CA2482506A1 - System and method of supply chain finance - Google Patents

Abstract

A supply chain finance system for providing supply chain finance in trading relationships is provided. The supply chain finance system comprises a repository for storing supply chain finance information, a transaction module for purchasing inventory from a supplier, a finance module for generating and selling asset backed commercial paper for the inventory, and an accounting module for managing the information stored in the repository relating to the purchase and sale of the inventory and the asset backed commercial paper.

Description

System and Method of Supply Chain Finance FIELD OF THE INVENTION
The invention relates generally to digital commerce, and in particular to a system and method of supply chain finance.
BACKGROUND OF THE INVENTION
In a typical trading relationship, a sponsor will purchase goods and products (the "Inventories") from its suppliers, take delivery, offer no security interest to the suppliers, provide security interests in such Inventories to other creditors, sell the Inventories and then discharge its obligations to its suppliers. Normally, suppliers are paid 55-60 days following delivery of such Inventories.
Figure 1 shows a typical supply chain 10 in a business-to-business (B2B) trading relationship. The supply chain 10 includes a supplier 12, a reseller 14, and a consumer 16. The supplier 12 and the reseller l4 have a trading relationship. The supplier 12 sells goods to the reseller 1,4 to sell to a consumer 16. The supplier 12 and the reseller 14 independently have banking relationships with banks 18 in order to finance the supply chain 10. The supplier 12 is typically willing to offer an incentive for early payment from the reseller 14. The reseller 14 is typically willing to participate in the supply chain 10 to increase operating profits from the reselling of the goods to consumers 16.
The traditional view of supply chain management is that real savings come from the substitution of information for Inventory and the integrated management of both the physical product and information flows. However, the Enancial flow, even more than the physical and information flows, holds the promise for cost reduction. The hidden truth is that the costs to Bnance products moving through the supply chain, over four percent (4%) of gross domestic product (GDP) in 1998 in the United States, approach the costs associated with transportation and distribution.
When one considers the total dollar value of goods shipped through third party providers, the value created by reducing the financing cost by even a few basis points is far greater than any cost savings possible from traditional transportation and warehousing targets. The relentless pressure on suppliers in virtually every industry to accept longer and longer trade terms to enhance their customers' return on invested capital (ROIC) and return on assets (ROA) comes from Wall Street pressure: when managing ROA, if you cannot up the "R," cut the "A". In short, own the inventory for the shortest time possible.
Objective coordination with information exchange and physical movement through the supply chain to support the financing of Inventory as it passes from one participant to the next is rare. As a result, process duplication occurs between suppliers 12 utilizing a variety of different finance providers.
There exists prior art that teaches a system and method of financing a supply chain by having a supplier provide a reseller an electronic invoice for goods. A
financial institution then accesses the electronic invoice, stored on either the supplier's network or the reseller's network, and pays the supplier. Once the reseller sells the goods, the reseller settles with the financial institution.
One problem with the prior art system is that it is intrusive since the financial institution is allowed to access a company's database. That is, the financial institution intrudes into the reseller's system or the supplier's system. Furthermore, a prior agreement between the financial institution and the supplier is required.
There is a need to reduce the cost of financing the relationships embedded in supply chains.
SUMMARY OF THE INVENTION
The present invention describes a solution to an inefficient capital market and the ability to reduce the cost of financing the trading relationships in a supply chain. One embodiment of the present invention consolidates the physical and the financial supply chains into one seamless process that increases the economic value of trading relationships for the constituents. Asset backed commercial paper (ABCP) is generated and sold to sponsors.
In accordance with an embodiment of the present invention, there is provided a supply chain finance system for providing supply chain finance in trading relationships.
The supply chain finance system comprises a repository for storing supply chain finance information, a transaction module for purchasing inventory from a supplier, a finance module for generating and selling asset backed commercial paper for the inventory, and an accounting module for managing the information stored in the repository relating to the purchase and sale of the inventory and the asset backed commercial paper.
In accordance with another embodiment of the present invention, there is provided a method of supply chain finance in trading relationships. The method comprises the steps of issuing to a supplier a purchase order for inventory, providing a financial interest to the inventory, paying the supplier, and retiring the financial interest to the inventory.
In accordance with another embodiment of the present invention, there is provided a computer data signal embodied in a carrier wave and representing sequences of instructions which, when executed by a processor, cause the processor to perform a method of supply chain finance in trading relationships. The method comprises the steps of issuing to a supplier a purchase order for inventory, providing a financial interest in the inventory for purchasers of asset backed commercial paper, paying the supplier, and retiring the financial interest in the inventory by applying the proceeds resulting from the sale of inventory to repay the asset backed commercial paper.
In accordance with another embodiment of the present invention, there is provided a computer-readable medium having computer readable code embodied therein for use in the execution in a computer of a method of supply chain finance in trading relationships.
The method comprises the steps of issuing to a supplier a purchase order for inventory, providing a financial interest in the inventory for purchasers of asset backed commercial paper, paying the supplier, and retiring the financial interest in the inventory by applying the proceeds resulting from the sale of inventory to repay the asset backed commercial paper.
In accordance with another embodiment of the present invention, there is provided a computer program product for use in the execution in a computer of a supply chain finance system for providing supply chain finance in trading relationships.
The computer program product comprises a repository for storing supply chain finance information, a transaction module for purchasing inventory from a supplier, a finance module for generating and selling asset backed commercial paper to fund the purchase of the inventory, and an accounting module for managing the information stored in the repository relating to the purchase and sale of the inventory and the issue and repayment of asset backed commercial paper.
BRIEF DESCRIPTION OF THE DRAWINGS
Figure 1 shows a typical supply chain in a business-to-business trading relationship.

Figure 2 shows an example of a supply chain finance system for providing supply chain finance in business-to-business trading relationships, in accordance with an embodiment of the present invention.
Figure 3 shows in a flowchart an example of a method of supply chain finance, in accordance with the supply chain finance system.
Figure 4 shows an example of a supply chain finance network environment, in accordance with an embodiment of the supply chain finance system.
Figure 5 shows in a process flow diagram an example of the process structure of the supply chain finance system.
Figure 6 shows in a process flow diagram an example of a transaction process, in accordance with an embodiment of the supply chain finance system.
Figure 7 shows in a process flow diagram an example of a core process system, in accordance with an embodiment of the supply chain finance system.
Figure 8 shows in a process flow diagram an example of a physical supply chain financial process flow, in accordance with an embodiment of the supply chain finance system.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
Figure 2 shows an example of a supply chain finance system 20 for providing supply chain finance in business-to-business (B2B) trading relationships, in accordance with an embodiment of the present invention. The supply chain finance system generates and sells asset backed commercial paper (ABCP). The supply chain finance system 20 comprises a repository 22 for storing supply chain finance information, a transaction module 24 for purchasing inventory from a supplier 12, a finance module 26 for generating and selling ABCP for the inventory to capital markets, and an accounting module 28 for managing information stored in the repository 22 relating to the purchase and sale of inventory and ABCP in the supply chain finance system 20. The transaction module 24 may include a supply accounts payable (A/P) module for settling payment with the supplier 12, and a supply accounts receivable (A!R) module for receiving payment from a reseller for the inventory. The finance module 26 may include a finance A/R module for receiving the funds from the capital markets in exchange for the ABCP, and a finance AlP module for retiring the ABCP. Alternatively, the accounting module 28 or the supply chain finance system 20 may have suitable modules for providing these _4_ AlR and A/P functions. Other components may be added to the supply chain finance system 20, including a registration module for suppliers 12, resellers 14, or financial backers in the capital markets to register and participate in the supply chain finance system 20.
The supply chain finance system 20 generates and sells ABCP to capital markets to finance the purchase of inventory produced by a supplier 12 and sold by a reseller 14.
Figure 3 shows in a flowchart an example of a method of supply chain finance (30), in accordance with the supply chain finance system 20. The method (30) begins with a reseller 14 requesting the transaction module 24 to issue a purchase order of inventory to a supplier 12 (32). Next, a financial interest is provided (34) in the form of ABCP to financial markets. The ABCP is issued by a special purpose entity (SPE) that is organized to purchase and sell such inventory and ABCP. Part of the proceeds from the sale of the legal title is used to pay the supplier 12 (36). Preferably, the supplier 12 is paid early (i.e., within 5 to 10 days of delivery) in exchange for a discount on the purchase price. Once the reseller sells the inventory to a consumer, part of the proceeds from the commercial sale are used to retire the ABCP (38) previously issued.
Once the ABCP is retired (38), the method (30) is done (39). Other steps may be added to the method (30).
Figure 4 shows an example of a supply chain finance network environment 40, in accordance with an embodiment of the supply chain finance system 20. The supply chain finance network environment 40 comprises a reseller server 42 used by a reseller 14 to communicate with the supply chain finance system 20, a supplier server 44 used by a supplier 12 to communicate with the supply chain finance system 20, a capital market entity server 46 used by a capital market financial entity to communicate with the supply chain finance system 20, an SPE server 48 used to host the supply chain finance system 20, and a network 49. The SPE server 48 communicates with the other servers 42, 44, 46, via connections through the network 49. The network 49 may be any suitable communications network, including a local area network, a wide area network, or the Internet.
Advantageously, the supply chain finance network system 20 converts inventories into ABCP, converts book debts of suppliers 12 into ABCP, settles supplier obligations in a short period of time (i.e., within 5 to 10 days), and produces highly rated ABCP.

There are no incremental risks for a reseller 14 that adopts the supply chain finance system 20. The reseller continues to purchase, warehouse, distribute, merchandise and sell inventories (but now as agent for the SPE). Since the sponsor purchases inventories that remain unsold at the end of the Performance Period, the business and operating culture of the reseller 14 remains unchanged. Although the SPE
has the legal relationship with suppliers 12, it is the resellex 14 who manages all aspects of such relationships as agent for the SPE. Essentially, the supply chain finance system 20 manages the settlement of supplier obligations (i.e., settles funds owed to suppliers 12 for the inventory purchase orders) based upon instructions received from the reseller 14 and issues ABCP to financial market entities to fund the early payment of such supplier obligations (again based on the instructions received from the reseller).
Advantageously for suppliers 12, the supply chain finance system 20:
1. Converts a supplier 12 into a 'cash and carry business';
2. Reduces the overall cost of financing a trading relationship;
3. Reduces management and administrative costs;

4. Provides an interest rate hedge for suppliers 12;

5. Provides inflation hedge for suppliers 12;

6. Eliminates the need for conventional bank financing;

7. Re-capitalizes the balance sheets of suppliers 12 by releasing the equity previously employed to fund the credit extended to resellers 14; and 8. Increases shareholder values.
A detailed example of an implementation of the supply chain finance system 20 is described below. The following definitions are used:
ADDITIONAL DISCOUNT
Additional Discount means an amount payable by suppliers 12 in addition to a Base Discount for early liquidity that is equal to an "Increase over the Base Money Rate" or the IBMR (which is the Money Rate in effect at the time of settlement less the Base Money Rate), divided by the number of financing turns multiplied by the face value of the Supplier Obligation (SO). The additional discount, assuming that the solution is based on the issued of 30 Day ABCP, is computed as follows:
(IBMR = 12) x SO = Additional Discount.

ASSET BACKED COMMERCIAL PAPER
Asset Backed Commercial Paper (ABCP) means the marketable securities issued by an SPE to finance the supply chain finance system 20.
BANKRUPTCY REMOTE
Bankruptcy Remote means an SPE that is structured and organized to mitigate the possibility of involuntary insolvency proceedings commenced against it by third-party creditors.
BASE DISCOUNT
Base Discount means a discount payable by suppliers 12 to the SPE for early liquidity when the Money-Rate is a certain stated yield.
BASIS POINTS
Basis Points {BPS) means 1/100th of a percent.
CONTRACT DATA
Contract Data means details provided by a sponsor relating to the purchase and sale of inventories as an agent for the SPE. Preferably, as authority and evidence that performance has been completed and that the Contract Data is complete and correct, a sponsor signs an electronic document containing the Contract Data by using electronic signature technology.
CUSTODIAN
Custodian means the business retained by the supply chain finance system 20 to act as the depository for the Contract Data.
DATABASE ENGINE
Database Engine means a relational database employed by the supply chain finance system 20 to convert and translate the Contract Data into useable fields of information, to compute a Discount payable by suppliers 12, to determine the value of ABCP to be issued, to prepare settlement details for payment of supplier obligations, to store asset details and to collect information regarding the sale of inventory and to provide the summary data and information for input to the finance module 26, the transaction module 24 and the accounting module 28.
DISCOUNT
Discount means the total of the Additional Discount plus the base discount.
ELECTRONIC SIGNATURE TECHNOLOGY
Electronic Signature Technology means the technology that meets the criteria for non-refutable electronic contracts.
FINANCE COSTS
Finance Costs means the yield on the ABCP issued by the SPE plus any Liquidity Facility Costs plus Supply Chain Finance System Dealer Fees.
LIBOR
The London Interbank Offered Rate (LIBOR) is the international rate that banks use to borrow from each other. LIBOR is the most widely used benchmark or reference rate for short-term interest rates.
LIQUIDITY COSTS
Liquidity costs means the bank stand-by or similar facilities that is pledged as collateral to the repayment of the ABCP issued by the SPE.
MARKETABLE SECURITIES
Marketable Securities means an ABCP issued by the SPE to fund the early payment of Supplier Obligations.
MONEY-RATE
Money-Rate means the rate published from time to time that reflects the yield on short-term securities, such as LIBOR for US$ denominated securities.
_g_ t The term reseller 14 means companies engaged in the sale of products and goods to consumers 16.
SPECIAL PURPOSE ENTITY (SPE) SPE means a special purpose entity that is structured and organized to mitigate the possibility of involuntary insolvency proceedings commenced against it by third-party creditors.
SPONSOR
Sponsor means an operating business entity of a reseller 14 that has entered into the sponsor agreement.
SUPPLIER
Supplier 12 means the business that has sold inventory to the SPE pursuant to a purchase order.
SUPPLIER OBLIGATION
Supplier Obligation means the face value of an obligation due to a supplier 12 where such supplier l2 has sold inventory to the SPE pursuant to a Purchase Order.
SUPPLY CHAIN FINANCE SYSTEM EXPENSES
Supply chain finance system Expenses means the aggregate of [a]
management and administration fees payable to managers and others employed to administrate the supply chain finance system 20; [b] Finance Costs; [c]
Service and Performance Fees; [d] Supplier Settlement Costs; [e] General and administrative expenses of the SPEs including insurance, rating agency fees, audit fees and legal fees.
SUPPLY CHAIN FINANCE SYSTEM PROFIT
Supply chain finance system ProEt means discounts collected from suppliers 12 less supply chain finance system Expenses.

YIELD ON THE ABCP
Yield on the ABCP means the amount that is equal to the Money-Rate plus a Premium over such rate.
Highlights of examples of supply chain finance system agreements include:
SPONSOR AGREEMENT
The Sponsor is appointed to act as agent of the SPE with specific and limited powers of attorney to provide those services normally associated with the management of supplier relationships and the planning, execution and management of such activities. In addition, the Sponsor is appointed as the agent of the SPE to provide those services normally associated the management and administration of the sale of such inventories.
The principal responsibilities of the Sponsor include the following:
1. The Sponsor determines which goods will be purchased and will issue Purchase Orders to the suppliers 12 in the name of the SPE.
2. On receipt of the inventories ordered from the suppliers 12, the Sponsor prepares and forwards the Contract Data which includes the amounts owing to the suppliers 12, and representations and warranties by the Sponsor that the supplier obligations attached are bona fide (the "Proof of Performance") 3. The Sponsor maintains appropriate insurance for all inventories purchased and warehoused for the account of the SPE. Any volume rebates, returns and allowances arising out of the activities contemplated herein are for the account of sponsor.
4. The Sponsor agrees to sell the inventories purchased within an agreed number of days following delivery of the Proof of Performance to the SPE (the "Performance Period").
5. At the time that the inventories are sold, the sponsor deposits, into a bank account maintained by the SPE, the proceeds from the sale of such inventories.
The proceeds due to the SPE for inventories sold are equal to the amounts included in the Proof of Performance.
6. Under this agreement, the sponsor purchases from the SPE any unsold inventories remaining at the end of the Performance Period (the "Purchase Covenant") 7. The sponsor pledges its standby-bank facility as collateral to its performance under the Purchase Covenant.
8. The sponsor will be paid a fee for.the services provided.
9. Volume rebates, returns and allowances arising out of the activities contemplated herein are for the account of Sponsor.
10. The Sponsor shall hold the SPE harmless from any product liability risk associated with any of the SPE's purchases. The Sponsor shall ensure that the SPE is a named party in its insurance policies.
PURCHASE ORDER
Preferably, the ability to take a discount for early payment is a term and condition of the Purchase Order. Aspects of purchasing process are the responsibility of the Sponsor. In simple terms, the Sponsor, as agent for the supply chain finance system 20, is responsible for the following:
~ All purchasing decisions;
Issuing all purchase orders on behalf of the SPE;
~ Receiving and verifying inventories delivered by a supplier 12 pursuant to a Purchase Order;
~ Receiving and verify invoices delivered by the supplier 12 in respect of investors delivered arid received by the Sponsor as agent for the SPE.
Preferably, suppliers 12 pay 1.5% as a base discount for early payment of obligations by the reseller 14. Under a supply chain finance system 20 established in United States (US) currency, the base discount is preferably applied as follows:
°
Supply Chain Finance Expenses ........... . .... .
............................ .. 33.3 /o Supply Chain Finance Profit .................................................... . . 66.7 /o °
Total ...............................................................................
.. . . . . . . . . . 100.0 /o For each $1 billion of inventories purchased and financed by the supply chain finance system 20 using 30 day ABCP, the reseller will earn a Supply Chain Finance System Profit of $10,000,000.
The supply chain Enance system 20 earns discounts from suppliers 12 by providing early payment of supplier obligations. Preferably, the supply chain finance system 20 is set to produce a average profit equal to 66.7% of the Base Discount collected from suppliers 12, when 30 Day ABCP is issued to fund the purchase inventories.
Advantageously, the supply chain finance system 20 has a positive effect on the financial performance of resellers 14. The reseller 14 earns an amount equal to the Supply Chain Finance System Profit. The increase in financial performance is translated into an increase in the Market Cap Values of public company resellers that must report quarterly.
The following is a summary of the benefits of the supply chain finance system to a reseller 14:
1. Removes operating inventories and corresponding accounts payable from the balance sheet of a reseller;
2. Increases the financial performance of a reseller without incurring any incremental operating or management risk; and 3. Increase the value of shareholder interests in the reseller.
Figure 5 shows in a process flow diagram an example of the process structure (50) of the supply chain finance system 20. The process structure 50 shows a supply chain finance system 20 requesting a purchase order from a purchase agent 52. The purchase agent 52 issues purchase orders 54 to suppliers 12. The suppliers 12 ship the goods (56) and the Sponsor 58 verifies and confirnis the performance (60). Asset and settlement details 62 are provided to the Custodian 64. The Custodian 64 stores the original information in a data warehouse 66, and a copy is attached (68) to a sponsor agreement 70. The Custodian 64 also sends a copy (72) to the SPE 74.
The Sponsor 58 sells the inventory in the normal course of its business and for prices determined by the Sponsor 58. Funds from the sale of inventory 76 by the Sponsor 58 are thus translated into the realization of assets 78. Preferably, the original cost of the inventory is collected by the Sponsor 58 from such sale and remitted to the SPE 74. The SPE 74 applies such proceeds to retire the ABCP (80). Funds from the sale of the ABCP
82 are sent to the supply chain finance system 20.
Funds received by the SPE from the sale of the ABCP 82 are applied by the SPE
74 to settle obligations with its suppliers 12, pay the Supply Chain Finance System Expenses and pay an amount equal to the Supply Chain Finance System Profit to the reseller 14. The supply chain finance system 20 also updates accounting records (84), including A/P and disbursements 86 and pays the suppliers 12 (88) and the Supply Chain Finance System Expenses. At this time, the reseller 14 is paid an amount equal to the Supply Chain Finance System Profit.
Figure 6 shows in a process flow diagram an example of a transaction process (90), in accordance with an embodiment of the supply chain finance system 20.
The transaction process (90) begins with a Sponsor 58 purchasing inventory from a supplier 12. The Sponsor 58 operates its database 92 to store supplier settlement data 94. The data is exported into a database file (96) and transferred to Custodian 64 (98) who holds and stores such original Contract Data. The Custodian 64 transfers a copy of such Contract Data to the SPE 74. The SPE 74 performs the process actions (100) and computes a discount (102). The settlement process 104 is then performed. An ABCP file is sent (106) to the Supply Chain Finance System Dealer (108) that then sells the ABCP
to capital markets (110). Funds from the sale of the ABCP are transferred via a direct deposit file 112 to a bank 18. Sufficient funds are transferred to the suppliers 12 (114).
The direct deposit details are forwarded (116) to the Custodian 64. The Direct Deposit Details and Settlement Details are merged (118) into a settlement file 120 and sent to the supplier 12 (122).
Figure 7 shows in a process flow diagram an example of a core process system 130, in accordance with an embodiment of the supply chain finance system 20.
The core process system 130 comprises a reseller 14 operating electronic signature technology 132 to send electronically executed non-refutable contracts and contract data 134 via a secure messaging network 136 to the Custodian 64. Preferably, an independent third party is engaged to act as the Custodian 64 for all Contract Data. The Custodian 64 becomes a signatory to the contract data for purposes of identification. The original electronically executed non-refutable contracts and Contract Data 138 is stored by the Custodian 64.
The Custodian 64 also makes copies 138' of the Contract Data and forwards the copies 138' to the SPE 74 for process, administration and management. Copies 138' of the Contract Data are sent using electronic signature technology 142 via a secure messaging network 140 to the SPE 74. Finally, Marketable Securities (i.e., ABCP) are distributed (144). Preferably, the Custodian 64 is the single authority and gateway for all data and information required to complete the conversion of inventories into Marketable Securities.
Figure 8 shows in a process flow diagram an example of a physical supply chain financial process flow 150, in accordance with an embodiment of the supply chain finance system 20. The physical supply chain comprises the following entities:
consumers 16, resellers 14, suppliers 12, an SPE 74, a custodian 64, and a capital market entity (or supply chain finance system dealer) 108. The financial process flow includes many processes, indicated with arrows in Figure 8.
In process 152, a reseller 14 requests a purchase order from a supplier 12.
Such a request may then be performed by a purchase order module in the transaction module 24 of the supply chain finance system 20. Such a purchase order module may be code implemented in a database. A reseller 14 may have purchase order software installed on the reseller server 42, or preferably, access the purchase order module on the SPE server through a network connection. Although Figure 8 shows process 152 as between the reseller 14 and supplier 12, preferably, the supplier 12 receives the purchase order from the transaction module 24. The supply chain finance system 20 rnay handle a plurality of purchase orders from a plurality of resellers 14 for a plurality of suppliers 12.
In process 154, a reseller 14 sends the purchase order Contract Data to a custodian (or trusted third party) 64. Preferably, the reseller 14 verifies that the Contract Data conforms to the enabling Program Agreements and confirms such to the SPE 74.
Such confirmation is used to release money to the suppliers 12 and sell ABCP to the Program Dealers (or capital market entities) 108. Preferably, the transaction module 24 may set to automatically digitally sign and send the Contract Data to the custodian 64 via a network connection.
In process 156, the custodian 64 authorizes the SPE 74 to pay suppliers 12.
Resellers 14 and suppliers 12 may be registered with the supply chain management system 20. Once registered, these entities may have digital profiles stored in a database used by the custodian 64 to confirm the purchase order and authorize the SPE
74 to pay the supplier 12. A confirmation module in the transaction module 24 having predetermined scripts may be used to digitally sign the Contract Data and append it to the agreement.
In process 158, ABCP is generated and issued to supply chain finance system dealers 108 (i.e., capital market entities). The supply chain finance system 20 on the SPE
server 48 receives a copy of the Contract Data and, using predetermined scripts in the finance module 26, converts the Contract Data into data used by the supply chain finance system 20. Such data includes financial data of the inventory of the purchase order.
Predetermined relationships with financial institutions may be registered with the supply chain finance system 20 and stored as profiles in a database. Such relationships allow the finance module 26 access to the current money rate (e.g., LIBOR). Once the finance module 26 obtains the money rate, the finance module 26 may then determine a Discount and net settlement amount to apply to the transaction with respect to each supplier 12.
The finance module 26 also tabulates the supplier obligations and aggregates them into equal, predetermined amounts as the values for the ABCP. Preferably, the face value of the ABCP is set to a predetermined amount and supplier obligations are aggregated daily such that they total as close to this amount as possible. Once the value of ABCP is set, they are issued to the financial markets in exchange for proceeds. Preferably, the ABCP
is transferred electronically to the capital market entity server 46, while the proceeds are transferred electronically from the capital market entity server 46 to a predetermined bank account.
In process 160, the net proceeds obtained in exchange for the ABCP are used to pay the suppliers 12 their respective net settlement amounts. The accounting module 28 of the supply chain finance system 20 may be set to automatically authorize such payment when the net proceeds are received. The payment of the suppliers 12 may be sent electronically to a predetermined supplier bank account. The Discount is retained by the In process 162, a consumer 16 purchases an inventory from a reseller 14. In process 164, the proceeds of these purchases are received electronically by a predetermined bank account. Moreover, information regarding the exact supplier obligations associated with the proceeds is obtained by the accounting module 28.
In process 166, once such proceeds are received, the accounting module 28 may automatically authorize the retirement of the respective ABCP and send a notification to the supplier 12 of such retirement. Part of the proceeds obtained from the reseller 14 is used to buy back the ABCP. Once the ABCP is repurchased by the SPE 74, it is retired.
The supply chain finance system 20 according to the present invention, and the methods described above, may be implemented by any hardware, software or a combination of hardware and software having the functions described above. The software code, either in its entirety or a part thereof, may be stored in a computer readable memory. Further, a computer data signal representing the software code that may be embedded in a earner wave may be transmitted via a communication network. Such a computer readable memory and a computer data signal are also within the scope of the present invention, as well as the hardware, software and the combination thereof While particular embodiments of the present invention have been shown and described, changes and modifications may be made to such embodiments without departing from the true scope of the invention.

Claims (13)

1. A supply chain finance system for providing supply chain finance in trading relationships, the supply chain finance system comprising:
a repository for storing supply chain finance information;
a transaction module for purchasing inventory from a supplier;
a finance module for generating and selling asset backed commercial paper for the inventory; and an accounting module for managing the information stored in the repository relating to the purchase and sale of the inventory and the asset backed commercial paper.

2. The system as claimed in claim 1, wherein the transaction module includes:
an accounts payable module for settling payment with the supplier; and an accounts receivable module for receiving funds from a reseller for the inventory.

3. The system as claimed in claim 1, wherein the finance module includes:
an accounts receivable module for receiving funds from a capital market entity in exchange for the asset backed commercial paper; and an accounts payable module for retiring the asset backed commercial paper.

4. The system as claimed in claim 1, wherein the accounting module includes:
an accounts receivable module for receiving payment from a reseller for the inventory and receiving funds from a capital market entity in exchange for the asset backed commercial paper; and an accounts payable module for settling payment with the supplier and retiring the asset backed commercial paper.

5. The system as claimed in claim 1, further comprising:
a special purpose entity server for hosting the functionality of the supply chain finance system;
a supplier server for allowing a supplier to communicate with the supply chain finance system via a network connection;

a reseller server for allowing a reseller to communicate with the supply chain finance system via a network connection; and a financial market server for allowing a financial market entity to communicate with the supply chain finance system via a network connection.

6. A method of supply chain finance in trading relationships, the method comprising the steps of:
issuing to a supplier a purchase order for inventory;
providing a financial interest to the inventory;
paying the supplier; and retiring the financial interest to the inventory.

7. The method as claimed in claim 6, wherein the step of issuing includes the step of sending an electronic purchase order to a supplier.

8. The method as claimed in claim 6, wherein the step of providing a financial interest includes the steps of:
issuing asset backed commercial paper for the inventory;
selling the asset backed commercial paper to financial markets; and obtaining a performance covenant from a sponsor.

9. The method as claimed in claim 6, wherein the step of paying includes the step of receiving proceeds of the sale of the asset backed commercial paper.

10. The method as claimed in claim 6, wherein the step of retiring includes the steps of receiving proceeds from the sale of the inventory; and applying the proceeds to financially settle the asset backed commercial paper.

11. A computer data signal embodied in a carrier wave and representing sequences of instructions which, when executed by a processor, cause the processor to perform a method of supply chain finance in trading relationships, the method comprising the steps of:
issuing to a supplier a purchase order for inventory;

providing a financial interest to the inventory;
paying the supplier; and retiring the financial interest to the inventory.

12. A computer-readable medium having computer readable code embodied therein for use in the execution in a computer of a method of supply chain finance in trading relationships, the method comprising the steps of issuing to a supplier a purchase order for inventory;
providing a financial interest to the inventory;
paying the supplier; and retiring the financial interest to the inventory.

13. A computer program product for use in the execution in a computer of a supply chain finance system for providing supply chain finance in trading relationships, the computer program product comprising:
a repository for storing supply chain finance information;
a transaction module for purchasing inventory from a supplier;
a finance module for generating and selling asset backed commercial paper for the inventory; and an accounting module for managing the information stored in the repository relating to the purchase and sale of the inventory and the asset backed commercial paper.