Third, the economic and social benefits are significant

The economic and social benefits of supply chain finance are very prominent. With the help of the "group buying" development model and innovation in risk control methods, The benefit-cost ratio of SME financing has improved and demonstrated significant economies of scale.

Fourth, supply chain finance realizes the integration of multiple flows into one

Supply chain finance has well realized "logistics", "business flow", "capital flow", "information flow", etc. Multiple flows into one.

6. How to prevent and control supply chain financial risks?

(1) Traditional risk prevention and control

According to the above definition, supply chain financial risk control starts from the surface From the above point of view, it is at least two aspects of risk control. On the one hand there are financial risks, on the other hand there are logistics risks.

How to control financial risks, from the central bank to the banking regulatory department, including all financial institutions and experts, have been arguing for many years. There are two risks, one is market risk, and the other is internal management. risk.

How to control logistics risks? The competent departments of the Ministry of Transport and logistics companies at all levels have done a lot of detailed work around ISO certification. The key is also two aspects of risk. On the one hand, transportation tools The security risks, on the one hand, are the security risks of the warehouse. Every year, various competent authorities organize safety production month activities, which I won’t go into details here.

The risk of combining finance and logistics to become a new financial logistics business is not only a simple superposition of the risks of finance and logistics, but also due to the addition of a third party financier, the legal relationship between the three parties is more complicated, and the risk is greater than The original one-sided risk. From the risk cases arising from regulatory business in the past ten years, we can see that not only are the risks high, but the amount is large, and the impact is also very large, often affecting the development of a certain industry. The Shanghai steel financing crisis is a typical case, involving tens of billions of yuan. All banks were implicated, almost all large logistics companies were implicated, and thousands of steel trading companies went bankrupt. The profound reasons are already being discussed, and there will definitely be an analysis of the truth in the future. To put it simply, after the integration of finance and logistics, both parties rely on the other to control risks, resulting in a lack of mutual supervision and excessive trust in third parties, which leads to out-of-control supervision.

The deep-seated risk causes of the financial logistics business are actually the fundamental shortcomings of China's current social development. First, the management inaction and fragmentation of government departments have led to the delay in unifying movable property registration, which has caused The root cause of repeated pledges; second, the legal system is imperfect and the cost of breaking the law is so low that operators imitate each other, causing a snowball effect. Fortunately, the Fourth Plenary Session of the 18th Central Committee of the Communist Party of China has put forward the program of governing the country according to law. In the future, there will no longer be the phenomenon of being unable to abide by the law and failing to abide by the law.

(2) Online risk prevention and control

Online supply chain finance is a program launched by commercial banks, various financial institutions, and logistics companies in order to prevent risks in the original supply chain financial services. The purpose of this new business is to form a closed loop in terms of capital and logistics through the combination of offline and online, mutual restriction and mutual control, so as to avoid the original situation of mutual shirk and unclear responsibilities leading to out-of-control supervision.

For example, the online supply chain financial service of Sinotrans & CSC Group, China’s largest comprehensive logistics provider, refers to the Sinotrans & CSC Group’s customized services for a certain type of bulk commodities (such as non-ferrous metals, grain, Rubber, etc.), develop a supply chain financing information system platform with the participation of production companies, banks, logistics companies, and trading companies, formulate supply chain financing rules, processes, and standards, and form a complete closed-loop financing service system within the supply chain.

The closed-loop financing service system refers to the production companies, logistics companies, and trading companies that participate in financing. They must provide information on contracts (including orders), fund settlement, and goods entering and exiting warehouses to the supply chain financing service platform to do so. The information is timely, accurate and transparent.

The platform checks each loan, purchase and sale contract, fund settlement, and cargo-related information, and promptly corrects any problems found, or takes measures such as terminating loans, freezing accounts, and disposing of goods.

As a third-party large state-owned enterprise in supply chain management, Sinotrans & CSC Group uses its shipping, port, transportation, warehousing services and monitoring capabilities to carry out loading, chartering, port operations, From inland transportation to full monitoring of the logistics park management, it is responsible for cargo storage; in addition, Sinotrans & CSC Group will use the most advanced technology to manage the bulk commodity logistics park, providing efficient warehousing and storage, collateral supervision, and commodity quality appraisal. Such public services have become the foundation and guarantee for supply chain financial risk prevention and control.