3

Standard Chartered Bank
ACKNOWLEDGEMENT
First and foremost, I would like to express my gratitude to the management of Standard Chartered Bank for giving me the opportunity to do my summer training and to learn so much about this prestigious organization. During the training I had the privilege to work under guidance of Mr. Amit Agarwal (Associate Portfolio Manager) who assigned the project on Cost-Benefit Analysis & Performance management of Supply Chain Finance dept. My sincere thanks go to him for his help and guidance. I would like to thank Mr.Santanu Sham (Head- Transaction Banking) and Mr. T K Sabhapathy (Senior Manager of Transaction banking) for their support and cooperation. I would also like to extend my gratitude to the members of the Supply Chain department who have provided with the relevant material required for the project and assistance during the course of my summer training. Last but not the least I would also like to thank the ICFAI University (IBS Hyderabad and Mumbai) allowing us to do the Project Training in Standard Chartered Bank. and my faculty guide Prof.D P Samantaray for his guidance and support.
Supply Chain Finance
CONTENTS
Topics

Page No.
ABSTRACT.........4 INTRODUCTION...6-9 OVERVIEW OF SUPPLY CHAIN FINANCE...10-20 BACKGROUND....10 VALUE PROPOSITION...11-12 SUPPLIER FINANCE PROGRAMME...13-16 BUYER FINANCE PROGRAMME.....17-21 COST BENEFIT ANALYSIS.....22-36 28 OBSERVATIONS..29-30 TAIL MANAGEMENT.31-44 DIFFERENT HEADS OF COST.....22-
RESEARCH DESIGN.45-52 .................45 OBJECTIVES SURVEY45 OBJECTIVE....45 SAMPLING PLAN....46 DEVELOPING QUESTIONARES.47 THE DEFINING THE PROBLEM AND RESEARCH OF THE INTRODUCTION.............................................................
.47-50
OBSERVATIONS COMPETATIVE PERFORMANCE51 ACTION PLAN......52
CONCLUSION53
APPENDIX54-63 QUESTIONARES FOR ANCHORS.54 QUESTIONARE FOR DEALERS....55 GRAPHS CUSTOMERS RESPONSE..56-61 SUPPLY CHAIN PROCESSES....62-63
GLOSSARY...64 BIBLIOGRAPHY..65 CONTENTS Anchor Selection Criteria Product Description Default Trend Tracker Observation- SCB Process Tail management-Basic Data Ageing Schedule Annual Revenue Customer response-anchors Customer response-dealers Default Trend Tracker Customer Response 3 PAGE NO 17 19 27 29 33 36 39 49 50 28 47 Supply Chain Finance
S.NO TABLE-1 TABLE-2 TABLE-3 TABLE-4 TABLE-5 TABLE-6 TABLE-7 TABLE-8 TABLE-9 GRAPH-1 GRAPH-2
GRAPH-3 GRAPH-4-9 FLOW CHART-1 FLOW CHART-2
Competitive Performance Customer response Supply Chain Processes BCA Preparation
51 56-61 62 63
ABSTRACT
SUPPLY CHAIN FINANCE
Supply chain finance (hereafter referred as SCF) examines the corporate supply chain and provides finance to the key external players therein (suppliers and distributors, collectively referred to as channel partners) for their sales to the corporate and their purchases for the corporate as the case may be. Supply chain finance (SCF) provides integrated commercial and financial solutions to the supply and distribution channels of a given industry. It gives support to the commercial relationship between banks clients and their suppliers and customers. The aim of SCF is to add value to supply and distribution channels by providing unique solutions that meet the customers' demands. Indian economy is growing at a very fast space and thus this fact motivates lot of entrepreneurial skills to be developed in the country it also encourages in manifold increase of trade activities. The major concern in this scenario is the availability of the funds and thus banks will play a key role in further building our economy This project aims to do the cost benefit analysis and performance management for the supply chain unit of standard chartered Bank. For determining the cost of the supply
chain unit, the overall cost has been divided under four major categories. The four major categories for the costing are identified as following 1-Start-up cost 2-Cost of funds 3-Servicing cost 4-Delinquency cost
The start-up cost includes the cost involved in the activity of the initiation of the deal with the prospective client and the materialization of the deal. Cost of funds is the interest cost paid by a financial institution for the use of money. The third head i.e. the servicing cost involves the cost of maintaining a customer that would include the monitoring of the customers account, handling the queries of the customer etc. The delinquency cost handles the losses due to default and the legal cost. To see whether the cost put on various activities are giving the desired results or not, for achieving this tail management is done, In this a ratio is determined which would enable the organization to concentrate on the customers, which provide the greater part of the business to the bank and exit the accounts of the customers which are not up to mark. To undertake these analysis parameters are decided and thus the ratio is determined on its basis. For managing an organization effectively to achieve its objectives requires an ability to assess the performance attained at these costs and adjust approach as necessary thus a survey is conducted to get the customers response relating to the supply chain performance and to benchmark its performance with the existing players in the supply chain finance , the survey is conducted with the objective to get a insight what are the customers expectation and satisfaction level and determine the banks competitive position verses major market participants. The recommendation and the suggestions are based on observation and the overall findings of the project. 5 Supply Chain Finance
INTRODUCTION
Supply chain management
Supply chain financing which is relatively a new concept in Indian market place, examines the corporate supply chain and provides finance to the key external players therein (suppliers and distributors, collectively referred to as channel partners) for their sales to the corporate and their purchases for the corporate as the case may be. Supply chain management offers a reduction in costs across functions, better planning for purchase and production, superior distribution efficiencies and much more efficient use of capital. The underlying presumption is the recognitions that distinct function like purchases inventory management, production planning and distribution work best when integrated. Companies traditionally have lacked this integrated view of the supply chain as they looked at these activities as a series of disparate functions. Companies have now begun to tackle all the four key elements of supply chain management materials, time, money, and information to squeeze the maximum possible benefits in terms of costs and efficiencies. The customer benefits in more ways than one 1- Reduction of finance costs in the supply chain 2- Increasing supply chain loyalty 3- Better term of trade 4- Balance sheet management
This business has tremendous opportunity for bank. The banks strive to exploit its strong corporate client base and demonstrate significant benefits in the form of strengthening existing corporate relationships.
Supply chain was introduced in India by Citibank in 1998. Standard chartered bank started the supply chain finance unit in 2001. The other major players in this field are ICICI, HDFC, HSBC, ABN AMRO AND UTI BANK. With such big players and more upcoming competition managing an organization effectively to achieve its objectives requires an ability to monitor costs, assess the performance attained at these costs and adjust budget and technical approach as necessary. Thus this project aims to do a cost benefit analysis and performance management by developing a strategic vision, with aims such as increasing efficiency, improving customer service, or reducing costs. The main objectives of the study are 1. 2. 3. 4. Assessing current business processes (As-Is analysis) To find the break even point of acquiring and maintaining a customer Tail management Conducting a survey with the following objective1-Conducting Competitors Survey as a benchmarking exercise for SCF, SCB. 2-To get customers feedback regarding the services and products offered by SCF, SCB. 5. Designing new business process on the basis of the findings of the study (To-Be design)
To achieve the above stated objective the methodology adopted involved- working with different section of supply chain unit of Standard Chartered Bank to understand their working and sales procedure, thus identifying the various cost heads and determining the cost under it, a survey will be conducted to get competitive position versus major market participants and also to get the customers feedback.
Cost Benefit Analysis is an economic tool to aid social decision-making, and is typically used by governments to evaluate the desirability of a given intervention in markets. The aim is to gauge the efficiency of the intervention relative to the status quo. The costs and benefits of the impacts of an intervention are evaluated in terms of the public's willingness to pay for them (benefits) or willingness to pay to avoid them (costs). Inputs are typically measured in terms of opportunity costs - the value in their best alternative use. The guiding principle is to list all of the parties affected by an intervention, and place a monetary value of the effect it has on their welfare as it would be valued by them. The process involves monetary value of initial and ongoing expenses vs. expected return. Constructing plausible measures of the costs and benefits of specific actions is often very difficult. In practice, analysts try to estimate costs and benefits either by using survey methods or by drawing inferences from market behaviour. For example, a product manager may compare manufacturing and marketing expenses to projected sales for a proposed product, and only decide to produce it if he expects the revenues to eventually recoup the costs. Cost-benefit analysis attempts to put all relevant costs and benefits on a common temporal footing. Most commonly, the discount rate used for present-value calculations is an interest rate taken from financial markets (R.H. Frank 2000). This can be very controversial - for example, a high discount rate implies a very low value on the welfare of future generations, which may have a huge impact on the desirability of interventions to 8 Supply Chain Finance
help the environment, and so on. Empirical studies have suggested that in reality, peoples' discount rates do decline over time. Because CBA aims to measure the public's true willingness to pay, this feature is typically built into studies. During cost-benefit analysis, monetary values may also be assigned to less tangible effects such as the various risks which could contribute to partial or total project failure; loss of reputation, market penetration, long-term enterprise strategy alignments, etc. This is especially true when governments use the technique, for instance to decide whether to introduce business regulation, build a new road or offer a new drug on the state healthcare.
The cost-benefit principle says, for example, that we should install a guardrail on a dangerous stretch of mountain road if the dollar cost of doing so is less than the implicit dollar value of the injuries, deaths, and property damage thus prevented (R.H. Frank 2000). Cost-benefit calculations typically involve using time value of money formula. This is usually done by converting the future expected streams of costs and benefits to a present value amount. Cost-benefit analysis is mainly, but not exclusively, used to assess the value for money of very large private and public sector projects. This is because such projects tend to include costs and benefits that are less amenable to being expressed in financial or monetary terms (e.g. environmental damage), as well as those that can be expressed in monetary terms. Private sector organisations tend to make much more use of other project appraisal techniques, such as rate of return, where feasible. The practice of cost-benefit analysis differs between countries and between sectors (e.g. transport, health) within countries. Some of the main differences include the types of impacts that are included as costs and benefits within appraisals, the extent to which impacts are expressed in monetary terms and differences in discount rate between countries.
A lot have been published on cost-benefit analysis (CBA) by accredited scholars and researchers. There is no dearth of the research conducted and thesis provided on this topic but as this project is trying to CBA of the supply chain finance department that have different functions under one department and thus a systematic and uniform approach cannot be applied in it. The literature on CBA analysis for service industry is not very rich and the researches provided does not address some of the important aspects like the dynamisms of individuals capacity, which is the backbone bone of any service industry.
OVERVIEW OF THE INDIA - SUPPLY CHAIN FINANCE BUSINESS

BACKGROUND
The India Supply Chain story began in the middle of Y2000 - a modest beginning with only one customer. In Y2001, Supply Chain Finance became a major Corporate & Institutional Banking initiative.
Address the changing needs of channel partners
SUPPLIERS
Channel Partner Channel Partner
BUYER / DISTRIBUTOR CHAIN

MNC/ LLC
CONSUMER
Channel Partner Channel Partner Flow of Goods Flow of Payments
Supplier and Buyer Chains are characterised by their different financing risk dyanmics . Hence a focused Buyer Product program will more distinctly address unique risk characateristics and needs of the Supply Chain Finance 10 Buyers/Distributors within the Supply Chain
The main objective under this initiative was to exploit the strong corporate relationship base of the bank in India, to gain an entry into an attractive market segment comprising of smaller entities that are linked to banks corporate clients by means of a supply chain. This would be the testing ground for an entry into the standalone mid market.
VALUE PROPOSITION:
The Supplier and Buyer finance programmes offer a set of eligible anchor customers a chance to arrange alternate financing options for their "Business Partners. The value provided to the parties involved in this product is as follows:
FOR ANCHOR
The programme allows companies to play a large part in the arrangement of cheaper finance for the business partner, enabling the companies to use the programme as a marketing tool to develop stronger relationships and promote loyalty amongst its business partners It allows re-negotiation of contract terms with business partners based on the "cheaper" funding arrangement made for them. There is an instant conversion of receivables to cash resulting in a positive impact on balance sheet Enables increase in sales by making available competitive financing to augment its business partners resources. Uses the programme to compete more effectively by running a well managed supply chain Potential to ascertain greater efficiencies in cash management and receivables management process. 11 Supply Chain Finance
Ability to introduce payment discipline within their business partners
FOR BUSINESS PARTNERS

An opportunity to develop a stronger business partnership with their anchor customer A cost effective financing option for purchase/sale of goods, i.e. prospect of benefiting from incentive schemes, thus favoring sales & profitability Flexibility in programme allowing extension of repayment period, alleviating cash flow burden
OPPORTUNITIES TO SCB
Entry into a new customer segment base, connected to existing/target quality customer base selection (first filter by anchor who have had first hand experience trading with their Buyers). Strategy for protecting / growing market shares, and sustains competitive advantage through strategic relationship building with the anchor. Entry strategy into C&I target companies who require product solutions specifically for their business partners Deepen customer segment penetration Earn higher margins (compared to that earned from direct lending to anchor). Bundling of Cash Management products and services
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SUPPLIER FINANCE PROGRAMME

1 PRODUCT DESCRIPTION
The Supplier Finance Programme (SFP) is a bilateral supply chain-financing programme under which SCB offers packaged pre and post-shipment finance facilities to the suppliers of bank existing/target C&IB clients (anchors). This finance is provided for those parts of the suppliers transactions, which have a direct linkage to the anchor, and is based in large part on the strength of the underlying buyer-supplier relationship.
Supplier
Anchor
Goods + Invoice
1 2
Funds Transaction Documents / Drawdown Repayment SCB
By packaging these facilities under SFP, the underlying risks of this pre and post-shipment finance are lower that that offered on a standalone basis, as: 13 Supply Chain Finance
It is strictly supply chain financing, whereby facilities are made available to the supplier only for those specific sales to the recognized anchor, and the corresponding payment is made directly by that anchor to SCB. The main risk, therefore, that bank take on the supplier is performance and not financial, which itself is mitigated by the fact that only established suppliers with a good performance record are permitted.
SFP is highly transactional in nature. By receiving purchase order/ invoice information from the anchor, SCB is able to advance funds to the supplier and track repayments against individual purchase orders/ invoices. Therefore, should a repayment against an individual purchase order /invoice be overdue, SCB can prevent any further drawdown from taking place until the overdue outstanding has been regularized, and appropriate credit approvals are received.
The facilities under SFP are well structured, ensuring that both the pre-shipment and post-shipment parts of the trade transaction are captured. Furthermore, the proceeds of the sale being made payable to SCB and not the supplier ensure that the loan is selfliquidating and cannot be diverted for use elsewhere.
The following products are offered to the suppliers under this programme
Product
Sales Bill Discounting
Brief Description
Sales bill discounting facility to the supplier Only used to discount bills raised on the anchor Bill of exchange pre-accepted by the anchor Supported by an invoice and evidence of transport Payment on due date from the anchor 100% of invoice value can be discounted Sales invoice financing facility to the suppliers Only used to finance invoices raised on the anchor No Bill of exchange, one time DPN taken from the borrower Supported by an invoice and evidence of transport Payment on due date from the anchor
Invoice Financing
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100% of invoice value can be discounted if invoice is accepted by the anchor; and 90% of the invoice value will be discounted if the invoice is not yet accepted by the anchor. Short term Loan Short term working capital loan facility to the suppliers to finance their receivables from the anchor Proceeds of the draw down will be to the credit of the partners account only after anchors acknowledgement of receipt of goods No Bill, Invoice or third party evidence of transport Summary of invoices /invoice extract from anchors ERP giving details of purchases systems will be acceptable. Payment on the due date from the anchor 90% of invoice value can be financed Pre-shipment loan Pre-shipment finance facility to the partner against firm purchase orders placed on him by the anchor Can be disbursed as a trade transaction on IMEX or as a lending transaction on Hogan (as a restricted overdraft). Will be liquidated by converting into post-shipment after delivery, in cases where the loan is booked as a trade transaction. The post shipment leg could be in the form of a bill, invoice, or a short term loan 70% of purchase order value can be financed
Purchase bill-discounting Purchase bill-discounting facility to the suppliers to discount bills drawn on them by their vendors. Facility granted on the back of a purchase order Will be restricted to those purchases of the supplier, which form a direct input into the end product supplied to the anchor. The amount of the facility will be set up in such a manner that it is commiserate with the suppliers purchases that go into his supplies to the anchor. Tenor will be calculated based on the actual working capital cycle of the supplier. Letter of Credit Import and Domestic letter of credit facility to the suppliers against firm purchase orders placed on him by the anchor. The import finance leg will be liquidated through a bill discounting / invoice discounting when the supplier dispatches the goods to the anchor. Payment from the anchor will be routed through SCB to liquidate the outstanding post shipment finance. 15 Supply Chain Finance
70% of the purchase order value can be granted as the LC facility. The specific items for which LCs can be issued will be mentioned in the BCA and loaded on the system as terms of approval.
CUSTOMER BASE
The customer base for this programme is the set of suppliers to our existing C&IB clients, requiring pre and post shipment facilities. The customer base may also include financing suppliers on a stand-alone basis, where C&I will finance working capital/LCs, Guarantees /term finance facilities to the supplier and the Supply Chain unit will finance pre and post shipment requirements. Suppliers for the purpose of this programme will include suppliers who fall into each of the following categories: 1. Manufactured component suppliers: These are the suppliers who manufacture components that form inputs into the anchors manufacturing process. These suppliers would be procuring raw material and converting them into the component. They would also typically have some amount of plant and machinery. For e.g. a supplier of piston heads to an auto manufacturer. 2. Raw material suppliers : These are suppliers who supply raw material, which forms an input into the anchors manufacturing process. These could be either primary producers who produce the raw material, processors who buy the raw material from the primary producers and process them before supplying to the anchor or traders (or sourcing agents) who buy the raw material from the primary producers/ processors and supply them to the anchor. If the supplier is a sourcing agent, we will only provide post-shipment financing. 3. Assembly suppliers: These are suppliers who in addition to manufacturing components also procure other manufactured components and assemble them into a bigger component which is supplied to the anchor. For e.g. a supplier of brake assemblies to an auto manufacturer. They would typically have a higher degree of technological sophistication as compared to a manufactured component supplier and broader range of procurement needs.
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4. Outsourced manufacturers: These are suppliers who carry out the entire manufacturing process and supply the finished good to the anchor. There is no further processing done at the anchors end. These suppliers would procure all the raw material required to manufacture the end product. For e.g. suppliers of ice cream to HLL. 5. Converters: These are entities who take their input from the anchor, convert it into finished goods and supply it back to the anchor. They get paid for the cost of manufacture only. They will typically not have any significant raw material or component procurement needs. For e.g. a supplier who gets fabric from Raymonds, converts it into ready made garments and supplies it back to Raymonds. This category of suppliers will be given post shipment facilities only. 6. Service Providers : Entities such as transporters, couriers, advertisers etc. who provide a service to the anchor can also be considers as eligible suppliers. By their very nature, these suppliers will be eligible for post-shipment finance only.
SELECTION CRITERIA
Anchor Selection Criteria Table-1 Parameter Criteria Anchor Credit Grade Industry Position Relationship with SCB CG 6 or better. Exceptions upto CG 8 can be approved by the SCO. The anchor should be among the top 5 players in the industry by market share. Minimum of 2 years. Target customers are acceptable provided they are investment grade.
BUYER FINANCE PROGRAMME 1 PRODUCT DESCRIPTION The Buyer Finance Programme (BFP) proposes to offer alternate financing solutions to provide steady and assured funds at attractive rates to the distribution business (Buyer) of established corporates, generally existing, strong relationships of the Bank, with a variety of underlying risk instruments and repayment options. Fundamentally, facilities offered under BFP are based on existing Trade & Cash products, processes and expertise. A typical transaction under the BFP would always 17 Supply Chain Finance
follow the invoicing of goods from the anchor to the Buyer (i.e. transaction based) and the financing would be made available to the Buyer only to the extent of purchases the Buyer makes from the anchor. Acceptable repayment options available to the Buyer are Post Dated Cheques Transactions can be initiated either by the Buyer or the anchor as shown in Activity (PDCs) or current accounts opened by the Buyer with SCB. (2) is transaction document.
The end use of funds is always monitored, as they are credited/paid only to the
Anchor
Goods + Invoice
Buyer
1
Transaction Documents Funds Transaction Documents
2
SCB
2
Repayment
4
Seller.
The steps followed briefly are as follows: 1. The BDM takes a name clearance for a program (Anchor) to be covered
under the BFP from Credit. The BDM then provides an offer letter to the Anchor detailing the specifications of the program. The master BCA for the Anchor is put up by the BDM to SCB Credit as a first Level of assessment and
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involves the assessment of the Anchor as a customer under this programme. The Master BCA highlights the key risks and mitigants for the program. 2. Post approvals from Credit, the Anchor recommends a list of Buyers based on their past track record, length of relationship with the Anchor, Dependence in terms of sales derived from the Anchor, profitability. The Anchor agrees to stop supplying to the buyer in the event of a default. 3. The buyers are visited by Bank empanelled CAs which collect the loan documents (flexi loan document for buyer financing including Demand Promissory Note, Letter of Continuity, Inchoate Cheques, Personal Guarantees for Pvt Ltd, Power of Attorney etc), financials and other KYC related documents of the buyers.
4. 5. 6. 7.
Credit Assessment is done on each individual buyer vides a Buyer BCA Limits are set up for individual buyers on Hogan/ IMEX based on the Based on the nature of the facility, the transactions are processed post limit The transactions are processed as per the DOI for BFP with the Trade and
and limits are approved by Credit. whether the facility is a Flexi loan Facility or Invoice/Bill Discounting facility. set up on the Transaction Processing systems. Payments team.
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Finance to Buyers will be made available through any of the following products: Table-2 Product Bill Discounting Description The anchor draws a Bill of Exchange (BoE) on the Buyer who accepts the same and returns it to the bank for discounting along with invoices, evidence of transportation. Repayment can be made by sending a PDC along with the BoE or by funding a current account opened with SCB. Essentially same product as above but without the BoE. NI act protection is retained by taking a one time DPN from the borrower. A paperless product where, either the Buyer or the anchor can draw down on a "loan" facility sanctioned to the Buyer, to the extent of his purchases made from the anchor. Repayment can be made with either a PDC or by funding a current account opened with the bank. An overdraft conceptually is a revolving borrowing facility repayable on demand, and made available to the Borrower in connection with a current account specially opened for this purpose. In the Flexi Loan product, propose to offer such a facility, not in its conventional form, but as a "loan" facility with flexibility of multiple repayments. Thus, while the Buyer enjoys the option of making part payments at his convenience, we propose to set up notional due dates which will be internally monitored (by a fully automated system) and beyond 20 Supply Chain Finance
Invoice Discounting
Working Capital Demand Loan (WCDL) Flexi Loan
Portfolio purchase of receivables
which such Buyers will be intimated for immediate payment. A product where we will purchase the anchor's sales receivables with full recourse to the anchor. Since full recourse is available, we will not carry out a detailed due diligence on the individual buyers or exchange any facility documentation with them. The product requirement is usually on a one off basis, usually at quarter ends or financial year-ends and not as a continuous facility. Buyers will be selected based on mutually accepted criteria between SCB and the anchor
CUSTOMER BASE Definition - Buyers under this programme are defined as distributors, stockists, dealers,
wholesalers, direct customers, sole selling agents, consignment agents, C&F agents and any other entity who is a part of the distribution process of the anchor. The success of the programme is largely dependant on SCBs ability to select quality candidates (anchor) and their recommended portfolio of Buyers (recommended Buyer names by anchor) does not constitute automatic eligibility of Buyers into the programme. The final selection is by SCB.
Anchor Criteria
Buyer Criteria-Existing customer with CG 8 or better Length of relationship : Minimum 2 year relationship with anchor Target/New customer anchor to be a leading brand in the targeted segment /product. Dependency : Minimum 40% of total sales turnover of the buyer should be from anchors products Dependency criteria are guided by specific industry requirements / market practices. In the event that the Buyer deals in multiple products, then above criteria may be reduced to 20% waived subject to buyers dependence on anchor be a minimum of 40% for that product category. To illustrate if a tubes dealer of a steel tube manufacturing anchor also stocks and
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sells other products like PVC tubes, hardware items etc, then criteria would read as 20% of the dealers total turnover and 40% of the steel tubes turnover should come from the anchor. Incase the product purchased is a raw material for the Buyer, then 40% (earlier 50%) of total procurement of that item should be from the anchor. Payment performance : No payment overdue to anchor > 90 days Accepted legal entity status :Partnership / Proprietorship firm/ Private Limited or Limited Company
Cost-Benefit AnalysisThis project aims to find the break even point of acquiring and maintaining a customer, it will provide greater cost control as organization can exercise control over cost only when it will have an effective cost accounting system to provide necessary cost information. It will enable the management to ascertain the variances between the actual and predetermined cost On the basis of the reported variances, the management could take corrective actions. This will involve identifying the causes of variances and taking suitable corrective action, these actions will ensure to eliminate uneconomic and unnecessary activities. This will further help the management to do proper planning and the targets would be set after taking into consideration all the relevant factors Cost - benefit analysis of the above nature is classified under Cost Accounting. Cost accounting deals primarily with cost data while management accounting involves the consideration of both cost and revenue it also takes into consideration that how cost can be controlled how the process can be made more efficient thus this project will undertake both the cost accounting as well as management accounting. 22 Supply Chain Finance
The cost are classified under four major heads 1-Start-up cost 2-Cost of funds 3-Service cost 4-Delinquency cost The sales process is mainly divided into three heads the origination, conversion and utilization. These processes will be discussed at length under their respective cost heads.
1- Start-up cost
The first head of the cost i.e. the start-up cost comprises the cost involved in the process of the origination and the conversion process, it will include the cost of all the activities involved in these processes for example the fee given to CA, the cost incurred due to outsourcing of work like SCORECARD preparation, MIS preparation etc. The origination process will involve the following stepsORIGINATION Initial contact with client Name clearance In principle offer Finalize deal details and obtain all info Obtain master BCA approval Send Firm offer 23 Supply Chain Finance
Receives the Recommendation List and passes it on to the Conversion Team
The second step comprises of the conversion process, the steps in the conversion process are as follows CONVERSION Assign CPAs for due diligence and obtain spoke financials Obtains the Facility Documents , FAR and financials from the CPA and passes them to the CRC / PM respectively Obtain dealer BCA approval & send facility docs Rectifies the Document Deficiency Requests CRC to set up client Ids and load limits.
2- COST OF FUNDS
Cost of funds is the interest cost paid by a financial institution for the use of money. A bank generates a profit from the differential between what level of interest it pays for deposits and other sources of funds, and what level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Cost of fund in this project is calculated by multiplying the monthly utilization of each dealer for last two years with the corresponding FTP rates for the given month. Earnings of the bank can be derived by multiplying the utilization with the difference of the FTP rates and the interest rates charged by the bank.
3- SERVICING COST
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The third head of the cost i.e the servicing cost. The servicing cost comprises of the utilization part of the sales process. The third step i.e the utilization comprises of the following steps Utilization Intimate Corporate of dealers operational. Monitor limit utilization on a daily/ weekly basis Follow up directly with suppliers and large dealers to maintain utilizations Regular Liaoning with the Portfolio Team for management of spokes for excesses and over-due monitoring To calculate the servicing cost there is a cost code maintained by the bank in which all the cost are listed in consolidated form thus the cost have to be segregated under different heads to derive the cost for the servicing of the supply chain finance.
4-DELINQUENCY COST As the loans are given on unsecured basis thus there can be chances of default from the customers thus there a default management team set up.
Default Management
To ensure that default management procedures prescribed in the PPG is adhered to in order to restrict provisions on SCF customers. Obtain approvals for write-back of recoveries made from provisioned accounts and Instruct credit operations to pass the necessary entries. Ensure correctness of data on SCI, SCFS, downgrades / upgrades, interest suspense, specific provision, GSAM reporting etc. related to the adverse accounts. The default management process takes preventive steps as the customer account goes into overdues following action are taken in case of overdues 25 Supply Chain Finance
Overdues > 15 days: Account placed on Early Alert. Account downgraded to CG 12 Overdues > 45 days : Legal Action initiated Overdues > 60 days : Anchor instructed to Stop Supply Overdues > 90 days: Account downgraded to CG 14 & transferred to GSAM.
The data for last two years is taken to understand if a pattern exists in the provisions created, following are the observation of the analyses
OBSERVATIONS Portfolio peak at quarter ends, especially Q1 (Sales push due to financial year ending) Q4 (festive season in India). Portfolio dips in Q2 (correction of year end sales push) Overdues normally trend with outstanding Overdues peak in April, July & Oct (average maturity of the portfolio is around 45 days)
REASONS Limit approval is given on average yearly sales basis, whereas every product has its lifecycle, which should be taken into consideration. Lack of co-ordination between SCB and anchor Dumping done by anchors. 26 Supply Chain Finance
Follow-up is not properRecords are not being updated on time.
RECOMMENDATIONS A team could be constituted to be in continuous touch with dealers and anchors. Enhancement in the selection criteria. Provisions for monitoring changes in the sectors. Measures to keep check on dumping should be provided.
TABLE 3 -for Default Trend Tracker

Graph Limits INR MIO O/s INR MIO Overdues 26.08.0 4 10.09.0 4 28.10.0 4 02.12.0 4 03.01.0 5 28.02.0 5 31.03.0 5 29.04.0 5 26.05.0 9,749 10,041 10,976 11,014 11,376 12,138 13,524 13,271 13,770 5,750 6,142 6,579 6,999 6,908 7,703 9,363 8,871 8,364 182 183 195 218 298 228 295 433 414 27 Net Prov. For the Net Prov. Year Historical 11.4 11.5 11.4 16.0 0.0 6.9 7.3 15.4 14.6 Supply Chain Finance 43 43 43 47 52 61 62 69 69
5 30.06.0 5 30.07.0 5 31.08.0 5 30.09.0 5 20.10.0 5 19.11.0 5 31.12.0 5 19.01.0 6 28.02.0 6 31.03.0 6 29.04.0 6 31.05.0 6 30.06.0 6 31.07.0 6 31.08.0 6 30.09.0 6 26.10.0 6 20.11.0 6 30.12.0 6 31.01.0 7 10.02.0 7
14,474 14,688 15,092 15,408 15,438 17,086 18,360 17,739 19,550 20,602 21,005 22,199 22,070 22,827 22921 24503 25418 24461 25247 25532 25744
8,834 8,865 9,605 10,350 10,015 10,281 11,736 11,175 12,754 13,280 12,932 13,480 14,296 14,951 14,306 16,314 15,573 16,836 17,498 20,189 17,101
497 394 471 374 435 343 445 492 354 419 483 439 607 357 645 459 455 455 568 732 513
14.3 15.4 21.5 19.1 17.9 17.9 42.2 -9.9 -12.6 -14.5 -9 -9 -12 -9 -1 -3 6 -15 0 9 9
68 69 73 72 74 78 96 86.0 73.4 58.9 86.5 86.5 95.9 95.9 95.8 94.0 102.5 95.9 97 88 88
28
Graph-1
29
Mio 0 10,00 0 15,00 0 20,00 0 25,00 0 30,00 0 5,000
Table-4
M o n th
Observation table
D e fa u lt T re n d T ra c k e r
30
0 100 200 300 -100 N et P rov. F or the Y ear
26 10.08 28.09 .04 02.10.04 03.12 .0 4 28.01 .0 4 31.02.05 29.03 .05 26.04 .0 5 30.05 .0 5 30.06 .0 5 31.07 .0 5 30.08 .05 20.09 .0 5 19.10 .0 5 31.11.05 19.12.05 28.01 .0 5 31.02 .0 6 29.03.06 31.04 .0 6 30.05 .0 6 31.06 .0 6 31.07.06 30.08 .0 6 26.09 .0 6 20.10 .0 6 30.11 .0 6 31.12.06 10.01 .06 .02 .0 7 .0 7
400 Mio O verdues O /s IN R M IO Lim its IN R M IO
500
600
700
800
SNo. 1
Observation Dealer appraisal Dealer appraisal involves BCA preparation and scrutiny of financial statements. Presently, the payment history of the dealer (vide bank statements) is not reviewed Record Maintenance Credit Operations, which does the document checking and maintains a list of the discrepancies. These cases are then allocated to outsourced staff, personnel from the staff picks the related documents and after solving the discrepancies return back the documents. Default Management Automation of reports Portfolio review reports and EAR reports are prepared on a weekly and monthly basis respectively. While the Portfolio review report includes details of grade, number of partners, limits, outstanding, portfolio triggers and ageing at an anchor level, the EAR report includes details such as limits, outstanding, overdue amount, credit grade, location, problem/concern, action/strategy and likely outcome for the early alert dealer cases. Monitoring of default trigger is in SCMS system, which is accessed daily. Servicing levels While for dealer conversion, the Start-up tracks the critical dates to identify servicing levels, at the Anchor level, there is no
Impact Scrutiny of bank statements could provide significant information on the payment track record of the dealer There is lot of manual work involved thus lot of time and effort is wasted. There is risk that the documents get lost during the transaction.
Recommendation Recent bank statements (3 to 6 months) can be collected from dealers for review
Discrepancy particulars to be maintained in the system so the time involved in the manual transfer of the documents can be saved.
These reports, prepared on excel, involve a lot of time and effort and are also subject to manual errors.
Most of the data in these reports are also contained in SCMS. With a few improvisations, these reports can be generated from the software.
The SCMSThe system can be monitoring of default more efficient in terms trigger involve a lot of speed and user of time and effort. friendliness. Servicing levels at Adequate provisions to Anchor level is not be made in the wherein tracked RMs can enter the critical dates such as 31 Supply Chain Finance
SNo.
Observation Impact tracking mechanism / MIS for the time taken for deal conversion. Turnaround time reports The SCF department also has a service level agreement (SLA) with Credit Operations which gives the time limits within which the latter needs to complete document verification and discrepancy reporting. However, compliance with SLA is not verified by the department
Recommendation initial contact, initial offer, Master BCA approval, offer acceptance, etc. The Credit Operations department maintains turnaround time (TAT) information for assessing its performance in document checking. This information can be regularly reviewed by SCF
Performance of the Credit Operations department is not being reviewed
Supplier vs. Dealer discounting process There is a lack of The entire operation for In the case of supplier bill uniformity in the dealer and supplier discounting, the entire set of process document checking can documents is scanned and sent be handled by the to the back office at Chennai Chennai back office. while in the case of dealer Critical checks like financing, the document limit availability, PDC checking is done here and only checks could be done a filled up checklist is scanned here before sending the and sent to Chennai documents Integrated software sytem The Company uses different softwares for its front end operations SCMS: the reporting software, BCA Engine: Excel based BCA maker and Start-Up Engine: Access based database for startup operations Maintaining different systems has resulted in duplication of entries and absence of an integrated view of the process flows. Also, as business grows, the scalability of such a model is doubtful Going forward, an integrated software needs to be adopted for all the front end operations
TAIL MANAGEMENT32 Supply Chain Finance
To see whether the cost put on various activities are giving the desired results or not, for achieving this tail management is done. For managing an organization effectively to achieve its objectives requires an ability to assess the performance attained at these costs and adjust approach as necessary thus a survey was conducted to get the customers response relating to the supply chain performance and to benchmark its performance with the existing players in the supply chain finance Tail management is done to look whether your efforts are giving the desired results or not, in the given scenario tail management is done to see which of the customers are being profitable to the organization and which are acting as liabilities. This will help to locate opportunities and risk areas for the bank. Thus the bank will decide on the strategy accordingly for example if the 20% of the customers are bringing 80% of the than bank should concentrate more on these customer. For doing this analysis some parameters are identified are BASIC DATA PROGRAMME SIZE CREDIT GRADING UTILIZATION
ANNUAL REVENUE AGEING SCHEDULE PROVISIONED AMOUNT
33
Ageing schedule- If the bulk of the overdue amount in receivables is attributable to one customer, then steps can be taken to see that this customers account is collected promptly. Overdue amounts attributable to a number of customers may signal that your business needs to tighten its general credit policy towards new and existing customers. The ageing schedule also identifies any recent changes in the accounts making up your total accounts receivable balance. If the makeup of accounts receivable changes, when compared to the previous month, it helps to spot the change rapidly. Is the change the result of a change in sales, or is it caused by a other problem? What effect wills this change in accounts receivable have on next months cash inflows? The accounts receivable ageing schedule can sound an early warning and help you protect your business. For the parameters identified for the tail management the data was collected and analyzed.
Table-5
Basic data 34 Supply Chain Finance
COMPANY COMPANY 1 COMPANY 2 COMPANY 3 COMPANY 4 COMPANY 5 COMPANY 6 COMPANY 7 COMPANY 8 COMPANY 9 COMPANY 10 COMPANY 11 COMPANY 12 COMPANY 13 COMPANY 14 COMPANY 15 COMPANY 16 COMPANY 17 COMPANY 18 COMPANY 19
No. of BP s 30 24 14 93 2 17 29 2 5 1 10 132 46 84 11 166 18 59 27
Progra m Size 150,000 150,000 45,000 200,000
Sanctione d limits 35,399 102,984 17,712 167,936 44,696
Progra m O/s 11,451 74,256 18,056 114,500 45,088 30,457 154,842 259,172 8,038 140 60,078 51,554 77,481 62,331 61,219 274,098 77,351 277,841 19,368
SL / PS 23.60% 68.70% 39.40% 84.00%
Ave Tick % Size Utilization 381.7 3,094.00 1,289.71 1,231.18 22,544.00 32.35% 72.10% 101.94% 68.18% 100.88% 62.32% 79.82% 43.20% 40.19% 11.67% 85.97% 18.82% 69.24% 28.63% 60.91% 90.95% 85.58% 59.56% 73.74%
100,000 220,000 600,000 100,000
48,872 194,000 600,000 20,000 1,200
48.90% 88.20% 100.00 % 20.00%
1,791.59 5,339.38 129,586.0 0 1,607.60 140
170,000 80,000 150,000 135,000 200,000 600,000 300,000 700,000 135,000
69,884 273,891 111,896 217,691 100,500 301,366 90,381 466,501 26,264
41.10% 342.40 % 74.60% 161.30 % 50.30% 50.20% 30.10% 66.60% 19.50%
6,007.80 390.56 1,684.37 742.04 5,565.36 1,651.19 4,297.28 4,709.17 717.33
35
No. of Program COMPANY BPs Size COMPANY 21 11 100,000 COMPANY 22 19 90,000 COMPANY 23 12 50,000 COMPANY 25 92 600,000 COMPANY 26 15 250,000 COMPANY 27 48 300,000 COMPANY 28 8 40,000 COMPANY 29 5 100,000 COMPANY 30 6 100,000 COMPANY 31 102 255,000 COMPANY 32 139 920,000 COMPANY 33 45 COMPANY 34 11 100,000 COMPANY 35 62 320,000 COMPANY 36 14 500,000 COMPANY 37 16 COMPANY 38 29 500,000 COMPANY 39 51 500,000 COMPANY 40 54 200,000 COMPANY 41 8 50,000 COMPANY 42 84 500,000
Sanctioned limits 95,500 52,400 19,787 540,914 237,884 155,860 30,000 29,322 103,000 292,066 7,450 56,929 14,910 66,278 338,189 40,750 334,576 353,600 98,727 30,437 499,494 36
Program O/s 72,598 36,353 3,858 362,929 223,616 104,266 17,317 23,966 95,428 226,716 7,341 11,789 16,787 53,249 302,158 3,288 274,527 149,879 99,990 21,942 295,361
SL / PS 95.50% 58.20% 39.60% 90.20% 95.20% 52.00% 75.00% 29.30% 103.00 % 114.50 % 0.80%
Ave Tick % Size Utilization 6,599.82 1,913.32 321.5 3,944.88 14,907.73 2,172.21 2,164.63 4,793.20 15,904.67 2,222.71 52.81 261.98 76.02% 69.38% 19.50% 67.10% 94.00% 66.90% 57.72% 81.73% 92.65% 77.62% 98.54% 20.71% 112.59% 80.34% 89.35% 8.07% 82.05% 42.39% 101.28% 72.09% 59.13%
14.90% 20.70% 67.60%
1,526.09 858.85 21,582.71 205.5
66.90% 70.70% 49.40% 60.90% 99.90%
9,466.45 2,938.80 1,851.67 2,742.75 3,516.20
COMPAN Y COMPAN Y 46 COMPAN Y 47 COMPAN Y 48 COMPAN Y 49 COMPAN Y 50 COMPAN Y 51 COMPAN Y 52 COMPAN Y 53 COMPAN Y 54 COMPAN Y 55 COMPAN Y 56 COMPAN Y 57
No. of Program BPs Size 17 3 25 63 82 2 205 59 100 5 41 64 2,456 5,000,00 0 1,500,00 0 1,000,00 0 80,000 1,000,00 0 500,000 21,160,0 00 135,000 100,000 50,000 750,000 360,000
Sanction ed limits 79,846 27,500 90,471 517,919 262,001 0 2,950,117 1,237,905 1,204,048 49,000 414,460 132,195 14,257,83 9
Program O/s 65,117 21,472 78,790 451,257 242,603 9,441 2,295,53 9 990,641 1,044,69 2 47,341 350,431 107,082 10,472,1 05
SL PS
Ave / Tick Size
% Utilizatio n
59.10% 3,830.41 81.55% 27.50% 7,157.33 78.08% 180.90 % 3,151.60 87.09% 69.10% 7,162.81 87.13% 72.80% 2,958.57 92.60% 4,720.50 11,197.7 59.00% 5 77.81% 16,790.5 82.50% 3 80.03% 120.40 10,446.9 % 2 86.76% 61.30% 9,468.20 96.61% 41.40% 8,547.10 84.55% 26.40% 1,673.16 81.00% 401,994 39
TABLE-6 AGEING SCHEDULE

37 Supply Chain Finance
%age of Overdues %age of %age of O/S No.of Provisions COMPANY COMPANY 1 BPs O/due 36.7% 8.3% COMPANY 2 COMPANY 3 COMPANY 4 COMPANY 5 COMPANY 6 COMPANY 7 COMPANY 8 35.7% 8.6% 50.0% 11.8% 13.8% 0.0% 3.9% 1.6% 0.0% 17.9% 0.0% 0.0% 2.6% 2.4% 0.0% 0.0% 7.0% 1.3% 4.3% 1.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.4% 0.6% 55 2 10 4 25 0 11 0 4,88 9 6 1 7 40 9 85 0 2 1,67 7 22.9% 3.1% 0.0% 1.0% 5 8 1 2 4 2,97 6 1,38 7 24,69 6 18 2 2,07 6 8 O/D O/s 28.4% 1.0% BPs Provided O/D 0.0% 0.0% 11 2
Age
Report
excl
Mandato 61ry Upto 7 8-30 31-60 90 Spread 1,78 2,01 1,60 1,1 8 5 9 85 350 53 317 64 186 55 6 1,01 7 52 7 73 1,7 300 250 1,00 450 231 91 1 250 100 300 250 175 769 1,70 7 12,33 0 913 10,65 107 5 14 400 3,23 250 350 200 7 1 140 300 300 300 200
40.0% COMPANY 9 COMPANY 10 0.0% COMPANY 11 0.0% COMPANY 12 0.8%
15.2% COMPANY 13 COMPANY 14 0.0% COMPANY 15 0.0% 33.1% COMPANY 16 COMPANY 17 11.1% COMPANY 18 COMPANY 19 16.9% 14.8%
38
COMPANY COMPANY 21 COMPANY 22 COMPANY 23 COMPANY 24 COMPANY 25 COMPANY 26 COMPANY 27 COMPANY 28 COMPANY 29 COMPANY 30 COMPANY 31 COMPANY 32 COMPANY 33 COMPANY 34 COMPANY 35 COMPANY 36 COMPANY 37 COMPANY 38 COMPANY 39 COMPANY 40 COMPANY 41
BPs O/due 36.40% 10.50% 0.00% 0.00% 12.00% 0.00% 22.90% 0.00% 20.00% 0.00% 22.50% 25.90% 31.10% 36.40% 6.50% 0.00% 0.00% 44.80% 7.80% 27.80% 12.50%
O/D O/s 5.90% 2.90% 0.00% 0.00% 2.40% 0.00% 6.50% 0.00% 7.70% 0.00% 8.60% 10.50 % 9.10% 14.40 % 5.80% 8.10% 0.00% 13.10 % 4.80% 8.00% 3.90%
Provided 0.00% 0.00% 0.00% 0.00% 1.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2.80% 3.70% 11.40% 14.10% 4.10% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
BPs O/D 4 2
Upto 7 397 910
30Aug 3,701 326
3160
6190
Mandatory Spread 250 250 250 150
11
403
4,892
1,72 7
928
225 250
11
1,392
3,787
770
200 250
2,017
200 300
23 36 14 4 4
7,599 1,206 63 1,846 1,596 20,216
3,589 35,244 2,022
5,57 7 7,92 4 14
3,61 0 465
275 450/450/250 200 350
1,208 2,692
695
375 150 300
13 4 15 1
1,030 4,295 412 969
28,256 2,732 6,133
27 222 23 1,05 9
125 200 200 300
39
%age of BPs O/due 0.00% 20.00 % 15.50 % 11.80 % 0.00% 44.00 % 14.30 % 13.40 % 0.00% 8.80% 11.90 % 16.00 % 0.00% 14.60 % 12.50 %
%age of O/D O/s 0.00% 4.60% 2.90% 2.40% 0.00% 14.60 % 1.10% 5.00% 0.00% 2.10% 1.30% 2.20% 0.00% 6.10% 4.00%
%age of O/S No.of BPs Provided O/D 0.00% 0.00% 0.00% 5.80% 0.00% 0.00% 0.40% 0.00% 100.00% 0.00% 0.00% 1.20% 0.00% 1.00% 1.40% 6 8 18 7 16 11 9 11 7 16 2
Overdues Provisions
Age
Report
excl
COMPANY COMPANY 43 COMPANY 44 COMPANY 45 COMPANY 46 COMPANY 47 COMPANY 48 COMPANY 49 COMPANY 50 COMPANY 51 COMPANY 52 COMPANY 53 COMPANY 54 COMPANY 55 COMPANY 56 COMPANY 57
Upto 7
30Aug
31-60
61-90
Mandatory Spread 250
1,808 3,259 1,562
5,334 4,755
13 659
104 345
250 225 250 250
758 3,346 2,112
11,722 1,737 9,254 3,193
300 250 300
30,606 11,249 5,760
16,674 36 2,207
5,270 2,104 4,955 11 412
250 250 250/165 150
740 1,820
10,437 8,180
9,477 800
165/250 250
40
TABLE-7
ANNUAL REVENUE PROVISIONING Net of provision Total Amount Number Revenue Revenue Prov Prov '000 3226 0 1 NA 129 na NA 431 822 78 583 3164 1330 616 6469 2772 863 NA NA NA 1462 1120 NA 26 2283 3195 6565 -21 2244 4699 4276 46 0 na 745 2256 1852 2223 112 727 2563 na 1888 1456 2574 3217 2786 2443 1629 274 2044 1119 2874 1841 9155 2156 1489 1780 1228 1528 1507 779 14640 3040 6099 1408 1759 10455 2772 6852 9014 10841 51 0 2054 5905 6359 8807 8060 26693 8366 11780 0 0 0 0 0 28 0 0 329 0 947 3 3 1 0 0 1,255 0 35 1 2 1,408 1,759 9,200 2,772 6,817 9,014 10,841 51 0 2,054 5,905 6,331 8,807 8,060 26,364 8,366 10,833 3,226
COMPANY 2003 COMPANY 1 40.68 COMPANY 2 COMPANY 3 COMPANY 4 COMPANY 5 COMPANY 6 COMPANY 7 COMPANY 8 COMPANY 9 COMPANY 10 COMPANY 11 COMPANY 12 COMPANY 13 COMPANY 14 COMPANY 15 COMPANY 16 COMPANY 17 COMPANY 18
2004 343
2005 1322
2006 1520
41
COMPANY COMPANY 19 COMPANY 20 COMPANY 21 COMPANY 22 COMPANY 23 COMPANY 24 COMPANY 25 COMPANY 26 COMPANY 27 COMPANY 28 COMPANY 29 COMPANY 30 COMPANY 31 COMPANY 32 COMPANY 33 COMPANY 34 COMPANY 35 COMPANY 36 COMPANY 37
2003 NA 5759 1563 NA NA
2004 9 3870 2005 NA NA
2005 460 2718 835 NA 5
2006 1185 1392 469 976 618 0
Net of provision Total Amount Number Revenue Revenue Prov Prov '000 1654 13739 4872 976 623 0 40807 5565 8555 2417 2720 19404 7651 43463 1459 1025 17142 13398 0 115 0 0 0 0 0 3,404 0 0 0 0 0 6,662 15,725 2,641 1,810 2,469 0 0 2 12 4 1 10 5 1 1,539 13,739 4,872 976 623 0 37,403 5,565 8,555 2,417 2,720 19,404 989 27,738 -1,182 -785 14,673 13,398 0
7402 NA NA 657 0 5759 NA
11679 NA 982 640 464 3870 NA
11408 995 3170 640 1170 2718 1139 23339
10318 4570 4403 480 1086 7057 6512 20,124 1459
NA 1746 NA
NA 3984 NA
160 6367 3672
865 5045 9726 0
42
COMPANY COMPANY 38 COMPANY 39 COMPANY 40 COMPANY 41 COMPANY 42 COMPANY 43 COMPANY 44 COMPANY 45 COMPANY 46 COMPANY 47 COMPANY 48 COMPANY 49 COMPANY 50 COMPANY 51 COMPANY 52 COMPANY 53 COMPANY 54 COMPANY 55 COMPANY 56 COMPANY 57
2003 NA 1686 NA 112 NA 3173 NA 252 NA NA
2004 NA 3040 233 1087 1663 1784 NA 1183 NA NA
2005 NA 5704 1987 1168 7188 3931 706 8085 1588 NA
2006 3417 6905 7141 668 7558 6394 4285 10036 2698 411 2243
Total Amount Number Net of Revenue Prov Prov provision 3417 17335 9361 3035 16409 15282 4991 19556 4286 411 2243 36973 10577 0 163185 91479 10660 3804 10660 28515 0 0 0 0 7,150 58 0 29 3,855 0 0 1,827 0 9,445 0 59 7,370 0 3,517 3,741 2 1 1 3 2 2 1 2 2 1 3,417 17,335 9,361 3,035 9,259 15,224 4,991 19,527 431 411 2,243 35,146 10,577 -9,445 163,185 91,420 3,290 3,804 7,143 24,774
NA NA
3385 NA
14091 1054
19497 9523 0
1635 13736 NA 2248 NA 5161
19235 28389 NA 403 NA 5958
43418 23315 2704 689 2704 9233
98897 26039 7956 464 7956 8163
43
TABLE-4
COMPANY CG COMPANY 8 1 COMPANY 2 COMPANY 3 COMPANY 4 COMPANY 5 COMPANY 6 COMPANY 7 COMPANY 8 COMPANY 9 COMPANY 10 COMPANY 11 COMPANY 12 COMPANY 13 COMPANY 15 COMPANY 16 COMPANY 17 COMPANY 18 COMPANY 19 COMPANY 20 COMPANY 21 5 5 7 8B 7 7 4 2 7B 9 8 8 8 7 7 4 3 5 (s) 6 (s) AcctStrgy No of BPs HOLD GROW HOLD GROW GROW HOLD GROW GROW HOLD GROW GROW GROW GROW GROW GROW GROW GROW HOLD GROW HOLD 30 24 14 93 2 17 29 2 5 1 10 132 46 11 166 18 59 27 7 11 TotalLimi t 50,645 107,163 13,603 167,686 45,000 48,942 253,157 600,000 27,500 1,200 79,963 275,091 115,853 120,500 342,866 92,611 437,533 27,320 37,000 75,500 30,897 201,864 422,404 9,362 238 62,280 44,973 76,721 48,460 294,033 69,751 251,697 19,771 28,110 69,179 20,455 91 3 10,900 263 5,000 4,098 1,178 1,863 O/s 23,253 88,832 17,686 125,337 O/dues 6,597 926 4,057 3,873 24,696 1,190 3,218 0 1,677
44
COMPANY CG
Strgy
BPs
Limits
O/s
O/dues (Excl prov)
45
COMPANY 23 COMPANY 24 COMPANY 25 COMPANY 26 COMPANY 27 COMPANY 28 COMPANY 29 COMPANY 30 COMPANY 31 COMPANY 32 COMPANY 33 COMPANY 34 COMPANY 35 COMPANY 36 COMPANY 37 COMPANY 38 COMPANY 39 COMPANY 40 COMPANY 41 COMPANY 42
6 7B 2 (s) 7 8 8 7 5 6(S) 8 7 4 7 (s) 8 8B 6 (S) 4 7A(S) 5(s) 4 (s)
GROW GROW GROW GROW GROW GROW HOLD GROW GROW GROW GROW EXIT
12 8 92 15 48 8 5 6 102 139 45 11
25,300 88,000 550,734 272,500 134,879 30,000 26,800 103,000 328,090 511,048 69,500 12,248 58,174 320,499 51,750 300,003 340,967 97,898 36,296 495,288
3,304 51,036 324,549 237,544 92,060 15,048 26,070 68,982 236,444 426,294 23,190 12,814 60,585 284,114 17,559 223,571 152,375 94,841 24,645 315,224 29,313 7,249 7,627 969 12,716 20,375 44,839 2,099 1,846 3,508 22,908 2,017 5,949 7,950
GROW 62 GROW GROW GROW GROW GROW GROW GROW 14 16 29 51 54 8 84
COMPANY 43 4 (s)
GROW 36 46
272,465
210,376 Supply Chain Finance
COMPANY 44 COMPANY 45 COMPANY 46 COMPANY 47
9 3 (s) 5 (s) 8
GROW 35 GROW 103 GROW 17 GROW 3
252,804 455,006 86,417 27,500
157,780 315,314 66,254 23,989
7,259 9,018 1,562
Survey
Introduction
Sales, forms an integral part of commercial activity. It is the cornerstone of business as it is the meeting of buyers and sellers and all other areas of business has the goal of making that meeting successful. it as a systematic process of repetitive and measurable milestones, by which a salesperson relates his offering enabling the buyer to visualize how to achieve his goal in an economic way. Sales is the heart of any business and fluctuations in the same can be an important source of concern. These fluctuations might be caused by varying growth, changing buyer patterns or increasing competition. Technological innovation, corporate culture, customer service levels and competition are the key factors determining customer churn for any organization. Today, it is not enough to focus only on increasing sales by new customer acquisition but also to retain the existing customers by building strong relationships. Nothing can replace customers telling you how they like to be treated, what you are doing right, and what could be done better. It is a wonderful way to constantly improve your service Organizations must realize the need to take feedback from the customers and measure their level of satisfaction in terms of the products and services offered by the organization as compared to competitors. Timely and regular feedback acts as a vital ingredient for the Bank to enhance its service levels and not only meet but exceed the dynamic and ever changing customer expectations. Moreover corporate sales are much more relationship based owing to the lack of emotional attachment to the products in question thus taking feedback from corporate clients is crucial. This project signifies a small yet significant step in this direction..
Objectives of the survey48 Supply Chain Finance
Conducting Competitors Survey as a benchmarking exercise for SCF, SCB. To get customers feedback regarding the services and products offered by SCF, SCB.
Defining the problem.
Defining the problem required a thorough understanding of the functioning of SCF department. This involved: Study and analysis of PPG Discussions and feedback from the SCF team
Sampling Plan Judgmental sampling plan was used to select the sample. The sample size taken was 35. The nature of desired data is expected to reflect the customers level of satisfaction with the bank. The sample is selected that respondent represents different industry types. The dealers are selected such that they are dealers with different anchors so that the results of the data provide a generic view. This data can be used for improving existing processes and increasing the Bank's customer retention capabilities. A careful development, testing and debugging of the questions was done before they were administered. Open-ended questions formed a part of the questionnaire as the respondents were allowed to provide more information and reveal more about how they perceived the bank. Emphasis was laid on collecting feedback relating to SCFs product features, document collection process, MIS and service delivery vis--vis the other banks the Anchors deal with.
49
Developing the questionnaires for different level of customers.
In order to collect the data, questionnaire was used as the research instrument. Asking the right question is at the heart of effective communications and information exchange. By using the right questions in a particular situation, you can improve a whole range of communications skills: for example, you can gather better information and learn more. Open-ended questions were adopted to capture diverse, revealing and customized responses in the dealers questionnaire and in the anchors questionnaire there was amalgam of both the close ended questions as well as the open ended questions. Both the open ended and the close ended questions have their own advantages Open questions are good for: Developing an open conversation Finding out more detail Finding out the other persons opinion or issues Closed questions are good for: Testing your understanding, or the other persons Concluding a discussion or making a decision Frame setting: Are you happy with the service from your bank?
GRAPH-2 RESPONSE OF CUSTOMERS(values in %)

MIS ease of understanding MIS Accuracy
84 76 88 100 68 88 88
MIS frequency Management of cash cycle Lead Time For Approval CA help
cc
Doc Interpretation
PLEASURE GROUND PRODUCT DESIGN DOCUMENT INTERPRETATION HELP FROM CA MIS & UTILIZATION REPORTS
TROUBLE GROUND INTERACTION WITH CUSTOMERS INTEREST RATES LIMIT ENHANCE MENT AUTOMATION OF PROCESSES
. TABLE-8 51 Supply Chain Finance
PROCESSES
Recommendations
MIS inefficienc y
Statements are sent manually, there are no auto-emails.
Auto emails to be generated and sent periodically. Autoemail regarding the limit enhancement should be sent. Enhancement in discrepancy report to enable the anchors to view the dealers list based on the status. Customers should be communicated about the facilities provided to them. A toll free number should be provided for handling customers queries..
Service
Customer service desk handles queries of the customer, customers are unaware of this facility provided to them.
General
Greater time enhancement limits
for of
Improvement in functioning of credit operations and service delivery.
Time taken for crediting the a/c is more than required
Customer response -dealers 52 Supply Chain Finance
Features Product Features
Document Collection
Requiremen ts Lower interest rates Increase in sanctioned limits More than one product should be offered efficient Process
Current level Interest rates are greater than the competitors Limits are decided by the anchor
Desired Level
Interest rate should be at par with the competitors pricing. Based on utilization reports, dealers limit should be enhanced. One dealer enjoy one Interested dealers should be product only looked for OD facility/ direct loans The CA should be instructed for educating the dealers. .
Document Approval
CA sent for the document collection does not educate the dealer regarding the products. He is only a document collection person. Lead time There is no online status should be of documents in the minimized approval process provided.
MIS frequency
Providing an online status of documents in the approval process can reduce the communication gap. This would inform the dealers about their status and they can send the pending documents Lack of There is a delay in The monthly reports should frequency receiving the monthly be made fortnightly. statements on time. There is no reporting by Daily reports regarding the bank on daily basis. information on accounts should be sent via email. No reminders on due date Reminders should be sent on are sent. regular basis. No single point of contact provided Customer service desk A toll-free number can be handles queries of the provided to them. customer; customers are unaware of this facility provided to them. Dealers have to make STD calls, which are expensive.
Service
53
Competitive Performance Market driven information regarding SCB's relative performance as compared to ICICI and HDFC was collected from primary and secondary data sources. The data covers the product and service related parameters like MIS, product design and pricing. Once the data was collected, analysis was done by calculating the average weightage given to each bank by the respondents. The weights are assigned on a scale of 1 to 5
GRAPH-3
Services provided Accuracy of MIS Lead Time Pricing of Products Sanctioned Limits Range Of Products
4 4 4 4 4 4 4 4 4 5 5 5 5 HDFC ICICI SCB
3 3 3
54
Action Plan
The action plan in order of the criticality of the events is as mentioned below.
Error: Reference source not found Increasing interactions with customer-constituting a team which will be in contact with the customers. Pricing to be matched with competitors. Limit enhancement process to be made more transparent-customers should be informed about the status of their request for limit enhancement and the reason for its rejection in case. Large number of manual process in place involves lot of time and effort. Automation save the time and it is important as the competitors already have themreport/utilization reports some dealers do not receive these reports at all, MIS . the number of such dealers are very less less but it should be ensured that every Performance appraisal of CA sent for document collection based on the discrepancy dealer receive these reports.
Satisfactory product design and terms of approval. Satisfactory documentation process.
CONCLUSION
. SUPPLY CHAIN FINANCE provides the financial solution to the key externals players of corporate supply chain, after understanding the functionality of the department and 55 Supply Chain Finance
thoroughly understanding the processes and analysing the cost involved the recommendations are provided some of the key observation of the project is that the department lacks in having a integrated approach this may be attributed to the fact that there is software system which provides common interface to the anchors, dealers and the supply chain officials. There is communication gap between the client and the bank, the clients are unaware of the facilities provided to them for example-there is customer service number to handle the queries of the clients, but most of the clients are unaware of the system provided to them. As with the growth in the economy the supply chain unit have become a very lucrative field thus many other banks are entering in this field and grabbing the market share of the standard chartered bank thus a competition analysis was also conducted, with the objective to get customer feedback and as a benchmarking exercise for the bank, the survey revealed many facts relating to different products features and the type of services provided by the STANDARD CHARTERED BANK as compared to others banks. These facts were analysed and accordingly pleasure zone and trouble zone was identified. After identifying the critical issues an action plan was designed. Standard chartered bank is the market leader in the supply chain finance but due to the emerging competition there is threat to its current position by keeping its customers needs in mind, having updated technological edge and handling the critical issues identified in this project it will definitely maintain its position
Appendix
Questionnaire design for the survey SCF Department, SCB 56 Supply Chain Finance
This questionnaire aims at collecting data from the customers (anchors) regarding their level of satisfaction with the bank as compared to the other banks. 1. How many suppliers and dealers are there in your channel finance network? 2. What benefits are you looking forward to while opting for the channel finance? Sales Increase Receivables Reduction Increase in Market Share Loyalty of the dealer Release manpower/ resources Reduction of default risk by the dealers 3. What is the percentage of your dealers with the following banks? SCB CITI ABN ICICI HDFC Any other bank? 4. How do you rate SCB as compared to other banks in terms of following aspects of channel finance?(rate on the scale of 1 to 5 1-best 5-worst) Variety of the products offered Sanctioned Limits Pricing of the products Time Taken for turning around a proposal Accuracy of MIS Services provided by the bank. 5. Has SCBs channel finance helped in achieving these benefits, and if yes, to what extent? 6. How much time is required for crediting the account once the transaction is initiated?
7. Which ERP system does the company use? 8. Is the documents collection flexible?
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9. Suggest three areas of improvement in SCBs channel financing programme. This questionnaire aims at collecting data from the customers (dealers) regarding their level of satisfaction with the bank.
Start-up
1. Are the documents easy to interpret / help is required? 2. Do you get the necessary help from the CA for filling up the forms/ documents? Services - Delivery channels, MIS, feedback Documents collection 3. Have you ever faced any problem in document submission? 4. Is the lead-time for approval of the documents convenient? MIS 5. Are you happy about the MIS and the utilization reports provided to you? Are they easy to understand Feedback 6. What do you like or dislike about the SCB offerings? 7. What are the additional facilities you expect from SCB? 8. Do you enjoy similar facilities with any other bank? If yes, please specify the name of the bank /banks. 9. What do you like in the other banks product? 10. Highlight two constraints that you feel to be look by SCB?
11. Should there be a feedback process by the bank regarding the services offered? Which mode would you prefer? - Telephonic - Email Internet ( Online chat service ) 58 Supply Chain Finance
12. Do you prefer personal service rather than automation (modes -email, internet)? Graphs Graph-4 Ca Help Frequenc y Valid MISSIN G YES NO Total 4 18 3 25
CA HELP NO Response CUSTOMER RESPONSE 12
Percent 16.0 72.0 12.0 100.0
Valid Percent 16.0 72.0 12.0 100.0
Cumulative Percent 16.0 88.0 100.0
NO
16
YES 0 10 20 30 40 50 PERCENTAGE 60 70
72 80
GRAPH-5
Documents Lead Time For Approval Frequenc y Valid YES 17 NO 8 Total 25 Percent 68.0 32.0 100.0 Valid Percent 68.0 32.0 100.0 Cumulative Percent 68.0 100.0
Customer response
La T e o Apoa ed i F r p r vl m
N O Rs os epne N O
3 2
YS E 0 2 0 4 0 Pr e t g ec n e a 6 0
6 8 8 0
60
GRAPH-6
Management of Cash Cycle Frequenc y 25 Valid Cumulative Percent Percent 100.0 100.0
Valid YES
Customer Response
Percent 100.0
Mn g mn O C s C ce aae et f ah yl
N O Rs o s epne N O
YS E 0 5 0 Pr e t g e c na e
10 0 10 0 10 5
GRAPH-7 MIS Frequency

Frequenc y Percent 61 Valid Percent Cumulative Percent Supply Chain Finance
yes no Total
Customer Response
22 3 25
88.0 12.0 100.0
88.0 12.0 100.0
88.0 100.0
M Fe u n y I rqec S
N O Rs o s epne N O
1 2
YS E 0 2 0 4 0 Pr e t g e c na e 6 0 8 0
8 8 10 0
GRAPH-8 MIS Accuracy
62
Frequenc y Valid YES 19 NO 6 Total 25

Customer Response
Percent 76.0 24.0 100.0
Valid Cumulative Percent Percent 76.0 76.0 24.0 100.0 100.0
M Ac r c I c ua y S
N O Rs o s epne N O
2 4
YS E 0 2 0 4 0 Pr e t g ec na e 6 0
7 6 8 0
GRAPH-9
MIS ease of understanding

Frequenc y Valid yes 21 no 4 Total 25
Percent 84.0 16.0 100.0
Valid Cumulative Percent Percent 84.0 84.0 16.0 100.0 100.0
64

Customer Response
M es ou dr t n i g I a e f n esa dn S
N O Rs o s epne N O
1 6
YS E 0 2 0 4 0 Pr e t g e c na e 6 0 8 0
8 4 10 0
65
66
67
GLOSSARY
Anchor Existing/target clients of the bank BCA (buyer credit application)-This is used only to assess the distribution channel of the anchor and set parameters for the buyers. This should mandatory contain the following points: Programme size Type of facility and tenor Description of the distribution structure and existing terms of trade Profile of buyers Wallet sizing and Deal revenue potential Selection criteria for buyers Pricing
BDM-Business Development Manager EAR (Early Alert Report) - This is a default management trigger. It informs the status of health of the business. FAR- Field Audit Report MIS- Management Information System SCORECARD- Used to find the credit worthiness of the dealer.
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REFERENCES:
1- Fundamentals Of Cost Accounting by DR.S.N Maheswari. 2- Cost & Effect by Kaplan Cooper. 3- http://vip.intranet.standardchartered.com/scybernet/common.SubmitSearch.do? country=grp&selCountry=in&querystring=supply+chain. 4- http://en.wikipedia.org/wiki/Cost-benefit_analysis 5- http://www.costbenefitanalysis.org/ 6- http://flyvbjerg.plan.aau.dk/JAPAASPUBLISHED.pdf 7- http://www.fdic.gov/index.html 8- http://www.sjsu.edu/faculty/watkins/watkins.htm 9- http://sm8.sitemeter.com/stats.asp?site=sm8SCIFC 10- Companys PPG documents
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Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

OBSERVATIONS COMPETATIVE PERFORMANCE51 ACTION PLAN......52

Standard Chartered Bank

GRAPH-3 GRAPH-4-9 FLOW CHART-1 FLOW CHART-2

Competitive Performance Customer response Supply Chain Processes BCA Preparation

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

OVERVIEW OF THE INDIA - SUPPLY CHAIN FINANCE BUSINESS

Address the changing needs of channel partners

BUYER / DISTRIBUTOR CHAIN

Channel Partner Channel Partner

Standard Chartered Bank

Standard Chartered Bank

Ability to introduce payment discipline within their business partners

FOR BUSINESS PARTNERS

Supply Chain Finance

Standard Chartered Bank

SUPPLIER FINANCE PROGRAMME

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Working Capital Demand Loan (WCDL) Flexi Loan

Standard Chartered Bank

Portfolio purchase of receivables

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Standard Chartered Bank

Receives the Recommendation List and passes it on to the Conversion Team

Supply Chain Finance

Standard Chartered Bank

Standard Chartered Bank

Standard Chartered Bank

Follow-up is not properRecords are not being updated on time.

TABLE 3 -for Default Trend Tracker

Standard Chartered Bank

Supply Chain Finance

Standard Chartered Bank

Supply Chain Finance

Mio 0 10,00 0 15,00 0 20,00 0 25,00 0 30,00 0 5,000

Standard Chartered Bank

400 Mio O verdues O /s IN R M IO Lim its IN R M IO

Supply Chain Finance