Pay-per-Use Supply Chain Finance

Practical example and current challenges

  • Supply Chain Finance refers to technologies and instruments that support companies along their supply chains and in the areas of financing working capital, risk hedging, balancing liquidity and increasing efficiency in processes and transactions. From the point of view of the companies, securing liquidity at all times has the highest priority.
  • However, with the increasing complexity of supply chains and supply chain networks, it is no longer sufficient to ensure the liquidity of one's own company, as even a liquidity bottleneck of one partner can put the stability of the entire supply chain at risk.
  • The horizontal and vertical networking of companies creates highly complex international supply chain networks with a constantly growing number of data sources, different systems, data structures and protocols. In the future, the data volumes generated and made available with a wide variety of technologies can (only) be processed with the help of AI to create information that is suitable for the addressee. This improves the financial stability of the supply chains of companies, from SMEs to large corporations, and makes them more resilient to supply chain risks.
  • Supply Chain Finance as an important component of the "Financial Supply Chains" is aligned with "Physical Supply Chains" and designs the flow of financial resources and risk management instruments in opposition to the real flows of goods and services and in addition to the flows of information. The availability of sufficient, timely and reliable data and information is the most important prerequisite for any form of financing, risk assumption or investment decision.
  • A concrete demo case, "Pay-per-Use Supply Chain Finance", accompanied by research activities in the field of "Financial Supply Chain Management", supported by innovative industrial and technology companies. The demo case is aimed at the increasingly important "pay-per-use" or subscription business models, such as those already offered by digital leaders, e.g. in mechanical and plant engineering or in the 3D printing business environment. By using the above technologies, especially IoT, smart sensors, block chain and smart contracts, Big Data and AI, the demo case aims to address two core problems of pay-per-use business models: On the one hand, the risk of under-utilization of the machine/system and, on the other hand, the financing of the different supply chains for the actual machine and for the consumables, operating materials and services supplied as added values by the manufacturer of the machine.
Infografik: Pay-per-Use Supply Chain Finance

What added value does the "GAIA-X project" offer?

  • The use case "Stable Supply Chain Finance" under the leadership of the Fraunhofer Institute for Material Flow and Logistics IML creates indispensable foundations for the project "Financial Big Data Cluster" and subsequently also for "GAIA-X" by researching different areas along the physical and financial supply chains of companies. This includes, for example, which data sources are relevant, how data can be obtained using industry 4.0 technologies such as IoT or smart sensor technology, how data can be transferred in block chains, and secure data models that preserve data sovereignty such as "RAMI 4.0" or "International Data Spaces", and how data prepared with the help of AI can be used for the new and further development of innovative financial products and risk management applications.
  • GAIA-X supports the use of Artificial Intelligence to control and orchestrate the physical flow of materials, thus enabling the distribution of risks, financing requirements and revenues between the manufacturer as the operator of the business model, its suppliers and its customers in a largely autonomous and synchronous manner. This "pay-per-use supply chain finance" approach will promote the establishment of the still young pay-per-use business models and provide companies with important growth impulses.
  • This will help to stabilize the data merged from the physical and financial supply chains. In this way, it is possible to optimize not only the value added, but also existing and innovative business models of the direct supply chain partners.
  • All approaches to optimizing and stabilizing physical and financial supply chains must take globalization and ever-increasing international networking into account. Close coordination and cooperation with the GAIA-X project ensures that the solutions developed in the "Stable Supply Chain Finance" use case are also interoperable with international data infrastructure models that are currently being developed.

Sponsors

  • Univ. Prof. Dr. Michael Henke - Fraunhofer Institute for Material Flow and Logistics IML and Chair of Corporate Logistics, Technical University of Dortmund