Background
Industries that are struggling can get out of the struggle phase through a combination of actions involving gaining new work orders for unique product programs and funding from sources wherein conventional banks are not an option. To ensure that there is a legitimate case for funding and assured returns, a trust chain needs to be created.
PROBLEM / OPPORTUNITY STATEMENT
One of the major problems with Manufacturing sector is that the product programs are often aligned for a single family of products and quick shift to entirely new product components is a daunting and investment driven task. Businesses that are already struggling will find it impossible to attract funds from conventional sources and this compounds the problem.
CRITICAL CONSTRAINTS
Manufacturing sector is a typical a asset leveraged industry, the capital investment apart, there is high working capital investment going into procurement of raw materials and sourcing terms for both financial services and supply chain are very stringent.
KEY OBSERVATIONS
Industries reach a stress mode for variety of reason, one key reason is the change in the product demand and geo-political factors that impact the demand. Industries tend to have working relationship with various banks, that in turn depend up on trends with similar industries for lending. When one industry segment starts to under perform, all rugs under the feet are pulled out last and noose tightened, making it extremely difficult for industries to recover.
SOLUTION
By creating a trackable trust chain using blockchain platform, the alternative source of funds are to be released as a working capital based on work orders from end of line suppliers to virtual clusters, how do you ensure trust is continuously established in the lending cycle.
APPROACH TO SOLUTION
Work with banks and alternative fund sources to build a self contained supply chain ecosystem that is driven entirely through the finance vertical. The vertical tracks issuance of work orders for established market entities to smaller work clusters that fund for working capital and capital investments is drawn against the milestone derivatives from the work orders.
KEY SOLUTION METRICS
This model triggered faster returns to the investors with limited period of risk exposure, whilst allowing the borrowers to limit their risks for both payment and production cycles, interest rates.
SOLUTION LIMITATIONS
The trust chain development and implementation depends heavily on various industries to come together and accept the terms as a whole, in an joint effort to improve their circumstances.
PROCESS APPLIED
The process involved a foreign fund to commission the blockchain platform for supply chain work order issuance and cluster based work tracking. Funds were made accessible against milestones, deliverables and issued and collected based on the anchor company issuing the work order.
REVENUE IMPACT
New source of funds, coupled with steady supply of work orders and lack of competition within the cluster allows for business to get back on track towards healthy financials and growth path.
AD-HOC CONTRIBUTORS
Cluster program was designed to non-competitive among cluster participants and no two clusters were working on the same product program, this allowed for better profits and faster path to recovery for participating industries.
KEY BENEFITS OF SOLUTION
Rapid assimilation of new product programs and ease of accessibility to funds meant better ability to take risks and innovate.