Category: Transport & Logistics
Highly Commended: Knorr-Bremse AG
Partner: Trade Information Network and Deutsche Bank
Summing up: A corporate which strives to push the boundaries of supply chain finance further upstream with its involvement in a new multi-bank multi-corporate digitised network
What the judges said: The aim for continuous improvement with the recent “full automation” via the Trade Information Network makes this really a sustainable success story
- Knorr-Bremse’s involvement in TIN opens option for suppliers to access purchase order financing
- Suppliers have the possibility of comparing financing offers from different banks
Knorr-Bremse is a German manufacturer of braking systems for rail and commercial vehicles that has been operating for more than 110 years. It is also a pioneer of payables finance having implemented its use well before the global financial crisis in 2008 when most supply chain finance solutions were still relatively unknown.
While recognising the benefits of traditional reverse factoring models, the company wanted to explore how to extend financing earlier in its supply chain, through the provision of purchase order financing which it hoped would support its wider supplier ecosystem.
To reach this goal, it has participated in a new initiative called the Trade Information Network (TIN). This platform sets itself out as an inclusive global multi-bank and multi-corporate network. It was established in September 2019 with six founding banks, including Deutsche Bank has worked closely with Knorr-Bremse.
The platform aims to offer corporates an automated and secure means of communicating their trade information and raise finance requests to participating banks. Banks then provide financing outside of the network via their own pre-existing channels. It aims to simplify the number of interfaces suppliers usually work with, and they benefit from a one-time registration and standardized connectivity.
The overriding objective of TIN is to meet the currently unmet demand from suppliers for earlier working capital financing. Knorr-Bremse is keen to offer its suppliers the opportunity to not only seek financing for invoices but also for purchase order financing, allowing them to access cash as soon as they receive an order from the buyer.
Suppliers could communicate transaction data – such as purchase orders, invoices, or shipment information – via this network and share this information with banks when they need working capital finance. Banks can then offer financing as appropriate and the supplier can compare financing costs before making a decision.
Knorr-Bremse’s continued involvement with TIN builds on the success of its original and market-leading reverse factoring programme with Deutsche Bank in 2007 which helped the company rationalise and extend its payment terms with suppliers. The original programme has grown significantly from covering just a few of Knorr-Bremse’s various business entities when it was first launched to now covering over 40 entities.
It also illustrates the company’s commitment to expanding the use of supply chain finance away from just a typical reverse factoring solution. The manufacturer aims to have an information hub platform where corporates are not dependent on one single financial service producer and could seek financing from a variety of partners.