Buyers of products in the process industry e.g. the chemical industry depend on the continuous availability of their raw materials. In order to guarantee the required constant availability and quality of supplies, the main focus of todays automation, as provided by AZHOS Infrastructure™ is set on monitoring, automating and digitizing parts of the supply chains through measurement technologies and sensors along the path. By implementing these technologies, shipments can now be controlled and executed as needed, to ensure the flow of goods meets the customer’s requirements.
In addition to consumption-based provisioning through e.g. VMI the next step in releasing capital tied-up in the supply chain and thus reducing capital and transaction costs. In fact, in today’s production economy, the terms of payment only cover parts of the time where the capital is tied up in current assets. In addition, there are production and transport times or consignment stocks. The time span between leaving the producer’s warehouse, the delivery and storage at the customer’s warehouse, up to reimbursement, can therefore easily cover several months.
By applying techniques like factoring these periods could be shortened, but this is only possible with considerable administrative effort or not at all, despite the potential financing volume of hundreds of billions of euros of global capital tied-up in the supply chain. While buyers benefit from long payment periods and consignment agreements, sellers have to bear the costs in the form of financing current assets. However, in most cases, a lack of data quality does not allow any action to be implemented in a fully automated way.
Beside the sole advantage of having access to cheap liquidity, the system allows each silo or warehouse system to act as a single profit centre from accounting perspective, adding transparency, enabling activity-based costing approaches and as well as making the underlying assets accessible and securitizable for institutional investors. Furthermore, when directly connected to the respective legacy systems, all manual steps regarding the ordering and invoicing process can be made obsolete – if properly set up all the mentioned processes can autonomously be run for months without any human interaction required.
AZHOS Trade Finance™ therefore fills the gap between supply chain automation and supply chain financing by being able to synchronize the cash flows with the flow goods, significantly improving KPIs like working capital and reducing previously tied-up capital in the supply chain. Based on the data gathered by the various data points, different strategies and logics can be applied in automating the payments according to the flow of goods in the supply chain.
Through the proof of existence created by AZHOS Infrastructure™ financial institutions are now able to perform transaction-related valuations of risk weighted assets that previously could not be carried out at reasonable expense for bulk goods, enabling them to offer attractive financing solutions for the processing industry with an assessable risk and return. With superior technology AZHOS Trade Finance™ paves the way for investors into a huge yet unoccupied market with countless opportunities of steady returns.