Note: Descriptions are shown in the official language in which they were submitted.
CA 02520947 2005-09-23
SYSTEM AND METHOD OF SUPPLY CHAIN PROCUREMENT, SETTLEMENT AND FINANCE
FIELD OF INVENTION
The invention relates generally to e-commerce, and in particular to a system
and
method of supply chain procurement, settlement and finance.
BACKGROUND OF THE INVENTION
In a typical trading relationship, a Buyer will purchase goods and services
from its
suppliers, take delivery, offer no security interest to the suppliers, provide
security
interests in such goods and services to other creditors, sell the Goods and
then discharge
its obligations to its suppliers. In most cases, suppliers are paid 55-60 days
following
Trade Day.
Figure 1 outlines an example of a financing structure and process in a typical
trading relationship 10, and particularly how a typical transaction is
initiated, completed
and financed. A buyer 12 issues a purchase order for goods and services (22)
from a
supplier 14. The supplier 14 ships the goods or provides the services (24) to
the buyer 12.
Next, the supplier 14 sends an invoice to the buyer 12 (26). A bank 16
provides financing
for outstanding accounts receivable of the supplier 14 (28). Typically, the
financing
covers 70 to 80 % of outstanding accounts receivable belonging to the supplier
14. The
supplier 14 usually provides the remaining funding. Normally, within 30 to 90
days the
buyer 12 pays the invoice (30). With the proceeds from the payment of the
invoice, the
supplier 14 is able to repay the bank 16 (32).
One problem with the financing in the typical trading relationship is costly.
The
costs to finance products moving through the supply chain is estimated to be
over four
percent (4%) of gross domestic product (GDP) in 1998 in the United States and
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 goods and services for the shortest time possible. Objective
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CA 02520947 2005-09-23
coordination with information exchange and physical movement through the
supply chain
to support the financing of goods and services as it passes from one
participant to the next
is rare. As a result, process duplication occurs between suppliers 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 buyer 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 buyer sells the goods,
the buyer
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 buyer's system or the
supplier's system.
There is a need to reduce the cost of financing the relationships embedded in
supply chains.
I S SUMMARY OF THE INVENTION
The present invention describes a solution to the operation of inefficient
supply
chains by reducing the process, administrative and financing costs for all
constituents.
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 trading partners.
In accordance with an embodiment of the present invention, there is provided a
supply chain procurement, settlement and finance system for providing supply
chain
procurement, settlement and finance. The system comprises a transaction module
for
purchasing and receiving goods and services from a supplier, a finance module
for
providing a financial interest for the goods and services, a settlement module
for
determining and settling supplier and non-supplier obligations, and a
repository for
storing buyer data and administration data of the transaction module, finance
module and
settlement module.
In accordance with another embodiment of the present invention, there is
provided
a method of supply chain procurement, settlement and finance. The method
comprises
the steps of issuing to a supplier a purchase order for goods and services,
providing a
financial interest to the goods and services, computing the amount owing to a
supplier
when an invoice is not used as the primary document to determine a liability
to a supplier,
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CA 02520947 2005-09-23
processing invoices and tabulating liabilities owing to suppliers, paying the
supplier,
selling and collecting proceeds from the sale of goods and services sold to
customers and
consumers of buyer, and retiring the financial interest to the goods and
services.
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 goods and services, providing a
financial
interest in the goods and services for purchasers of asset backed commercial
paper,
paying the supplier, and retiring the financial interest in the goods and
services by
applying the proceeds resulting from the sale of goods and services to repay
the asset
backed commercial paper.
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 procurement, settlement and finance. The method
comprises the
steps of issuing to a supplier a purchase order for goods and services,
receiving settlement
details from a buyer and a custodian, providing a financial interest to the
goods and
services, determining a liability owing to suppliers of goods and services,
paying the
supplier, communicating settlement and banking details to suppliers, and
retiring the
financial interest to the goods and services.
In accordance with another embodiment of the present invention, there is
provided
a carrier wave embodying a computer data signal representing sequences of
instructions
which, when executed by a processor, cause the processor to perform a method
of supply
chain procurement, settlement and finance. The method comprises the steps of
issuing to
a supplier a purchase order for goods and services, receiving settlement
details from a
buyer and a custodian, providing a financial interest to the goods and
services,
determining the liability owing to suppliers of goods and services, paying the
supplier,
communicating settlement and banking details to suppliers, and retiring the
financial
interest to the goods and services.
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
procurement, settlement and finance system for providing supply chain
procurement,
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CA 02520947 2005-09-23
settlement and finance. The computer program product comprises a transaction
module
for purchasing and receiving goods and services from a supplier, a finance
module for
providing a financial interest for the goods and services, a settlement module
for
determining and settling supplier and non-supplier obligations, and a
repository for
storing buyer data and administration data of the transaction module, finance
module and
settlement module.
BRIEF DESCRIPTION OF THE DRAWINGS
These and other features of the invention will become more apparent from the
following description in which reference is made to the appended drawings
wherein:
Figure 1 outlines an example of a financing structure and process in a typical
trading relationship, and particularly how a typical transaction is initiated,
completed and
financed.
Figure 2 shows in a block diagram an example of a supply chain procurement,
settlement and finance system for providing procurement and settlement
logistics for
buyers and financing for suppliers, in accordance with an embodiment of the
present
invention.
Figure 3 shows in a flowchart an example of a method of providing procurement
and settlement logistics for buyers and financing for suppliers, in accordance
with an
embodiment of the supply chain procurement, settlement and finance system.
Figure 4 shows in a process flow diagram an example of a method of a non-
financing cash deal, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system.
Figure 5 shows in a process flow diagram an example of a method of a non-
financing term deal, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system.
Figure 6 shows in a process flow diagram an example of a method of a financing
deal, in accordance with an embodiment of the supply chain procurement,
settlement and
finance system.
Figure 7 shows in a block diagram an example of a transaction module, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system.
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Figure 8 shows in a block diagram an example of an invoice free transaction
submodule, in accordance with an embodiment of the supply chain procurement,
settlement and finance system.
Figure 9 shows in a block diagram an example of an invoice based transaction
submodule, in accordance with an embodiment of the supply chain procurement,
settlement and finance system.
Figure 10 shows in a block diagram an example of a finance module, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system.
Figure 11 shows in a block diagram an example of a financing deal with asset
backed commercial paper finance submodule, in accordance with an embodiment of
the
supply chain procurement, settlement and finance system.
Figure 12 shows in a block diagram an example of a selling and collection of
goods and services financed by asset backed commercial paper finance
submodule, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system.
Figure 13 shows in a block diagram an example of a financing deal with net
cash
finance submodule, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system.
Figure 14 shows in a block diagram an example of a financing deal with
promissory note finance submodule, in accordance with an embodiment of the
supply
chain procurement, settlement and finance system.
Figure 15 shows in a block diagram an example of a settlement module, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system.
Figure 16 shows in a block diagram an example of a liability referencing
supplier
discount matrix settlement submodule, in accordance with an embodiment of the
supply
chain procurement, settlement and finance system.
Figure 17 shows in a block diagram an example of a depositary bank settlement
submodule for direct deposits, in accordance with an embodiment of the supply
chain
procurement, settlement and finance system.
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Figure 18 shows in a block diagram an example of a communication of
liabilities
and settlement submodule, in accordance with an embodiment of the supply chain
procurement, settlement and finance system.
Figure 19 shows in a block diagram an example of a non-supplier obligations
settlement submodule, in accordance with an embodiment of the supply chain
procurement, settlement and finance system.
Figure 20 shows in a block diagram an example of a repository module, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system.
Figure 21 shows in flowchart another example of a method of providing
procurement and settlement logistics for buyers and financing for suppliers,
in accordance
with an embodiment of the supply chain procurement, settlement and finance
system.
Figure 22 shows in a component diagram an example of a network and technology
platform, in accordance with an embodiment of the supply chain procurement,
settlement
and finance system.
Figure 23 shows an example of a business process and communication platform
technology architecture, in accordance with an embodiment of the supply chain
procurement, settlement and finance system.
Figure 24 shows examples of buyer subsystems, in accordance with an
embodiment of the supply chain procurement, settlement and finance system.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS
Figure 2 shows in a block diagram an example of a supply chain procurement,
settlement and finance system 100 for providing procurement and settlement
logistics for
buyers and financing for suppliers, in accordance with an embodiment of the
present
invention. The supply chain procurement, settlement and finance system 100
comprises a
transaction module 102 for purchasing and receiving goods and services from a
supplier,
a finance module 104 for providing a financial interest for the goods and
services, a
settlement module 106 for determining and settling supplier and non-supplier
obligations,
and a repository 108 for storing buyer data and administration data of the
transaction
module 102, finance module 104 and settlement module 106. Other components may
be
added to the supply chain procurement, settlement and finance system 100.
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Figure 3 shows in a flowchart an example of a method of providing procurement
and settlement logistics for buyers and financing for suppliers (200), in
accordance with
an embodiment of the supply chain procurement, settlement and finance system
100. The
method (200) begins with issuing to a supplier a purchase order for goods and
services
(202). Next a financial interest to the goods and services is provided (204).
The amount
owing to a supplier when an invoice is not used as the primary document is
computed to
determine a liability to the supplier (206). Next, invoices are processed and
liabilities
owing to suppliers are tabulated (208). The supplier 14 is paid (210). Next,
goods and
services are sold to customers and consumers of buyer 12 and proceeds are
collected from
such sales (212). The financial interest to the goods and services is retired
(214).
Tl~~rrmrmnc
The following words or expressions have the following meanings:
Agency Agreement means the agreement between Buyer and Buy-Sell Co. whereby
the
Buyer has agreed to act as agent for Buy-Sell Co. As agent, Buyer will issue
Purchase
Orders to Suppliers, receive Goods and Services, verify that Suppliers have
performed
pursuant to the Purchase Orders, prepare and forward Settlement Details and
such other
duties as are normally associated with procurement and related process
activities. Under
the Financing Structure, the Buyer will:
a. Agree to sell the inventories purchased within an agreed number of days
following Settlement Day (the "Performance Period").
b. Purchase from Buy-Sell Co. any unsold inventories remaining at the end of
the
Performance Period (the "Purchase Covenant").
c. Pledge its standby-bank facility as collateral to its performance under the
Purchase Covenant.
Asset Backed Commercial Paper (ABCP) means the Marketable Securities issued by
a
Buyer to fund the Cash Deal.
ABCP Agreement means the agreement between the Commercial Paper Dealer and Buy-
Sell Co., which agreement defines the terms and conditions for the sale of
ABCP by Buy-
CA 02520947 2005-09-23
Sell Co. to the Commercial Paper Dealer to fund the Supplier and Non-Supplier
Obligations under the Financing Structure.
Banker's Acceptance (BA) means a bill of exchange or negotiable instrument
drawn by
the borrower for payment at maturity and accepted by a bank. Banker's
Acceptances
constitute a guarantee of payment by the bank and can be traded in the money
market.
The bank earns a "stamping fee" for providing this guarantee.
Banking Details means the information pertaining to the settlement of Supplier
Obligations that has been posted on and is available to Suppliers on the
Communications
Platform.
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 Rate means that certain rate applied to determine the discount
payable by
Suppliers to Buy-Sell Co. for early liquidity at when the Money-Rate in Effect
is equal to
or less than the Base Floor Rate.
Base Discount Rate Identifier means that certain alphanumeric number attached
to each
Purchase Order issued by Buy-Sell Co. that identifies the Base Discount Rate
that will be
referenced to the Discount Rate Matrix in order to compute the Discount
payable by the
Supplier for early liquidity and determine the Net Supplier Obligation that
will be
included with the Direct Deposit Details and posted on the Communications
Platform.
Base Floor Rate means a stated Money-Rate.
Basis Points (BPS or bps) means 1/100th of a percent.
Buy-Sell Agreement means the agreement between Buyer and Buy-Sell Co. whereby
Buy-Sell Co has agreed to purchase Goods and Services from Suppliers as
required by
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CA 02520947 2005-09-23
Buyer from time to time; or, whereby Buyer has agreed to sell Goods and
Services
purchased and owned by Buy-Sell Co. to customers or consumers of Buyer.
Buy-Sell Co. means that certain company that is party to a Buy-Sell Agreement
that will
be organized to
[a] Sell goods and services (supplied or provided by Suppliers pursuant to a
Purchase Order) to a Buyer in exchange for Cash or a Promissory Note under
the Non-Financing Structure or to consumers or customers of Buyer under the
Financing Structure;
[b] Sell such Promissory Note to a Commercial Paper Dealer at a Discount;
[c] Settle obligations to Suppliers early by applying the proceeds in [b] or
the Net
Cash received from Buyer; and
[d] Earn a finance fee from Suppliers in exchange for [c].
The Buy-Sell Co. may be organized as a special purpose entity (SPE) that is
structured
and organized to mitigate the possibility of involuntary insolvency
proceedings
commenced against it by third-party creditors. SPE means the entity that will
purchase
Goods and Services from Suppliers pursuant to Purchase Orders and will finance
the
early payment of Supplier Obligations by issuing ABCP to Commercial Paper
Dealers
under the Financing Structure.
Buyer means an entity that purchases goods and services from Buy-Sell Co. or
agrees to
sell goods and services on behalf of Buy-Sell Co. to its customers.
Business Process & Communication Platform means the System's Business
Processes
and Communication Platform that is employed to receive transaction data,
compute
settlement amounts with Suppliers and provide banking details and to
communicate
settlements with Suppliers and Buyers. The Platform consists of a highly
available
Internet-worked website with operating system, database, integration and
security,
backup, control, monitoring and web system software in secure physical
facilities. This
platform interacts with the platforms of participants such as Buyers,
Suppliers,
Custodians, Trustees, Depositary Banks and Commercial Paper Dealers.
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CA 02520947 2005-09-23
Browser means the program used to access the World Wide Web. It interprets
hypertext
markup language (HTML) code including text, images, hypertext links,
Javascript, and
Java applets. After rendering the HTML code, the browser displays a nicely
formatted
page.
Buy-Sell Expenses means the total of Solution Fees and Finance Costs.
Buy-Sell Profit means Buy-Sell Revenues less Buy-Sell Expenses.
Buy-Sell Revenues means the total of Discounts collected from Suppliers and
Outsource
Management Fees collected from Buyers.
Cash Deal means the business arrangement between the Buyer and Buy-Sell Co. as
defined in the Buy-Sell Agreement requiring the Buyer to pay for Goods &
Services
provided by Buy-Sell Co. on each Settlement Day plus the Outsource Management
Fee.
Cash Discount means the discount deducted from the total of the Face Value of
Supplier
Obligations and the Outsource Management Fee.
CDOR means the Canadian Dollar Offered Rate, which is, determined daily from a
survey of nine market makers in bankers' acceptances (BA). The daily survey of
money
market rates is derived from bid side prices provided by survey participants.
For each
maturity band ( 1-month BA, 2-month BA, 3-month BA, 6-month BA, 1-year BA and
call
markets), the high and the low rates taken from the survey are removed and a
simple
arithmetic average is calculated for the remaining survey rates.
Certified Contract Data means copies of Settlement Details (which was
originally
delivered by the Buyer to the Custodian) that have been electronically signed
and
numbered as a schedule ("Schedule") by the Custodian for identification
purposes only
and forwarded to Buy-Sell Co., the Trustee and the Buyer. The Custodian will
attach the
Schedules to the Buy-Sell Agreement and will keep such original electronic
records for
safekeeping.
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CA 02520947 2005-09-23
Commercial Paper means an unsecured, short-term loan issued by a corporation,
typically for financing accounts receivable and inventories and usually issued
at a
discount reflecting prevailing market interest rates.
Commercial Paper Dealer means a financial institution that has entered into a
formal
relationship with Buy-Sell Co. and has agreed to purchase Promissory Notes
from Buy-
Sell Co. under certain terms and conditions.
Communications Platform means that portion of the Business Process Platform
used to
communicate Settlement and Banking Details to Suppliers of Buy-Sell Co.
Contract Liability Memo (CLM) means the electronic document prepared by
reference
to Purchase Orders and receiving documents to determine the liability owing to
a Supplier
resulting from the receipt of a shipment of Goods or to the receipt of
Services, where such
Goods & Services were provided pursuant to a Purchase Order issued by Buy-Sell
Co.
Custodian means that business entity (usually a trust company) that is
retained by Buy-
Sell Co. to be the single authority and gateway for all data and information
required to
determine and settle Supplier Obligations and to determine and receive
appropriate
payment from a Buyer. The Custodian is responsible for the receipt,
identification and
storage and safekeeping of electronically executed Settlement Details, which
are
identified as a specific schedule under the Buy-Sell Agreement and attached
thereto
(Schedule) and form part thereof. The Custodian is the single authority and
gateway for
all data and information required to complete the conversion of goods and
services into
cash or into Marketable Securities.
Custodian Agreement means the agreement between Custodian and Buy-Sell Co.
Direct Deposit Agreement means the agreement between the Depository Bank and
Buy-
Sell Co. which agreement defines the rules, process and procedures for the
direct deposit
of Net Supplier Obligations into Supplier bank accounts maintained with the
Depository
Bank.
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CA 02520947 2005-09-23
Depositary Bank means that certain bank in which all Suppliers to Buy-Sell Co.
will be
required to open and maintain a business account for purposes of receiving
payment of a
Supplier Obligation. Buy-Sell Co. will deposit Net Supplier Obligations
directly into
bank accounts maintained at the Depository Bank for its Suppliers.
Discount means the amount deducted from the Face Value of a Supplier
Obligation in
exchange for early payment by Buy-Sell Co.
Discount Rate Matrix means that certain schedule that is referenced by using
the Base
IO Discount Rate Identifier and is published on the Web Site organized and
maintained for
Suppliers of Buy-Sell Co.
The Discount Rate Matrix contains the Discount Rate that is applied to a
Supplier's Obligation to determine the Discount payable by Suppliers for Early
Liquidity
as defined in the Purchase Order when the Money-Rate is at a certain yield on
a certain
Settlement Day.
E-commerce (electronic commerce) refers to business over the Internet. The two
major
forms of e-commerce are Business-to-Consumer (B2C) and Business-to-Business
(B2B).
Electronic Signature Technology means the user authentication technology that
meets
the criteria for non-refutable electronic contracts.
Encryption means the coding or scrambling of information so that it can only
be decoded
and read by someone who has the correct decoding key. Encryption is used in
secure
Web sites as well as other mediums of data transfer. If a third party were to
intercept the
information you sent via an encrypted connection, they would unable to read
the message.
Finance Costs means the costs incurred to fund the early payment of Supplier
Obligations. Under the Non-Financing Structure, Financing Costs include the
Discount
paid to a Buyer under the Cash Deal or the Promissory Note Discount paid to a
Commercial Paper Dealer on the sale of the Promissory Note. Under the
Financing
Structure, Finance Costs include the costs and expenses associated with the
issue of
ABCP.
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CA 02520947 2005-09-23
Financing Structure means the structure employed by Buy-Sell Co. to finance
the early
payment of Supplier Obligations, when its agent sells goods and services
purchased from
Suppliers to consumers or customers of Buyer.
Goods means either inventories purchased for resale or for inputs to value
added
manufacturing or products and supplies intended for internal consumption.
Internet means a computer network consisting of a worldwide network of
computer
networks that use the transmission control protocol/Internet protocol (TCP/IP)
network
protocols to facilitate data transmission and exchange.
Liquidity Costs means the bank stand-by or similar facilities that is pledged
as collateral
to the payment of the Promissory Notes.
London Interbank Offered Rate (LIBOR) means 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.
Marketable Securities means the ABCP issued by a Buyer to fund the Cash
Payment of
its obligations on each Settlement Day or by Buy-Sell Co under the Financing
Structure.
Money-Rate means the published rate that reflects the term yield on 30-Day and
60-Day
CDOR.
Net Supplier Obligation means the Face Value of a Supplier Obligation less the
Discount.
Non-Finance Structure means the structure employed by Buy-Sell Co. to finance
the
early payment of Supplier Obligations when goods and services purchased from
Suppliers
are sold to the Buyer in exchange for cash or a Promissory Note on each
Settlement Day.
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Non-Supplier Obligations means those obligations incurred in respect of the
management and administration of Buy-Sell Co. These obligations include
professional
fees, fees payable to the Custodian and Trustee, hosting and systems
maintenance costs
and expenses, commissions, the fees earned by the Buyer.
Non-Variable Components means the fixed percentages included in the Cash
Discount
that reflects the cost of a liquidity facility, Rating Agency Fees and the
cost of distribution
of such securities to the Capital Markets.
Outsource Management Fee means the fee payable by the Buyer under the Non-
Financing Structure as compensation for the procurement, settlement and
communication
services provided by Buy-Sell Co. The Outsource Management Fee is computed as
a
percent of the Face Value of Supplier Obligations and is paid by Buyer to Buy-
Sell Co.
on each Settlement Day.
Participation Interest means the interest acquired by the Buyer or a
subsidiary of the
Buyer in the Buy-Sell Profits of a Buy-Sell Co.
Participation Agreement means the agreement between the Buyer and Buy-Sell Co.
whereby Buyer acquires an interest in the Buy-Sell Profits of Buy-Sell Co.
Payment Term & Conditions means those terms and conditions included in a
Purchase
Order issued to a Supplier. Generally, the Purchase Order will contain two [2]
payment
terms and conditions:
[a] Normal Payment Term & Condition (established in consultation with Buyer -
this normal term will mirror the Buyer's traditional payment terms before the
relationship with Buy-Sell Co.); and
[b] Early Payment Term - generally this term will be equal to the Settlement
Day
and will give Buy-Sell Co. the right to take a discount as defined elsewhere
in
the Purchase Order or by reference to a Website maintained by Buy-Sell Co. for
such a purpose.
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Program Manager means the company retained by Buy-Sell Co. to manage and
administrate those activities not otherwise performed by the Trustee.
Promissory Note means a negotiable instrument received by Buy-Sell Co. as
consideration for goods and services sold to a Buyer and as compensation for
the
Outsource Management Fee. Preferably, Canadian Banks or AAA Rated Insurance
Companies will underwrite the performance of such Promissory Note.
Promissory Note Sale Agreement means the agreement between Commercial Paper
Dealer and Buy-Sell Co. which agreement defines the terms and conditions for
the sale of
the Promissory Notes received by Buy-Sell Co. from time to time from Buyer to
Commercial Paper Dealer.
Promissory Note Discount means the discount that will be deducted by the
Commercial
Paper Dealer from the Purchase Price of the Promissory Note received by Buy-
Sell Co. as
consideration for the sale of goods and services and then sold by the Buy-Sell
Co. to the
Commercial Paper Dealer or similar organization.
Purchase Order means the contractual agreement with a Supplier of Goods or
Services
that specifies payment terms, delivery dates, item identification, quantities,
freight terms
and all other obligations and conditions. The right to take a discount in
exchange for
early payment will be a term and condition of all Purchase Orders issued by
Buy-Sell Co.
Purchase Price means the amount payable by the Commercial Paper Dealer for a
Promissory Note that is equal to the Face Value of Promissory Note less the
Promissory
Note Discount.
Rating Agency means the company that is engaged in the evaluation of
securities issued
either by the Buyer to finance the Cash Deal, the Promissory Notes issued by
the Buyer
under the Non-Financing Structure and the ABCP issued under the Financing
Structure.
Rating Agencies include companies such as Standard & Poor, Moodys and Fitch.
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Repository means a relational database employed to convert and translate the
Contract
Data into useable fields of information, to compute a Discount payable by
suppliers, to
prepare settlement details for payment of supplier obligations, to store asset
details and to
collect information regarding the sale of Goods & Services to a Buyer and to
provide the
summary data and information into the transaction module and the settlement
module.
Server serves information to computers that connect to it. When users connect
to a
server, they can access programs, files, and other information from the
server. Common
servers are Web servers, mail servers, and local area network (LAN) servers. A
single
computer can have several different server programs running on it.
Services means those non-Goods ordered by a Buyer.
Settlement Appliance means a mufti-function device consisting of computer and
network hardware, operating system software, application, network and
compatibility
software, and an information/business rules repository. It automatically
aggregates data
from a buyer's systems, processes it and transmits it to Buy-Sell Co.'s
business system.
This may be installed by Buyers to expedite business processing and
communication with
the Buyer's subsystems.
Settlement Day means the day on which Supplier Obligations are paid. The
intention is
to have the Settlement Day be equal to the Trade Day + 1 Business Day.
Settlement Details means the information and data prepared by Buyer and sent
to
Custodian for identification and warehousing.
In the case of an Invoice Based System, the data includes invoice amount,
invoice
number, Date of invoice and Purchase Order Number. In the case of an Invoice
Free
System, the data includes CLM amount, CLM number, Date of CLM, Purchase Order
Number, Receiving References, Supplier Shipping References and CLM Details.
In the communication of Settlements to Suppliers, the difference between the
two
systems is the level of details that will be provided to Suppliers. In an
Invoice Free
System, the CLM Details are communicated as a second layer of information that
will
permit the Supplier to verify and confirm the accuracy of payment of a certain
shipment
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CA 02520947 2005-09-23
made. This level of detail is not required in an Invoice Based System since
the Supplier
has already furnished such information in the invoice previously issued.
Solutions Fees means the fee payable to the Program Manager pursuant to the
Program
Management Agreement. The Solution Fees will be computed and paid to the
Program
Manager on each Settlement Day.
Supplier means an entity that has sold Goods and/or Services to Buy-Sell Co.
Supplier Obligation means the face value of an obligation due to a Supplier
where such
Supplier has sold Goods or provided Services to Buy-Sell Co. pursuant to a
Purchase
Order.
Technology Requirements means some or all of the following:
~ Settlement Appliance installed by the Buyer
~ Virtual Private Network (VPN)
~ Electronic Signature Technology
~ Repository
~ Business Process & Communication Platform
~ Internet Service Provider (ISP) - Used by all parties.
~ Email
~ Methods for computing Discounts
~ Personal Computer Hardware and Software Configurations including some or
all of the following: a current web browser (preferably 128 bit encryption),
VPN access, standard email, Internet access and electronic signature tools.
~ Off the-shelf accounting software
Trade Day means the day that the Supplier either delivered Goods or provided
Services
under a Purchase Order.
Transaction Structure means either the Financing Structure or the Non-
Financing
Structure.
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CA 02520947 2005-09-23
Term Deal means the business arrangement between the Buyer and Buy-Sell Co. as
defined in the Buy-Sell Agreement requiring the Buyer to deliver a Non-
Interest Bearing
Promissory Note as consideration to Buy-Sell Co. on each Settlement Day.
Trustee means that certain business engaged by Buy-Sell Co. to perform those
services
normally provided by a Corporate Trustee, which will include responsibility
for the
collection of proceeds, settlement of Supplier and Non-Supplier Obligations
and
communication of settlement activities to relevant parties.
Trustee Agreement means the agreement between Trustee and Buy-Sell Co.
VPN means Virtual Private Network. The use of encryption in the lower protocol
layers
(of the 7 layer ISO network definition model) to provide a secure connection
through an
otherwise insecure network, typically the Internet. The System may use VPNs
and or real
private networks using private lines that may rely on having the same
encryption system
with all parties. The encryption may be performed by firewall software or by
routers.
Variable Component means the Term Money-Rate in Effect.
Web Page is a document that is written in hypertext markup language (HTML) and
is
translated by a Web browser. Web pages can either be static or dynamic. Static
pages
show the same content each time they are viewed. Dynamic pages have content
that can
change each time they are accessed.
Website is a collection of Web pages. For example, Amazon.com is a Web site,
but there
are millions of Web pages that make up the site.
MODES OF OPERATING STRUCTURES
In one embodiment of the supply chain procurement, settlement and finance
system 100, the system 100 includes two modes of operating structures for
financing or
funding supplier obligations. A non-financing structure is used when a buyer
enters into
a Buy-Sell Agreement with a Buy-Sell Co. formed and organized for each
agreement.
Such Buy-Sell Co. will:
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CA 02520947 2005-09-23
[a] Purchase Goods and Services from Suppliers pursuant to Purchase Orders
issued by the Buy-Sell Co.;
[b] Sell the Goods and Services described in [a], above, to the Buyer on the
Settlement Day;
[c] Collect from the Buyer either Cash less a Cash Discount or a Promissory
Note equal to the total of the Face Value of Supplier Obligations and
Outsource Management Fee (In the case where a Promissory Note was
received as settlement, Buy-Sell Co. will sell such Promissory Note to a
Commercial Paper Dealer.); and
[d] Charge Suppliers a Discount (as such term is defined in each Purchase
Order) in exchange for such early payment and settle such Supplier
Obligations by applying the proceeds collected in [c], above.
A financing structure is used when a special purpose entity (SPE) is formed
and
organized for each Supply Chain that adopts the system 100. Such SPE will:
[a] Purchase Goods and Services from Suppliers pursuant to Purchase Orders
issued by the SPE;
[b] Engage a Buyer to sell such Goods and Services to consumers as agent for
the SPE;
[c] Issue Asset Backed Securities to the Capital Markets to finance the early
payment of Supplier Obligations; or alternatively call on a finance facility
to finance the early payment of Supplier Obligations;
[d] Charge Suppliers a Discount in accordance with the terms of the Purchase
Order in exchange for such early payment; and
[e] Collect the proceeds from the sale of the Goods and Services and repay the
Asset Backed Securities previously issued.
Furthermore, the cost of processing invoices is in today's marketplace no
longer a
requirement in order to establish a liability to a supplier by the purchasing
buyer. The
cost incurred by a buyer to verify the accuracy and validity of a suppliers
invoice is the
range of $10.00 - $20.00 per invoice issued. Similarly, the cost of preparing,
issuing and
delivering an invoice to a buyer by a supplier is estimated to cost $10.00 -
$20.00 per
invoice issued.
Preferably, under the supply chain procurement, settlement and finance system
100:
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CA 02520947 2005-09-23
~ All Goods and Services will be purchased pursuant to a Purchase Order.
~ All liabilities will be determined by reference to quantities of Goods and
Services received and verified, the prices contracted for and the value
added taxes payable by reference to the previously issued Purchase Orders.
The Discount Rate applied to Supplier Obligations will be a Term and
Condition of the Purchase Order.
~ Ideally, invoices will not be processed.
~ The Buyer will avoid the expense of processing Invoices - estimated to be
$10 - $20 per Invoice.
~ The Suppliers to Buy-Sell Co will avoid the cost of preparing, processing
and delivering Invoices - also estimated to be $10 - $20 per Invoice.
THE NON-FINANCING STRUCTURE
Under the Non-Financing Structure, the Buyer enters into a Buy-Sell Agreement:
~ To purchase goods and services using the system 100; and,
~ To pay for such Goods and Services on the Settlement Day.
A separate company ["Buy-Sell Co"] is formed and organized to manage and
administer
each Buy-Sell Agreement with buyers 12. The buyer 12 pays for the goods and
services
in one of two [2] ways:
1 ) The Cash Deal
The buyer pays an amount equal to the Face Value of Supplier Obligations
less a Cash Discount [the "Cash Deal"]. In one embodiment, the Cash
Deal Business Structure assumes that the Buyer will finance its obligation
by issuing Commercial Paper to the Capital Markets. The Cash Discount
deducted from the Face Value of Supplier Obligations is structured to
approximate the buyer's 12 cost of funds incurred from issuing
Commercial Paper to fund the Cash Deal.
2) The Term Deal
The buyer 12 delivers a non-interest 30-Day or 60-Day Promissory Note
(typically guaranteed by a bank 16) equal to the Face Value of Supplier
Obligations. Under the Term Deal, Buy-Sell Co. sells the Promissory
Note at a discount (the "Promissory Note Discount") to a Commercial
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CA 02520947 2005-09-23
Paper Dealer. Buy-Sell Co applies the proceeds from the sale of the
Promissory Note to settle supplier 14 and other obligations.
OUTLINE OF PROCESS STEPS FOR THE NON-FINANCING STRUCTURE
S CASH DEAL:
Figure 4 shows in a process flow diagram an example of a method of a non-
financing cash deal (300), in accordance with an embodiment of the supply
chain
procurement, settlement and finance system 100. The method (300) comprises the
steps
of:
(301) Suppliers 14 delivers Goods & Services based upon Purchase Orders
received from Buy-Sell Co. 18. Purchase Orders are based upon instructions
received from a buyer 12.
(302) The Goods & Services are then sold (and shipped directly) to the buyer
12.
(303) The buyer 12 pays an amount equal to the Face Value of Supplier
Obligations less a Cash Discount (the "Cash Deal").
(304) Buy-Sell Co. 18 pays its suppliers 14 early, at a Discount determined by
reference to terms and conditions contained in the Purchase Orders.
TERM DEAL:
Figure 5 shows in a process flow diagram an example of a method of a non-
financing term deal (310), in accordance with an embodiment of the supply
chain
procurement, settlement and finance system 100. The method (310) comprises the
steps
o~
(301) Suppliers 14 delivers Goods & Services based upon Purchase Orders
received from Buy-Sell Co. 18. Purchase Orders are based upon instructions
received from a buyer 12.
(302) The Goods & Services are then sold (and shipped directly) to the buyer
12.
(313) Buyer 12 delivers a transferable 30 or 60-day Promissory Note.
(314) Buy-Sell Co. 18 sells the Promissory Note at a discount (the "Net
Selling
Price").
(315) Buy-Sell Co. 18 receives the Net Selling Price.
(316) Buy-Sell Co. 18 pays its suppliers 14 early, at a Discount determined by
reference to terms and conditions contained in the Purchase Orders.
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OUTLINE OF PROCESS STEPS FOR THE FINANCING STRUCTURE
In addition to the Non-Financing Structure, the system 100 also includes a
Financing Structure, which entails the issue of ABCP to finance the payment of
supplier
14 and Non-Supplier Obligations. Although somewhat more complex, the financial
and
operating benefits for buyers 12 and suppliers 14 are almost the same as under
the Non-
Financing Structure. However, this Solution does remove operating inventories
from the
books of retailers.
Figure 6 shows in a process flow diagram an example of a method of a financing
deal (320), in accordance with an embodiment of the supply chain procurement,
settlement and finance system 100. The method (320) comprises the steps of:
(301) Suppliers 14 delivers Goods & Services based upon Purchase Orders
received from Buy-Sell Co. 18. Purchase Orders are based upon instructions
received from a buyer 12.
I S (322) Goods delivered by suppliers 14 to Participating buyer 12.
(323) Participating buyer 12 delivers Sales & Unsold Goods and Services
Purchase Commitment to SPE 24.
(324) SPE 24 sells ABCP to Commercial Paper Dealer 20 (or calls and draws on
a commercial finance facility).
(325) SPE 24 receives Net Proceeds from sale of ABCP (or receives proceeds
under a commercial finance facility).
(326) Supplier 14 and other obligations settled.
(327) Inventories sold to consumers 22.
(328) Proceeds from sale of Inventories collected and applied to retire ABCP.
ROLES OF THE PARTICIPANTS
THE BUYER AS AGENT
As agent for Buy-Sell Co. 18, the buyer 12:
~ Maintains all master contract files of suppliers 14, including
banking information and direct deposit information.
~ Prepares and issues Purchase Orders to suppliers 14 for all
purchases made by Buy-Sell Co. 18.
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~ Verifies and confirms that suppliers 14 have fulfilled all or
certain of their obligations.
~ Prepares a Contract Liability Memo (CLM) for each shipment
received pursuant to a Purchase Order, which CLM will detail
the nature of the liability due to a supplier 14, including
relevant references (such as purchase order number, supplier 14
shipping references, date of receipt, buyer 12 receiving
references, etc.).
~ Forward, on a daily basis, all CLMs and a summary by the
supplier 14 of such CLMs (the "CLM Summary") (in total, the
"Settlement Details") to Buy-Sell Co. 18 for processing and
settlement.
THE ROLE OF THE TRUSTEE
Under the Cash Deal, the Trustee will [a] receive the Cash from the buyer 12
as
Settlement of a Trade; and [b] pay supplier 14 and other related Obligations.
Under the Term Deal, the Trustee will [a] take delivery of the Promissory
Notes
issued by the buyer 12 as agent; [b] sell the Promissory Notes to a Commercial
Paper
Dealer 20; and [c] pay supplier 14 and other related Obligations.
THE BUSINESS PROCESS AND COMMUNICATION PLATFORM
Buy-Sell Co. 18 employs a principal web-based platform to communicate all
Settlement and Banking Details to suppliers 14 on each Settlement Day.
THE ROLE FOR COMMERCIAL PAPER DEALERS
Under the Non-Financing Structure, Buy-Sell Co. 18 enters into a Promissory
Note Sales Agreement with Commercial Paper Dealers 20. The Commercial Paper
Dealers 20 purchase the Promissory Notes, at a discount, conditional upon such
Promissory Notes being guaranteed by banks 16. The Net Selling Price of the
Promissory
Notes will be applied to fund the payment of supplier 12 and Non-Supplier
Obligations.
Under the Financing Structure, Buy-Sell Co. 18 enters into an ABCP Agreement
with Commercial Paper Dealers 20 to purchase the ABCP to fund the payment of
supplier
14 and Non-Supplier Obligations.
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SYSTEM lOO COMPONENTS
Figure 7 shows in a block diagram an example of a transaction module 102, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system 100. The transaction module 102 includes one or more of an invoice free
transaction submodule 110 for operating the transaction module 102 when
invoices are
not required to establish the liability due to a supplier 14 that has shipped
goods or
provided services to Buy-Sell Co. 18 pursuant to a Purchase Order, and an
invoice based
financing transaction submodule 112 for operating the transaction module 102
when
invoices are required in order to establish the liability due to a supplier 14
who has
shipped goods or provided services to Buy-Sell Co. 18 pursuant to a Purchase
Order.
Figure 8 shows in a block diagram an example of an invoice free transaction
submodule 110, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system 100. The invoice free financing transaction
submodule
110 includes a memory for storing computer readable code representing invoice
free
transaction methods 118 (or a set of instructions) for electronically
performing the
following tasks:
1. As agent for Buy-Sell Co. 18, buyer 12 prepares and issues Purchase
Orders to suppliers 14 in name of Buy-Sell Co. 18, and buyer 12
maintains all relevant Supplier Master Files. The buyer 12 negotiates,
on behalf of Buy-Sell Co. 18, a Base Discount payable by suppliers 14
for early liquidity. The right to deduct a discount from the amount
otherwise payable under a Purchase Order will be a right included with
the Terms and Conditions in each Purchase Order issued to suppliers
14. The Discount Payable by suppliers 14 is indexed to the movement
of Money-Rates over a Base Floor Rate. Each Purchase Order issued
contains a Base Discount Rate Identifier that is employed to compute
the amount of the discount payable by suppliers 14 in exchange for
early payment of an obligation arising from completion of the Terms
and Conditions contained in a Purchase Order issued by Buy-Sell Co.
18.
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2. Buyer 12 agrees and warrants, under the Buy-Sell Agreement, to
purchase from Buy-Sell Co. 18 the same goods and services as ordered
from suppliers 14.
3. Supplier 14 receives Purchase Orders and ships goods or provides
services. In the case of goods, the suppliers 14 ship directly to buyer's
12 facilities. Shipping and routing instructions are a component part of
the Purchase Order issued by Buy-Sell Co. 18 to suppliers 14.
Supplier 14 provides bar-code information on shipment or other
suitable information (the "Shipping Data"). In addition to product
descriptions, product codes and units shipped, the Shipping Data also
includes relevant references to purchase order number, supplier 14
shipping references, date of shipment, etc.
4. As agent for Buy-Sell Co. I8, buyer 12 records Shipping Data and
relevant receiving documentation (collectively, the "Performance
Data")
5. Buyer 12 prepares a Contract Liability Memo (CLM) for each
receiving transaction by reference to the Performance Data and the
underlying Purchase Order issued to suppliers 14. The CLM contains
a Base Discount Rate Identifier supplied by Buy-Sell Co. and
published in its website for reference by suppliers 14. The Base
Discount Rate Identifier is employed by the Buy-Sell Co. 18 to
calculate the Discount payable by suppliers 14 in exchange for early
payment.
6. Buyer 12 prepares a listing of all CLM processed in the case of an
Invoice Free System or (the "Settlement Details"). The Settlement
Details will include all appropriate folio references, including the Base
Discount Rate Identifier.
7. Buyer 12 electronically signs the Settlement Details and forwards same
to a Custodian.
8. Custodian time and date stamps the Settlement Details, appends a
unique alpha numeric identity, signs the Settlement Details for
identification purposes only and holds in safekeeping the Settlement
Details as a Schedule to the Buy-Sell Agreement.
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9. Custodian forwards a copy of the Schedule to the Trustee and the
buyer 12 and the Program Manager.
The invoice free financing transaction submodule 110 also includes invoice
free financing
architecture components 120 for providing communication between participants
in the
supply chain procurement, settlement and finance system 100. The invoice free
financing
architecture components 120 include an invoice free transaction method invoker
(or
program) for invoking the invoice free transaction methods 118, software
services
including an email service, an electronic signature service and a repository
data import
service, and technology platform including a custodian platform, a buyer 12
platform,
supplier 14 platforms, supply chain finance business process & communication
platform.
Figure 9 shows in a block diagram an example of an invoice based transaction
submodule 112, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system 100. The invoice based financing transaction
submodule
112 includes a memory for storing computer readable code representing invoice
based
transaction methods 122 (or a set of instructions) for electronically
performing the
following tasks:
1. As agent for Buy-Sell Co. 18, buyer 12 prepares and issues Purchase
Orders to suppliers 14 in name of Buy-Sell Co. 18, and buyer 12
maintains all relevant Supplier Master Files. The buyer 12 negotiates,
on behalf of Buy-Sell Co. 18, a Base Discount payable by suppliers 14
for early liquidity. The right to deduct a discount from the amount
otherwise payable under a Purchase Order will be a right included with
the Terms and Conditions in each Purchase Order issued to suppliers
14. The Discount Payable by suppliers 14 is indexed to the movement
of Money-Rates over a Base Floor Rate. Each Purchase Order issued
contains a Base Discount Rate Identifier that is employed to compute
the amount of the discount payable by suppliers 14 in exchange for
early payment of an obligation arising from completion of the Terms
and Conditions contained in a Purchase Order issued by Buy-Sell Co.
18.
2. Buyer 12 agrees and warrants, under the Buy-Sell Agreement, to
purchase from Buy-Sell Co. 18 the same goods and services as ordered
from suppliers 14.
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CA 02520947 2005-09-23
3. Supplier 14 receives Purchase Orders and ships goods or provides
services. In the case of goods, the suppliers 14 ship directly to buyer's
12 facilities. Shipping and routing instructions are a component part of
the Purchase Order issued by Buy-Sell Co. 18 to suppliers 14.
Supplier 14 provides bar-code information on shipment or other
suitable information (the "Shipping Data"). In addition to product
descriptions, product codes and units shipped, the Shipping Data also
includes relevant references to purchase order number, supplier 14
shipping references, date of shipment, etc.
4. As agent for Buy-Sell Co. 18, buyer 12 records Shipping Data and
relevant receiving documentation (collectively, the "Performance
Data").
5. Supplier 14 prepares and delivers an Invoice to buyer 12 as agent for
Buy-Sell Co. 18.
6. Buyer 21 compares details contained in the Invoice received to
receiving documents, to the Purchase Order issued and verifies the
validity of the units billed and the accuracy of the amount included on
the Invoice and the related value added taxes.
7. In the case of an error or incorrect invoice, the buyer 12 returns the
Invoice to the supplier 14 for correction.
8. Buyer 12 prepares a listing of approved Invoices (the "Settlement
Details"). The Settlement Details include all appropriate folio
references, including the Base Discount Rate Identifier.
10. Buyer 12 electronically signs the Settlement Details and forwards same
to a Custodian.
11. Custodian time and date stamps the Settlement Details, appends a
unique alpha numeric identity, signs the Settlement Details for
identification purposes only and holds in safekeeping the Settlement
Details as a Schedule to the Buy-Sell Agreement.
12. Custodian forwards a copy of the Schedule to the Trustee and the
buyer 12 and the Program Manager.
The invoice based financing transaction submodule 110 also includes an invoice
based
financing architecture components 124 for providing communication between
participants
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CA 02520947 2005-09-23
in the supply chain procurement, settlement and finance system 100. The
invoice based
financing architecture components 124 include an invoice based transaction
method
invoker (or program) for invoking the invoice based transaction methods 122,
software
services and technology platforms similar to those of the invoice free
financing
architecture 120.
Figure 10 shows in a block diagram an example of a finance module 104, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system 100. The finance module 104 includes one or more of an asset backed
commercial paper financing submodule 126 for operating the financing structure
of the
finance module 104 for a transaction requiring the issue and sale of ABCP to
Commercial
Paper Dealers 20, an asset backed commercial paper sales and collection
submodule 128
for operating the financing structure of the finance module 104 to collect
goods and
services sold to customers of buyer 12 and to repay the ABCP issued by the
asset backed
commercial paper financing submodule 126, a cash payment submodule 130 for
operating
the Non-Financing Structure of the transaction module 104 when goods and
services are
sold to buyers 12 for Cash, and a promissory note submodule 132 for operating
the Non-
Financing Structure of the transaction module 104 when goods and services are
sold to
buyers 12 in exchange for Promissory Notes.
Figure 11 shows in a block diagram an example of an asset backed commercial
paper financing submodule 126, in accordance with an embodiment of the supply
chain
procurement, settlement and finance system 100. The asset backed commercial
paper
financing submodule 126 includes a memory for storing computer readable code
representing asset backed commercial paper financing methods 134 (or a set of
instructions) for electronically performing the following tasks:
1. The Trustee, by reference to the copy of the Schedule, notifies the
Commercial Paper Dealer 20 on the Trade Day that a Trade has been
concluded and the amount of the ABCP to be issued and settled on the
Settlement Day pursuant to the ABCP Agreement. The means of
notification and communication (whether by email or by facsimile)
used by the Trustee to the Commercial Paper Dealer 20 is determined
by the parties and is an operating rule and procedure under either the
ABCP Agreement or the Promissory Note Sale Agreement.
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CA 02520947 2005-09-23
The asset backed commercial paper financing submodule 126 also includes asset
backed
commercial paper financing architecture components 136 for providing
communication
between participants in the supply chain procurement, settlement and finance
system 100.
The asset backed commercial paper financing architecture components 136
include an
asset backed commercial paper financing method invoker (or program) for
invoking the
asset backed commercial paper financing methods 134, software services
including an
email service with file attachments, an electronic signature service, and a
repository data
import service, and technology platforms including a supply chain finance
business
process & communication platform.
Figure 12 shows in a block diagram an example of an asset backed commercial
paper sales and collection submodule 128, in accordance with an embodiment of
the
supply chain procurement, settlement and finance system 100. The asset backed
commercial paper sales and collection submodule 128 includes a memory for
storing
computer readable code representing asset backed commercial paper sales and
collection
methods 138 (or a set of instructions) for electronically performing the
following tasks:
1. The Trustee sells ABCP to Commercial Paper Dealers 20 to fund the
early payment of Supplier Obligations purchased to be sold to
customers or consumers of buyer 12. On the Trade Day, Trustee
notifies the Commercial Paper Dealer 20 of the Face of the ABCP to
issued and sold pursuant to the ABCP Agreement. On the Settlement
Day, the Commercial Paper Dealer 20 affects a transfer of the proceeds
into the bank account maintained by Trustee on behalf of Buy-Sell Co.
18.
The asset backed commercial paper sales and collection submodule 128 also
includes
asset backed commercial paper sales and collection architecture components 140
for
providing communication between participants in the supply chain procurement,
settlement and finance system 100. The asset backed commercial paper sales and
collection architecture components 140 include an asset backed commercial
paper sales
and collection method invoker (or program) for invoking the asset backed
commercial
paper sales and collection methods 138, software services including an email
service with
file attachments, an electronic signature service, and a repository data
import service, and
technology platforms including a trustee platform, a depository bank platform,
a
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CA 02520947 2005-09-23
commercial paper dealer platform, and a supply chain finance business process
&
communication platform.
Figure 13 shows in a block diagram an example of a cash payment submodule
130, in accordance with an embodiment of the supply chain procurement,
settlement and
finance system 100. The cash payment submodule 130 includes a memory for
storing
computer readable code representing cash payment methods 142 (or a set of
instructions)
for electronically performing the following tasks:
1. The Trustee determines the Money-Rate in Effect on the Settlement
Day, which Money-Rate is referenced in order to determine the Cash
Discount payable when the buyer 12 settles its purchase obligations to
Buy-Sell Co. 18 in Cash. On the Settlement Day, the buyer 12 pays
the Net Cash as consideration for the Face Value of Supplier
Obligations included in the Schedule. The Business Structure assumes
that the buyer 12 issues Commercial Paper to fund the payment of its
obligations under the Cash Deal. The Cash Discount is intended to
represent a re-imbursement of the finance costs and expenses incurred
by the buyer 12.
2. If the Terms of Settlement with the buyer 12 requires payment of Cash
on Closing, the buyer 12 computes the Cash Obligation by deducting
the Cash Discount from the Face Value of Supplier Obligations
contained in the CLMs. The Non-Variable Components of the Cash
Discount are defined in the Buy-Sell Agreement executed by the buyer
12 and Buy-Sell Co. 18. The Variable Component of the Cash
Discount will be the Money-Rate in Effect on the Settlement Day.
The cash payment submodule 130 also includes cash payment architecture
components
140 for providing communication between participants in the supply chain
procurement,
settlement and finance system 100. The cash payment architecture components
144
include a cash payment method invoker (or program) for invoking the cash
payment
methods 142, software services including an email service with file
attachments, an
electronic signature service, and a repository data import service, and
technology
platforms including a supply chain finance business process & communication
platform.
Figure 14 shows in a block diagram an example of a promissory note finance
submodule 132, in accordance with an embodiment of the supply chain
procurement,
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CA 02520947 2005-09-23
settlement and finance system 100. The promissory note finance submodule 132
includes
a memory for storing computer readable code representing promissory note
finance
methods 146 (or a set of instructions) for electronically performing the
following tasks:
1. The Trustee advises the Commercial Paper Dealer 20 on the Trade Day
that a Promissory Note has been received, the Face Value of such
Promissory Note and that the sale of such Promissory Note will be
made on the Settlement Day pursuant to the Promissory Note Sale
Agreement. The means of notification and communication (whether
by email or by facsimile) used by the Trustee to the Commercial Paper
Dealer 20 is determined by the parties and is an operating rule and
procedure under either the ABCP Agreement or the Promissory Note
Sale Agreement.
The promissory note finance submodule 132 also includes promissory note
finance
architecture components 148 for providing communication between participants
in the
supply chain procurement, settlement and finance system 100. The promissory
note
finance architecture components 148 include a promissory note method invoker
(or
program) for invoking the promissory note methods 146, software services
including an
email service, and an electronic signature service, and technology platforms
including a
buyer platform, a depository bank platform, a trustee platform, and a supply
chain finance
business process & communication platform.
Figure 15 shows in a block diagram an example of a settlement module 106, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system 100. The settlement module 106 includes a liability referencing
supplier discount
matrix submodule 150 for determining and computing the Discount payable by
suppliers
12 in exchange for early payment of Supplier Obligations, a direct deposits of
supplier
obligations by depository bank submodule 152 for effecting a direct deposit of
Supplier
Obligations into bank accounts maintained by suppliers 14 at Depositary Bank,
a
communication of liabilities and settlement submodule 154 for communicating
Settlement and Deposit details to suppliers 14, and a non-supplier obligations
submodule
156 for determining and effecting payment of Non-Supplier Obligations.
Figure 16 shows in a block diagram an example of a liability referencing
supplier
discount matrix settlement submodule 150, in accordance with an embodiment of
the
supply chain procurement, settlement and finance system 100. The liability
referencing
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supplier discount matrix settlement submodule 150 includes a memory for
storing
computer readable code representing liability referencing supplier discount
matrix
settlement methods 158 (or a set of instructions) for electronically
performing the
following tasks:
1. Trustee, by reference to the Money-Rate in Effect, the Base Discount
Rate Identifier and the relevant Discount Matrix, computes the
Discount to be deducted from the Supplier Obligation and the Net
Supplier Obligation owing for all suppliers 14 included in the
Schedule. Trustee uses authorized external website for money rates
and Buy-Sell Co.'s Business Process & Communication Platform for
relevant discount matrix. Trustee will use Buy-Sell Co.'s unique
Methods for computing Discounts.
The liability referencing supplier discount matrix settlement submodule 150
also includes
liability referencing supplier discount matrix settlement architecture
components 160 for
providing communication between participants in the supply chain procurement,
settlement and finance system 100. The liability referencing supplier discount
matrix
settlement components 160 include a liability referencing supplier discount
matrix
settlement method invoker (or program) for invoking the liability referencing
supplier
discount matrix settlement methods 158, software services including an email
service,
and an electronic signature service, and technology platforms including a
financial
information reference service platform (i.e., Moneyline/Telerate), a trustee
platform, and
a supply chain finance business process & communication platform.
Figure 17 shows in a block diagram an example of a depositary bank settlement
submodule 152 for direct deposits, in accordance with an embodiment of the
supply chain
procurement, settlement and finance system 100. The direct deposits of
obligations by
the depositary bank settlement submodule 152 includes a memory for storing
computer
readable code representing depositary bank settlement methods 162 (or a set of
instructions) for electronically performing the following tasks:
1. Trustee prepares a data file containing the Net Supplier Obligations
and relevant bank deposit details (the "Direct Deposit File").
Preferably, Trustee uses a database file to create the Direct Deposit
File. The form and layout of this Direct Deposit File is developed in
consultation with the relevant bank.
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CA 02520947 2005-09-23
2. On the Settlement Day, the Trustee receives confirmation that either
the Net Cash under the Cash Deal Structure has been paid by the buyer
12 and has been deposited into the Buy-Sell Co.'s Bank, or that the Net
Proceeds from the sale of the Promissory Note (sold at a Discount
pursuant to the Promissory Note Sale Agreement) has been paid by the
Commercial Paper Dealer 20 and has been deposited into the Buy-Sell
Co.'s Bank account. Preferably, the Commercial Paper Dealer 20 uses
electronic mail through the Internet to communicate the details used to
determine Net Proceeds.
3. Trustee forwards the Direct Deposit File to the Buy-Sell Co.'s Bank
with instructions to immediately transfer the Net Supplier Obligations
from the Buy-Sell Co.'s bank account into the bank account of the
relevant suppliers 14. Depositary Bank affects the transfer of funds
from Buy-Sell Co.'s 18 accounts and deposits the Net Supplier
Obligations into the accounts of the suppliers 14. The Trustee also
forwards a copy of the Direct Deposit File to the Program Manager and
to the buyer 12. Preferably, Trustee forwards the Direct Deposit File
to the Bank over a VPN.
The depositary bank settlement submodule 152 also includes depositary bank
settlement
architecture components 164 for providing communication between participants
in the
supply chain procurement, settlement and finance system 100. The depositary
bank
settlement architecture components 164 include a depositary bank settlement
method
invoker (or program) for invoking the depositary bank settlement methods 162,
software
services including an email service, an electronic signature service, a
module/application
service, and a repository/database service, and technology platforms including
a
depository bank platform, a trustee platform, a commercial paper dealer
platform, and a
supply chain finance business process & communication platform.
Figure 18 shows in a block diagram an example of a communication of
liabilities
and settlement submodule 154, in accordance with an embodiment of the supply
chain
procurement, settlement and finance system 100. The communication of
liabilities and
settlement submodule 154 includes a memory for storing computer readable code
representing communication of liabilities and settlement transaction methods
166 (or a set
of instructions) for electronically performing the following tasks:
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1. Program Manager updates the Business Process & Communication
Platform by reference to the Schedule and the Direct Deposit File on a
Supplier-by-Supplier basis. Preferably, the data contained in the
Schedule and in the Direct Deposit File is imported and housed into the
Business Process & Communication Platform and is available to
suppliers 14 on demand at anytime using a web browser. Preferably,
detailed data has the look and feel of an invoice and summary data has
the look and feel of a remittance form. The Business Process &
Communication Platform permits a viewer to export the data desired
into a downloadable tab delineated text file. The user could import it
into their database, accounting system or spreadsheet.
2. Trustee notifies all relevant suppliers 14 that the Buy-Sell Co. Business
Process & Communication Platform contains relevant data and
information for concerning recently completed Trades. Preferably,
suppliers communicate by electronic mail through the Internet.
3. Using a permission based access system, suppliers 14 access their
portion of the Business Process & Communication Platform and are
able to retrieve relevant Supplier Settlement and Banking Details for
completed Trades processed and settled by Buy-Sell Co. 18. The
suppliers 14 are able to download such Supplier Settlement and
Banking Details for processing into their management information and
accounting systems. Preferably, suppliers 14 access the Business
Process & Communication Platform using a browser through an
Internet service provider.
The communication of liabilities and settlement submodule 154 also includes
communication of liabilities and settlement architecture components 168 for
providing
communication between participants in the supply chain procurement, settlement
and
finance system 100. The communication of liabilities and settlement
architecture
components 168 include a communication of liabilities and settlement method
invoker (or
program) for invoking the communication of liabilities and settlement methods
166,
software services including an email service, an electronic signature service,
a web
server-buyer & supplier web access to buyer repository service, and technology
platforms
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CA 02520947 2005-09-23
including a trustee platform, a supplier platform, and a supply chain finance
business
process & communication platform.
Figure 19 shows in a block diagram an example of a non-supplier obligations
settlement submodule 156, in accordance with an embodiment of the supply chain
procurement, settlement and finance system 100. The non-supplier obligations
settlement
submodule 156 includes a memory for storing computer readable code
representing non-
supplier obligations settlement methods 170 (or a set of instructions) for
electronically
performing the following tasks:
1. Trustee settles Non-Supplier Obligations by making payment either
through a web enabled payment system provided by the bank or by
wire transfer. Preferably, Trustee prepares a bank transfer instruction
in an agreed upon manner with the host bank. Such bank instruction
can be forwarded either by email or by facsimile.
The non-supplier obligations settlement submodule 156 also includes non-
supplier
obligations settlement architecture components 172 for providing communication
between participants in the supply chain procurement, settlement and finance
system 100.
The non-supplier obligations settlement architecture components 172 include a
non
supplier obligations settlement method invoker (or program) for invoking the
non
supplier obligations settlement methods 170, software services including an
email service,
and an electronic signature service, and technology platforms including a
depository bank
platform, a trustee platform, and a supply chain finance business process &
communication platform.
Figure 20 shows in a block diagram an example of a repository module 108, in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system 100. The repository module 108 includes a common administration
repository
174, and one or more buyer repositories 176. Each buyer repository 176
includes a
memory for storing computer readable code representing invoice based
transaction
methods 178 (or a set of instructions) for electronically performing the
following tasks:
1. Program Manager records all transactions represented by the
Schedules, the Sale of a Promissory Note, the Direct Deposit Details
and the payment of Non-Supplier Obligations into the books of Buy
Sell Co. 18. Preferably, Program Manager uses off the-shelf
accounting software to complete the recording process.
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CA 02520947 2005-09-23
The buyer repository 176 also includes buyer repository architecture
components 180 for
providing communication between participants in the supply chain procurement,
settlement and finance system 100. The buyer repository architecture
components 180
include a buyer repository method invoker (or program) for invoking the
promissory note
methods 178, software services including general accounting services and a
repository/database service, and technology platforms including a supply chain
finance
business process & communication platform.
Figure 21 shows in flowchart another example of a method of providing
procurement and settlement logistics for buyers and financing for suppliers
(250), in
accordance with an embodiment of the supply chain procurement, settlement and
finance
system 100. The method (250) comprises the following process steps:
Process Steps on or before the Trade Date -
(251 ) As agent for Buy-Sell Co. 18, buyer 12 prepares and issues
Purchase Orders to suppliers 14 in name of Buy-Sell Co. 18, and buyer 12
maintains all relevant Supplier Master Files. The buyer 12 negotiates, on
behalf of Buy-Sell Co. 18, a Base Discount payable by suppliers 14 for
early liquidity. The right to deduct a discount from the amount otherwise
payable under a Purchase Order will be a right included with the Terms
and Conditions in each Purchase Order issued to suppliers 14. The
Discount Payable by suppliers 14 is indexed to the movement of Money-
Rates over a Base Floor Rate. Each Purchase Order issued contains a Base
Discount Rate Identifier that is employed to compute the amount of the
discount payable by suppliers 14 in exchange for early payment of an
obligation arising from completion of the Terms and Conditions contained
in a Purchase Order issued by Buy-Sell Co. 18. Preferably, buyer 12
employs its existing purchase order process and management system to
complete this process step (251 ).
(252) Buyer 12 agrees and warrants, under the Buy-Sell Agreement, to
purchase from Buy-Sell Co. 18 the same goods and services as ordered
from suppliers 14.
(253) Supplier 14 receives Purchase Orders and ships goods or provides
services. In the case of goods, the suppliers 14 ship directly to buyer's
facilities. Shipping and routing instructions are a component part of the
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Purchase Order issued by Buy-Sell Co. 18 to suppliers 14. Supplier 14
provides bar-code information on shipment or other suitable information
(the "Shipping Data"). In addition to product descriptions, product codes
and units shipped, the Shipping Data also includes relevant references to
purchase order number, Supplier shipping references, date of shipment,
etc. Preferably, suppliers 14 uses their existing fulfillment system to
complete the Purchase orders received.
(254) As agent for Buy-Sell Co. 18, buyer 12 records Shipping Data and
relevant receiving documentation (collectively, the "Performance Data").
Preferably, buyer 12 uses their existing receiving/management system.
(255) In the case of an Invoice Free System, buyer 12 prepares a Contract
Liability Memo ("CLM") for each receiving transaction by reference to the
Performance Data and the underlying Purchase Order issued to suppliers
14. The CLM contains a Base Discount Rate Identifier supplied by Buy-
Sell Co. 18 and published in its website for reference by suppliers 14. The
Base Discount Rate Identifier is employed by the Buy-Sell Co. 18 to
calculate the Discount payable by suppliers 14 in exchange for early
payment.
(256) In the case of an Invoice Based System, supplier 14 prepares and
delivers an Invoice to buyer 12 as agent for Buy-Sell Co. 18.
(257) Buyer 12 compares details contained in the Invoice received to
receiving documents, to the Purchase Order issued and verifis the validity
of the units billed and the accuracy of the amount included on the Invoice
and the related value added taxes.
(258) In the case of an error or incorrect invoice, the buyer 12 returns the
Invoice to the supplier 14 for correction.
(259) (a) Buyer 12 prepares a listing of all CLM processed in the case of
an Invoice Free System or (the "Settlement Details").
(b) Buyer 12 prepares a listing of approved Invoices in the case of
an Invoice Based System (the "Settlement Details").
The Settlement Details include appropriate folio references, including the
Base Discount Rate Identifier. Preferably, buyer 12 uses its accounting
system export function to create two flat files, both database importable,
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CA 02520947 2005-09-23
(summary and detailed data), or uses a recommended Settlement
Appliance/accounts receivable subsystem.
(260) Buyer 12 electronically signs the Settlement Details and forwards
same to the Custodian. Preferably, buyer 12 uses electronic signature
technology that fulfills host country electronic signature laws. The buyer
12 forwards such Settlement Details to the Custodian using electronic mail
through the Internet or the Settlement Appliance.
(261 ) Custodian time and date stamps the Settlement Details, appends a
unique alpha numeric identity, signs the Settlement Details for
identification purposes only, and holds in safekeeping the Settlement
Details as a Schedule to the Buy-Sell Agreement. Preferably, Custodian
uses a database to store such Settlement Details and also uses electronic
signature technology to sign and identify the documents as the original
electronic files.
(262) Custodian forwards a copy of the Schedule to the Trustee and the
buyer 12 and the Program Manager. Preferably, Custodian forwards
copies of Schedules by electronic mail through the Internet.
(263) (a) Under the Financing Structure, the Trustee, by reference to the
copy of the Schedule, notifies the Commercial Paper Dealer 20 on the
Trade Day that a Trade has been concluded and the amount of the ABCP
to be issued and settled on the Settlement Day pursuant to the ABCP
Agreement.
(b) Under the Non-Financing Structure, the Trustee advises the
Commercial Paper Dealer 20 on the Trade Day that a Promissory Note has
been received, the Face Value of such Promissory Note and that the sale of
such Promissory Note will be made on the Settlement Day pursuant to the
Promissory Note Sale Agreement. The means of notification and
communication (whether by email or by facsimile) used by the Trustee to
the Commercial Paper Dealer 20 is determined by the parties and will be
then be an operating rule and procedure under either the ABCP Agreement
or the Promissory Note Sale Agreement.
Process Steps on the Settlement Date -
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CA 02520947 2005-09-23
(264) Under the Non-Financing Structure, the Trustee determines the
Money-Rate in Effect on the Settlement Day, which Money-Rate is
referenced in order to determine the Cash Discount payable when the
buyer 12 settles its purchase obligations to Buy-Sell Co. 18 in Cash. On
the Settlement Day, the buyer 12 pays the Net Cash as consideration for
the Face Value of Supplier Obligations included in the Schedule. In one
embodiment, the Business Structure assumes that the buyer 12 issues
Commercial Paper to fund the payment of its obligations under the Cash
Deal. The Cash Discount is intended to represent a re-imbursement of the
finance costs and expenses incurred by the buyer 12.
(265) If the Terms of Settlement with the buyer 12 requires payment of
Cash on Closing, the buyer 12 computes the Cash Obligation by deducting
the Cash Discount from the Face Value of Supplier Obligations contained
in the CLMs. The Non-Variable Components of the Cash Discount are
defined in the Buy-Sell Agreement executed by the buyer 12 and Buy-Sell
Co. 18. The Variable Component of the Cash Discount is the Money-Rate
in Effect on the Settlement Day.
(266) If the Financing Structure is employed, the Trustee sells ABCP to
Commercial Paper Dealers 20 to fund the early payment of Supplier
Obligations purchased to be sold to customers or consumers of buyer 12.
On the Trade Day, Trustee notifies the Commercial Paper Dealer 20 of the
Face of the ABCP to be issued and sold pursuant to the ABCP Agreement.
On the Settlement Day, the Commercial Paper Dealer 20 affects a transfer
of the proceeds into the bank account maintained by Trustee on behalf of
Buy-Sell Co. 18.
(267) Trustee, by reference to the Money-Rate in Effect, the Base
Discount Rate Identifier and the relevant Discount Matrix, computes the
Discount to be deducted from the Supplier Obligation and the Net Supplier
Obligation owing for suppliers 12 included in the Schedule. Preferably,
Trustee uses authorized external website for money rates and Buy-Sell
Co.'s Business Process & Communication Platform for relevant discount
matrix. Trustee uses Buy-Sell Co.'s unique Methods for computing
Discounts.
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CA 02520947 2005-09-23
(268) Trustee prepares a data file containing the Net Supplier Obligations
and .relevant bank deposit details (the "Direct Deposit File"). Preferably,
Trustee uses a database file to create the Direct Deposit File. The form
and layout of this Direct Deposit File is developed in consultation with the
relevant bank.
(269) On the Settlement Day, the Trustee receives confirmation that
either the Net Cash under the Cash Deal Structure has been paid by the
buyer 12 and has been deposited into the Buy-Sell Co.'s Bank or that the
Net Proceeds from the sale of the Promissory Note (sold at a Discount
pursuant to the Promissory Note Sale Agreement) has been paid by the
Commercial Paper Dealer 20 and has been deposited into the Buy-Sell
Co.'s Bank account. Preferably, the Commercial Paper Dealer 20 uses
electronic mail through the Internet to communicate the details used to
determine Net Proceeds.
(270) Trustee forwards the Direct Deposit File to the Buy-Sell Co.'s
Bank with instructions to immediately transfer the Net Supplier
Obligations from the Buy-Sell Co.'s bank account into the bank account of
the relevant suppliers 14. Depositary Bank affects the transfer of funds
from Buy-Sell Co.'s accounts and deposits the Net Supplier Obligations
into the accounts of the suppliers 14. The Trustee also forwards a copy of
the Direct Deposit File to the Program Manager and to the buyer 12.
Preferably, Trustee forwards the Direct Deposit File to the Bank over a
VPN.
(271 ) Program Manager updates the Business Process & Communication
Platform by reference to the Schedule and the Direct Deposit File on a
Supplier-by-Supplier basis. Preferably, the data contained in the Schedule
and in the Direct Deposit File is imported and housed into the Business
Process & Communication Platform, and is available to suppliers 14 on
demand at anytime using a web browser. Preferably, detailed data have
the look and feel of an invoice, and summary data have the look and feel
of a remittance form. The Business Process & Communication Platform
will permit a viewer to export the data desired into a downloadable tab
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CA 02520947 2005-09-23
delineated text file. The user could import it into their database,
accounting system or spreadsheet.
(272) Trustee notifies all relevant suppliers 14 that the Buy-Sell Co.
Business Process & Communication Platform contains relevant data and
information for concerning recently completed Trades. Preferably,
suppliers 14 communicate by electronic mail through the Internet.
(273) Using permission based access system, suppliers 14 access their
portion of the Business Process & Communication Platform and are able
to retrieve relevant Supplier Settlement and Banking Details for completed
Trades processed and settled by Buy-Sell Co. 18. The suppliers are able to
download such Supplier Settlement and Banking Details for processing
into their management information and accounting systems. Preferably,
suppliers 14 access the Business Process & Communication Platform
using a browser through an Internet service provider.
(274) Trustee settles Non-Supplier Obligations by making payment either
through a web enabled payment system provided by the bank or by wire
transfer. Preferably, Trustee prepares a bank transfer instruction in an
agreed upon manner with the host bank. Such bank instruction is
preferably forwarded either by email or by facsimile.
(275) Program Manager records all transactions represented by the
Schedules, the Sale of a Promissory Note, the Direct Deposit Details and
the payment of Non-Supplier Obligations into the books of Buy-Sell Co.
18. Preferably, Program Manager uses off the-shelf accounting software
to complete the recording process.
Process Steps on Collection and ABCP Repayment Days -
(276) As Goods and Services are sold, the buyer 12 prepares a report (the
"Daily Sales Report"), which identifies the Goods and Services that have
been sold since the Settlement Day. The Sponsor electronically signs and
then forwards the Daily Sales to the Custodian using the VPN. The Daily
Sales Report contains relevant Bank Deposit information. The proceeds
from the sale of Goods and Services are deposited into a Special Trust
Account maintained by the Trustee. This Special Trust Account is used
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CA 02520947 2005-09-23
solely for the redemption of the ABCP previously by the SPE under the
Financing Structure.
(277) On receipt of the Daily Sales Report, the Custodian [a] date stamps
and identifies the file as the "Original Daily Sales Report"; [b] signs the
file electronically for identification purposes only; and [c] places the file
in
safekeeping as an addendum to the Buy-Sell Agreement. Custodian
forwards copies of the Original Daily Sales Report over the VPN to the
buyer 12, the Program Manager and the Trustee.
(278) Program Manager updates the accounting records of the SPE to
reflect the Sale or the collection of Goods and Services and the deposit of
Sale Proceeds into the Special Trust Account.
(279) Program Manager, on a daily basis, provides the buyer 12 and the
Trustee with Financial Statements of the SPE, including details of Assets
and Unsold or Uncollected Goods and Services by Performance Period.
(280) On each Maturity Date, the Trustee retires the ABCP by payment
from the Special Trust Account.
(281 ) Program Manager updates the Accounting Records of the SPE to
reflect the repayment of the ABCP.
Figure 22 shows in a component diagram an example of a network and technology
platform 400, in accordance with an embodiment of the supply chain
procurement,
settlement and finance system 100. The platform 400 comprises a supply chain
finance
system business & communication platform 402, a custodian platform 404, a
trustee
platform 406, a depository bank platform 408, a commercial paper dealer
platform 410, a
financial information reference service (i.e., Moneyline/Telerate) platform
412, and one
or more buyer platforms 414. With the exception of the financial information
reference
service platform 412, the platforms communicate through a VPN through the
Internet
416. As illustrated by Buyers A, B and "?", multiple buyers and their
suppliers may be
connected by secure Virtual Private Networking through the Internet to the
Supply Chain
Finance System Business Process and Communications Platform 400.
Figure 23 shows an example of a business process and communication platform
(BPCP) technology architecture 402, in accordance with an embodiment of the
supply
chain procurement, settlement and finance system 100. The BPCP technology
architecture 402 comprises one or more buyer subsystem modules 424, a common
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CA 02520947 2005-09-23
administration module execution program 426, a module/application server 428,
an
electronic signature server 430, an email server 432, a web server 434, a
repository/database server 436, a general accounting services server 436, a
virtual private
networking module 440, a hardware server operating system 442, a common
administration module repository 174, and a modules repository 444 for
computer
programs that support execution of modules and submodules. The BPCP
architecture
communicates to other platforms through a VPN to the Internet 416.
The business process and communications platform (BPCP) 402 comprises data
processing, storage and networking hardware, operating system software,
software
servers, an Internet connection, and custom coded computer programs formed
into
subsystems that deliver submodule or modularized business functions.
Ultimately, supply
chain financial services are furnished.
In one implementation, the data processing hardware is based on blade
technology
that offers parallel processing and easy expansion when more capacity is
needed. The
supply chain financing system architecture segments software services into
separate but
coordinated servers where practical. The server types include: general
accounting,
repository/database, web, email, electronic signature and module/application.
All of these
servers are housed in one blade device. If the supply chain procurement,
settlement and
finance system 100 is broadly adopted, it is conceivable that thousands of
buyers and
hundreds of thousands of suppliers will use the BPCP. Performance can be
improved by
strategically distributing software servers and or subsystems on separate
blade devices.
This is possible because of the software services segmentation and the use of
servers.
The foundation of the BPCP 402 is defined as the data processing, storage and
networking hardware, the blade operating system, the software servers, and the
VPN/Internet connection. Upon this foundation, a library of generalized supply
chain
procurement, settlement and finance system 100 modules, (Transaction 102,
Financing
104, Settlement 106, Administration) and submodules are installed into the
Modules
Repository 444.
Buyer subsystems 424 may be added, changed or deleted using administration
functions in the Common Administration Module Execution Program 426. Once
transaction and financing structures are chosen, Transaction, Financing,
Settlement and
Repository modules from the Modules Repository 444 are installed into a System
Modules Execution Program that then becomes a buyer subsystem 424. In one
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CA 02520947 2005-09-23
embodiment, the buyer subsystem 424 is a computer program loop that executes
through
Transaction, Financing, and Settlement modules each time an authenticated
Buyer Client
Liability Memo email is received. The module/application server 428 executes
the
modules. Many of the process steps or methods performed by the Custodian,
Trustee and
Depositary Bank are automated. For ongoing buyer 12 and supplier 14 enquiries
and
communications, a web portal interface to the buyer subsystem repository is
provided and
supported by the web server 434.
Figure 24 shows two examples of buyer subsystems 424, in accordance with an
embodiment of the supply chain procurement, settlement and finance system 100.
The
buyer subsystems 424 show examples of the selection of submodules used in two
different uses of the supply chain procurement, settlement and finance system
100. Buyer
A subsystem 424 shows an example of an invoice free, cash payment based use,
while
Buyer B subsystem 424 shows an example of an invoice based, asset backed
commercial
paper financed user.
ADVANTAGES TO THE PARTICIPANTS
Advantageously, the supply chain procurement, settlement and finance system
100 can revolutionize how supply chains are managed and financed.
Advantageously,
buyers can see a significant increase in shareholder values (approximately
equal to 1.5% -
2.0% of the financial volumes facilitated by the system 100 multiplied by the
price
earnings ratio of such buyer). Suppliers will see a significant reduction in
finance,
process, management and administrative costs, along with an increase in
stockholder
values. The goal of the system 100 is to provide continuing liquidity to
suppliers within
1-3 days following completion of a trade (the "Settlement Day").
For Buyers 12
The following is a summary of certain operating benefits of the supply chain
procurement, settlement and finance system 100 for buyers 12:
~ Buyers no longer need to operate or manage an accounts payable
system;
~ Buyers will improve their reporting transparencies by always being in
a position to measure and report on issued and outstanding purchase
commitments;
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CA 02520947 2005-09-23
~ Buyer will improve its ability to forecast and manage its cash flow and
meet future liabilities with much greater certainty;
~ The control exerted over the assets of the Buyer is greatly improved
since the supply chain procurement, settlement and finance system
100 requires that all purchases by made pursuant to Purchase Orders;
and
~ Buyers will greatly improve their working relationships with Suppliers.
The following is a summary of certain of the financial benefits of the supply
chain
procurement, settlement and finance system for buyers 12:
~ Buyers can avoid the cost of processing invoices from Suppliers;
~ Buyers can greatly reduce dispute resolution costs with Suppliers;
~ Buyers can avoid the cost of settling Supplier Obligations;
~ Buyers can reduce management and administrative costs associated
with accounts payable and cash flow management;
~ Buyers can share in the Buy-Sell Profits (see Definitions above); and
~ Buyers can improve shareholder values.
For Suppliers 14
Prior to adoption of the supply chain procurement, settlement and finance
system
100, suppliers 14, by extending credit, were effectively operating as bankers
to buyers 12.
Adoption of the supply chain procurement, settlement and financing system 100
changes
the nature of the relationship between buyers 12 and suppliers 14.
The following is a summary of certain operating benefits of the supply chain
procurement, settlement and finance system 100 for suppliers 14:
~ Suppliers can avoid having to operate or manage an accounts
receivable system;
~ Suppliers can know within 1-3 days the status of a shipment to a
Buyer;
~ Suppliers can improve their ability to forecast and manage their cash
flow and meet future liabilities with much greater certainty; and
~ Suppliers can improve their working relationships with Buyers.
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CA 02520947 2005-09-23
The following is a summary of certain of the financial benefits of the supply
chain
procurement, settlement and finance system 100 for suppliers 14:
~ Suppliers can avoid the cost of processing invoices to Buyers;
~ Suppliers can reduce dispute resolution costs with Buyers;
~ Suppliers can reduce management and administrative costs associated
with accounts receivable and cash flow management;
~ Suppliers can reduce their cost of financing and managing the trading
relationship with Buyers (estimated to range from 20% to 50%
depending upon the capital structure of each Supplier and the
collection term of its receivables);
~ By not requiring financing facilities to support their trading
relationships, Suppliers can improve their ability to secure other
sources of financing and funding;
~ By no longer having to support accounts receivable balances on their
books, Suppliers can effectively be recapitalized as a result of the
system 100 (For example, if a Supplier employed $25 of capital to
support a $100 receivable from a Buyer, the $25 would be released and
be available for the Supplier to use for other business purposes);
~ The system 100 represents either the only source of liquidity or a new
and less expensive source of financing for Suppliers; and
~ Suppliers can prove shareholder values.
For Commercial Paper Dealers
Prior to adoption of the supply chain procurement, settlement and finance
system
100, Commercial Paper facilitated very little B2B financing for suppliers 14.
Under the
system 100, Commercial Paper can be the dominant instrument used to finance
all B2B
relationships. In most cases, such Commercial Paper is purchased by Commercial
Paper
Dealers and resold to the Capital Markets. Commercial Paper Dealers can earn
significant fees from such activities.
For the Capital Markets
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CA 02520947 2005-09-23
The Capital Markets (pension plans, money-market funds, etc.) are able to
purchase high quality Commercial Paper in volumes not previously available.
For B2B Marketplaces
If the system 100 is broadly adopted by Supply Chains within a certain
marketplace, the results for such a marketplace can be profound. By releasing
the capital
previously employed by suppliers 14 to support trading relationships and by
greatly
reducing the cost of process, management and administration, the marketplace
will
become more flexible, dynamic and competitive.
For Customers and Consumers
The efficiencies and reduction in costs for buyers 12 and suppliers 14 under
the
system 100 will eventually result in reduced costs and prices for Customers
and
Consumers of Buyers.
The systems and methods according to the present invention 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 carrier 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.
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