The power of a networked platform: a cash flow example
There’s been a shift in mindset across the supply chain world, recognizing that traditional enterprise centric approaches are insufficient. The future is networks. Network ERP. Networked supply chains. Networked commerce. The need for collaboration and free flowing data is well understood. But what types of benefits should be expected from a network architecture? This part remains unclear for many.
A true networked supply chain is defined as a hyperconnected connection of buyers, suppliers and service providers such as financial institutions and carriers, with a single instance of data residing at the core. Everyone is connected on the same network, contributing to – and benefitting from – network data and intelligence.
Let’s look at a fairly simple use case that helps draw a clear picture of the network difference. A footwear supplier that manufactures sneakers for multiple buyers (major brands) receives orders electronically. In a typical enterprise-centric environment, the supplier must log in multiple times and manage each customer’s orders separately. In a true multi-tenant network, the supplier logs in once and sees all its orders, across all of its customers. Going a step further, that manufacturer in a networked environment can see approved invoices across its brand customers and select the invoices it would like to finance to get paid faster. All incoming receivables from across its customer network are consolidated into a single view. The network assesses each order and actually helps prescribe the optimal receivable to finance based on various conditions. Financing options are offered by financial institutions on the network that have visibility into the buyer, supplier and key milestone events in the transaction. From the end-user’s perspective, none of that matters. The manufacturer needs capital to pay its workers and order raw materials. It needs the best available option based on time and cost factors.
Behind the scenes, the network can look through hundreds of approved outstanding invoices and highlight the ones that make the most sense for the manufacturer to finance at the given moment based on capital needs. The manufacturer obtains cash quickly with minimal interaction, often without having to get a credit line from the bank, and it can choose how much it needs and when. The tool is integrated with all parties, including the buyers (brands), the supplier (manufacturer) and financial institution.
The benefits are very tangible:
- Visibility: Incoming receivables are consolidated into a single easy-to-use view
- Optimized invoice discounts for capital: Optimal discounting options are automatically calculated and compared to enhance funding decisions
- Reduced processing time: Financing requests are created and sorted by payment dates; the manufacturer has control of working capital and visibility into payment dates
For the manufacturer, knowing when payment will arrive is essential to operating business. In this scenario, the network helps it control the timing and amounts of receivables. The system optimizes invoice selection to minimize discounting costs. And it improves working capital and reduces risk.
This is the power of a network. It connects enterprises and delivers visibility and value to each party based on its needs. All the data from all parties are stored in one place. And the entire network can learn and benefit from data intelligence gleaned from the end to end network. Without a multitenant, single instance network, cross-party innovation and value such as this are unattainable.