When approaching supply chain finance, many believe that the main factor for successful implementation of such a program is the choice of technology or transaction platform. This is not entirely untrue; the platform is important as it must process thousands of invoices and payments, provide dispute management and audit trails, manage credit notes, and carry out many other tasks for all involved parties. However, equally critical for a successful supply chain finance program is the corporate information that it captures, the source of which can be traced back to a company’s ERP system.
In essence, ERP (Enterprise Resource Planning) systems are a type of software that centralizes business data linked to activities such as accounting, procurement and project management, allowing companies to gain full transparency and control of their operations and processes. Data is updated in real time, enabling seamless communication between departments, and eliminating the chance for errors, while instant access makes it possible to identify potential setbacks and errors.
A successful financing program is one that can integrate ERP data with a supply chain finance platform.
Today, most platform providers offer some form of integration, either manually or fully automated. While this progress is welcomed, these platforms are often limited in their ability to streamline integration with payments or with other supply chain finance participants, such as banks. ERP integration is not just a matter of up and downloading files to and from a financing platform; it requires the harmonization of existing processes in ERP with the supply chain finance platform in order to automate straight-through processing.
Large financing programs are generally managed and funded by multiple financial institutions, each of which focuses on specific jurisdictions or currencies. In today’s world, this means that every institution has one bespoke connection with each of their corporate client’s ERP systems. Over the last few years, some fintech providers have started offering independent multi-funding platforms that allow the buyer organization to connect with multiple banks. To some extent, this has helped reduce the number of separate integrations required, but has also raised further questions regarding data privacy, security, transparency, and provenance, with the data being managed centrally by the third-party fintech platform.
Leveraging blockchain technology can overcome some of these challenges and take the existing benefits of integrating with ERP systems to another level.
Blockchain technology to ease integration challenges
For one, blockchain technology incorporates functionality that enables data to be pulled directly from an ERP system, without the need for manual systems. For the corporate, that means that they continue to use their ERP as before, instead of building another bespoke connection.
Data is not managed on a third-party platform, but within the company’s own system and can be controlled and shared with permissioned parties, such as banks, credit insurers, and technology or logistic providers, with everybody having the same view of the underlying data. This allows an increase in efficiency, auditability as well as transparency in each step of the transaction.
For banks, blockchain technology enables them to gain more control over internal data operations, which gives them a better grip on security.
By working with a distributed platform, the transaction system is distributed among the different participants, meaning that each company manages the platform either on the cloud or their own premises.
Marco Polo is one such distributed platform that manages trade and supply chain finance transactions, allowing participants to offer and access a complete suite of trade and working capital solutions in one place. It is a network with over 35 financial institutions and their corporate clients, all connected via APIs and the Corda blockchain technology.
Recently, Marco Polo has partnered with msg, one of Germany’s largest IT consulting and system integration companies, to develop SAP-enabled solutions and extensions that will facilitate seamless integration, user experience and real-time data exchange between an organization’s ERP system and the Marco Polo Network.
The partnership opens up significant opportunities for both Marco Polo and msg’s clients and partners, particularly in the insurance and financial sectors, to co-develop and provide innovative insurance offerings on the network, alongside already available financial products, through a unified portal and managed services. “Building bridges across companies and industries is a key pattern for creating digital products and services as well as new business models. With our partnership, we will help enterprises with key digital technologies, such as DLT, evolve from monolithic ERP silos to interconnected digital networks,” adds Bernhard Lang, executive board member at msg.
What is more, organizations on the Marco Polo Network will be able to manage multiple funding programs across different jurisdictions and parties as well as keep their ERP systems updated in real time for flexible cash flow management and accurate demand forecasting.