Supply Chain Finance and Supply Chain Fintech: The Value Model of Relationship Finance

Here we need to clarify a few key elements to capture the essence of supply chain finance, and integrate it with financial technology:

The first element is the goal: as a sub-segment of finance, the goal is to "control risk". In other words, the core values and main tasks are the same as in finance, but with new objectives.

The second element is the object: that is, what are the bearers of the main tasks of finance and what are the realizers of the goals? Different bearers of the main tasks of finance form different branches of finance, supply chain finance focuses on the whole of the supply chain enterprises, that is, the production clusters formed by the supply chain, finance or other enterprises (not limited to banks, the expansion of the first paragraph of the descriptive definition) through the optimization of the measures of management to achieve the specific objectives of supply chain finance.

The third element is implicit in the description, is the essence of supply chain finance, that is, supply chain finance is essentially the relationship of the financial, supply chain is the relationship formed by the production, supply chain finance is the formation of financial services on this relationship. Relationship finance and traditional finance is the biggest difference is the carrying of the core elements of finance from the object (such as business loans, the core element is credit, carrying the object is the enterprise / future cash flow) to expand in the relationship between the object, this expansion makes the core elements to re-representation, quantification and prediction, which representation and quantification consists of one of the main tasks of finance "pricing "

Supply Chain

The third element of supply chain finance leads to relational finance, which also makes supply chain finance easy with fintech from the beginning, the reason is that the main work of traditional financial analysis is to calculate on ordinary real numbers, by defining measurements, so that probability theory and mathematical statistics, and stochastic processes can adequately support the task of financial analysis, and if you consider the scenario of big data (high-frequency data is a kind of big data) machine learning artificial intelligence. If we consider big data scenarios (high frequency data is a kind of big data) machine learning artificial intelligence makes this analysis more "accurate" and "generalized"; but relational finance requires financial analysis to be extended from the real numbers to "graph data".

Define finance (analytics) on graph data as relational finance (analytics). There are many specific practical scenarios of relational finance, and one can even generalize most of the finance to relational finance, such as international finance, etc. However, the most typical relational finance is supply chain finance, mainly because it contains the three main elements mentioned above, but also has two characteristics that support the practical application in this way:

The first one is that it has a clear and stable underlying relationship, which makes the definition of the financial elements, such as credit, clear. clear;

the second is the existence of a limited number of service providers (financial institutions), which allows the core features of finance to be consistent, and the conclusions to be compliant and actionable.

From the essence of finance, supply chain finance is actually a comprehensive embodiment of the three-dimensional characteristics of finance, logistics, information flow, capital flow synergy and optimization is simultaneously involved in the three characteristics of the financial dimension (insurance involves two), in fact, its basic model structure is logistics, information flow, capital flow through the financial "elemental flow" to match the synergistic optimization. "to match the synergistic optimization and control of the elemental flow, the elemental flow is subject to the objectives of the financial institutions, regulatory constraints and synergistic resources, this process is actually a multi-scale graph of the "operation", of course, you can consider a certain perspective of the problem with different themes, such as the use of graphical data analysis to optimize the flow of funds For example, using graph data analysis to optimize capital flow, using big data 5G to build information flow efficiency, and using financial automation process to complete the tracking and processing of capital flow, etc., which are more mature modes of supply chain finance, and can be regarded as the embodiment of supply chain finance technology in the business. However, in fact, supply chain finance also needs to involve the characteristics and trends of the change of this "relationship", for example, many banks first established the prototype of supply chain finance "inventory financing" business, so that the change of this relationship can be expanded to the secondary collateralization and circulation of credit, the new financial institutions and supply chain manufacturers, and the new financial institutions and supply chain manufacturers. The new financial institutions and financial service institutions of supply chain manufacturers can join in, when we have multiple flows of credit, it also means the formation of a sharing mechanism, which is also the reason why supply chain finance has a "risk sharing mechanism", in which financial technology can play a more definite role, that is, risk sharing. The more reasonable mechanism of risk sharing means that it can play a role in the decentralization of credit (the so-called blockchain-supported supply chain finance), the replication of relational credit (the so-called specialized industry supply chain finance constructed by platform enterprises in specific fields), and the enrichment of the risk-bearing mechanism (the so-called proactive introduction of the financial model of compliance), etc. Specific applications have been reflected in many studies. Specific applications have been reflected in many cases of studying the application of financial technology in supply chain finance, and will not be repeated here.

The above is a more in-depth analysis of supply chain finance from a technology perspective, and this paper considers supply chain finance from the origin of finance by going from technology to "value". From the research point of view, we can consider the infinite possibilities of technology, and consider all kinds of changes in supply chain finance, but the various definitions of supply chain finance have overlooked one thing, that is, as an application of the financial field, the vitality of supply chain finance lies in the "value", and the value of the existence of the financial sector is clear, and supply chain finance of course has the same value. The value of financial existence is clear, of course, supply chain finance also has the same value, but also has its unique value, that is, the reduction and elimination of uncertainty through the construction of the relationship (the three key characteristics of the financial dimension). So the core of its value is the future supply chain's multiple cash flows in the current rationalization of credit optimization, although it is very simple, but with this height can be better from the overall grasp of the structure of the supply chain finance, adjustments, create value in the way and direction, and then optimize the entire supply chain with the help of supply chain finance, and ultimately serve the real economy.

Based on the above value model, supply chain finance can be roughly divided into: single-value model, oligopoly value model, and multi-value model, but note that it does not mean that the multi-value model is more advanced, which is related to the real economic industry in which the supply chain is located, as well as the regulatory environment; and at the same time, based on the dimensional characteristics of the financial relationship between the supply chain finance can also be divided into 3 * 3 a **** 9 kinds of The model.

The author has published a monograph on industrial clusters, researched and studied "thirteen domestic industries in the supply chain finance model", and some of the models have formed a graduate teaching guide case, the key to the success of these models lies in the sharing of value, but the sharing of value is often misunderstood as cash flow (money), in fact, the supply chain finance has been described in the previous section. Supply chain finance has been introduced to explain the value of its elements are reflected through different stages, not reached the "cash flow" when the wrong judgment, so this paper is divided into three elements, and emphasize its financial characteristics of the three dimensions, as well as the importance of the relationship between the financial. Specifically, one is a city in Shandong lithium (new energy power supply), a southwest province to promote the "auto parts industry chain finance". These are just two contrasting examples. We believe that the current supply chain finance in most industries is suitable for the following modes: single-value mode (geographic dimension aggregation) and multi-value mode (non-geographic latitude aggregation); in the nine modes, it is more important to build a relationship between the credit replication and the enrichment of the risk to bear; and in the consideration of the value creation, the financial value of the choice of the strategy to extend the value.

(Author Zhang Ning, Ph.D., Professor, Doctoral Supervisor, Director of China Financial Technology Research Center, Central University of Finance and Economics, Chairman of Quality of Life Research Society, Chairman of the Board of Governors and Chief Economist of Home Office Development and Cooperation)