1. Introduction Supply Chain Finance (SCF) Lecture # 11
Jan H Jansen

2. Lectures period 2 or 4 Lecture Topic Preparation 8
Introduction to value
Cool connection round 1
Assignment 6 9
CAPM & EVA
Cool connection round 2
Assignment 7 10
SCF instruments
Cool connection round 3
Assignment 8
EBA SCF 11
Blockchain in SCM & SCF
Cool connection round 4
Case Heineken 12
Cool connection round 5
Case Unilever 13
Cool connection round 6
Case Philips 14
Cool connection round 7
Test exam
Exam case

3. Round # 4 The Cool Connection
TeamId
TeamName
ScoreRound1
ScoreRound2
ScoreRound3
ScoreRound4
16959
sthannv - Team 1
-14,28
-9,73
0,33
16960
sthannv - Team 2
-33,95
-20,45
-3,78
-1,69
16961
sthannv - Team 3
-6,34
-2,41
-2,19
1,1
16962
sthannv - Team 4
-14,94
0,01
-11,53
6,21
16963
sthannv - Team 5
-13,57
-3,54
-0,32
0,92
16964
sthannv - Team 6
-17,28
-36,63
-55,84
-11,14
16965
sthannv - Team 7
-15,82
-17,06
7,41
16966
sthannv - Team 8
-15,68
-12,41
16967
sthannv - Team 9
16968
sthannv - Team 10

4. Levels of SCF instruments
Strategic
Take over
Joint venture
Minority interest
Tactical
Equipment financing
Pay on production
Supply risk sharing
Currency risk sharing
Operational
Working capital
Reverse factoring
Dynamic discounting
Inventory financing
Purchase order financing
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. Order-to-cash process Order-to-cash process
Potential for improvement O2C
Firm buys
inventory
Firm pays for
inventory
Firm sells
Inventory
Accounts Receivable
Accounts Payable
Firm receives
Payment
Operating Cycle
Cash out
Cash Cycle
Cash in
Pre-Order comes in
Pre-Order comes in
Order comes in
Delivery /
Sending Invoice
Delivery /
Sending Invoice
Approval of invoice
Approval of invoice
Payment of invoice
Payment of invoice
Order-to-cash process
Order-to-cash process
Payment Term
Payment Term
Potential for early payment:
Faster registration in buyer ssytem
(processen)
By invoicing often and faster
(processen)
By faster approval of invoice / Reducing Dipsutes
(processen)
By using SCF
tools like RF and DD
(instrumenten)
By decrease of late payments
(processen)

7. Blockchain in Logistics
Lecture 11
Blockchain in Logistics
Source:

8. Ronde Table Session Blockchain
Bron:
Vervoerslogistieke Werkdagen 2018
Jan H Jansen

9. Source DHL Trend Radar
2018/2019

13. 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:

14. Blockchain
Financial
Cypto currencies
Bitcoin
Ethereum
Altcoins
Non-financial
Energy
Logsitics data
Etc.

15. What do we want to register using Blokchain technology?
Jane Gleeson-White

17. Integrated reporting model (The IIRC, 2017)

18. Capital
Description
Examples I
Financial capital
The pool of funds that is:
Available to the organization for use in the production of goods or the provision of services
Obtained through financing, such as debt, equity or grants, or generated through operations or investments.
Equity
Loans
Subsidies
Retained earnings II
Manufactured capital
Manufactured physical objects (as distinct from natural physical objects) that are available to the organization for use in the production of goods or the provision of services
Buildings
Equipment
Infrastructure (roads, ports, bridges, waste & water treatment plants).
III
Intellectual capital
Intangibles that provide competitive advantage for the organization
Patentes, Copyrights, Software
Licences, Brands, Reputation
Systems & Procedures
Tacit knowledge IV
Human capital
People’s skills and experience, and their capacity and motivations to innovate.
Competencies, Skills, Capacities
Risk tolerance, Loyality, Motivation, Ability to lead and to collaborate V
Social & relationship capital
The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being.
Common values &behaviours
Trust & Loyalty
Stakeholders (internal & external)
Customers
Suppliers
Business partners VI
Natural capital
Natural capital is an input to the production of goods or the provision of services. An organization’s activities also impact, positively or negatively, on natural capital.
Water, Land, Minerals & Forests
Biodiversity & Ecosystem
Health.

19. Example Annual Report 2017 Unilever

20. Example Annual Report 2017 Philips

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

23. Blockchain URL Topic http://blocklab.nl/
Information on blockchain applications
Blockchain University of Delft
How to get an account in Bitcoins (wallet)
Chicago Board Options Exchange
Dutch Central Bank (risks & opportunities)

24. Hash code Example: 6b1f6fde5ae60b2fe1bfe50677434c88
Source:

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

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

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

29. Lecture 11
Case study
Source:

30. Source:https://www. google. com/finance

31. Ticker symbol
Company name
HINKY
Heineken N.V. (ADR)
HKHHF
HEINEKEN HOLDING NV
BUD
Anheuser Busch Inbev
ABV
Companhia de Bebidas das Americas
SBMRY
SABMiller plc (ADR)
CABGY
Carlsberg A/S (ADR)

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. 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.

34. Heineken’s supply chain (source:http://www. sustainabilityreport

35. Source:

36. Hops & Barley
Source:

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.

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

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

41. Which part of the supplier’s working capital is financed by Heineken
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?

42. 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.

43. Credit Rating Heineken NV (Source: http://www. theheinekencompany
Agency
Long-term
Short-term
Outlook
Standard & Poor's
BBB+
A - 2
Stable
Moody's
Baa1
P - 2

44. 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.

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

46. 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

47. 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.

48. Dynamic discounting (Source SCF, EBA 2014)

49. (Source SCF, EBA 2014)

50. 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.

51. Additional risks supply chain of beer
Currencies risk
Commodity prices risk
Interest rates risk
Financial lease risk
Credit risk

52. Source: http://www. theheinekencompany

53. HEINEKEN is predominantly a single-product business, operating throughout the world in the alcohol industry.
The international spread of its business, a robust balance sheet and strong cash flow, as well as a commitment to prudent financial management, form the context based on which HEINEKEN determines its appetite to risk.
A structured risk management process allows HEINEKEN to take risks in a managed and controlled manner. In recent years, there has been increased media, social and political criticism directed at the alcoholic beverage industry.
An increasingly negative perception in society towards alcohol could prompt legislators to implement further restrictive measures such as limitations on availability, advertising, sponsorships, distribution and points of sale and increased tax.
This may cause changes in consumption trends, which could lead to a decrease in the brand equity and sales of HEINEKEN’s products.
Source:

54. The HEINEKEN Governance, Risk and Compliance activities are an integral part of the HEINEKEN Business Framework. Based on the COSO reference model, this framework provides an overview of how HEINEKEN’s vision, purpose and values lie at the core of the Company’s strategic priorities, organisation structure and behaviours. Translating this into policies and processes, the Code of Business Conduct, Company Rules and Risk Management process enable the achievement of HEINEKEN’s strategic priorities while protecting the Company’s employees, assets and reputation. Source:

55. 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.

56. Is Heineken a focal company? Yes!
“a focal company is quite often a large buyer, which controls and dominates the chain”
(Source: