1. Introduction
Small and medium-sized enterprises take a large portion of the total number of enterprises, but there is a severe problem they encounter in the development process, which is finance. However, they are extremely difficult to obtain financing from banks or capital markets, due to their high operating risks and low credit rating. Therefore, we need to prioritize their financing problem, in order to enhance their development potential [1]. At the same time logistics industries are becoming more and more capable of providing funds in supply chain finance. So supply chain finance provides a new way for small and medium-sized enterprises to finance, and it has advantages in low threshold, convenience and efficiency. The essence of supply chain finance is to use the core enterprises, which have a certain scale and high qualifications to provide credit support to both upstream and downstream enterprises. This will lead to controllable risks of the whole current supply chain, instead of unknown risks of traditional financing. Supply chain finance can integrate logistics, information and fund flow together, and analyze this information completely to reduce the risk to the largest extent. This study examines the financial operation modes and fundamental principles of two leading logistics enterprises, ShunFeng(SF) Express Group and foreign united logistics companies in the United States. This paper draws comparisons between the two cases to serve as a resource for the growth of the supply chain finance market in China.
2. Theoretical Overview of Supply Chain Finance
2.1. Definition of Supply Chain Finance
A range of trade finance services offered by financial institutions or businesses built on extensive electronic information systems are collectively referred to as supply chain finance [2]. Supply chain finance is a financial innovation that can help small and medium-sized businesses with their financing challenges in addition to addressing the high cost of supply chain financing brought on by global outsourcing operations and the bottleneck of supply network node capital flow.
2.2. Analysis of Typical Models of Supply Chain Finance
2.2.1. Logistics Provider Leading Model
The credit sale method is a widely used technique in most international trading. The seller will be under a lot of financial pressure because of the buyer's strict requirements, which require the seller to pay all or a portion of the payment upfront, then the buyer will settle the payment within a specific time frame following the arrival of the goods. As a result, there will be a strained relationship between buyers and sellers. However, by understanding the accurate information of mortgaged commodities, logistics firms can leverage their customer relationship and information advantages to provide short-term finance for credit-pressured clients in the supply chain financing. By working with upstream and downstream businesses to gather data on product flow and manage rights to goods, logistics companies will play a significant role in supply chain finance in this model by gathering, analyzing, and integrating information about the whole supply chain [2-3].
2.2.2. Model of Enterprise Group Collaboration
While the customer extends payment for the items, the selling enterprises collect financing interest and offer financing leasing, equipment leasing, and other services to the buyer. This shortens the buyer's operation preparation time and lessens the strain on the customer to make a one-time purchase of products payment. It also increases the seller's sales. According to the enterprise group cooperation model, the company has a robust department or subsidiary that, in addition to offering financial services, encourages growth in the primary business revenue. In this approach, buyers and sellers have more equal standing, and the enterprise group serves as both the core business and the source of finance in addition to taking a direct role in supply chain transactions [3].
This model operates by having the credit company, a subsidiary of the main enterprise, first sign the financial lease agreement with the buyer. After that, the credit company places the purchase order directly with the manufacturer and pays for it. Following production, the producer will ship the products straight to the customer. Lastly, the customer pays the credit company's rent on a regular basis using the money earned from the beginning of these goods' operations. Due to the fact that the core enterprise is also the manufacturer's upstream enterprise, this enables the buyer to get the goods ahead of time and begin operations. It can also increase the sales scale of both the core enterprise and the manufacturer.
2.2.3. Model of Commercial Bank Services
The opacity of small and medium-sized businesses' collateral frequently discourages banks, despite the fact that these businesses represent a sizable untapped market for banks. However, supply chain finance services offered by commercial banks can address this issue. Commercial banks have developed financing plans for buyers and sellers, as well as approval processes for transactions between the two parties within the same nation or across borders when it comes to financing supply chain financial services. This adaptable and practical service can better serve the requirements of various businesses [3]. Under this arrangement, commercial banks are able to provide the seller with before-shipment and after-shipment financing so that the seller can begin manufacturing ahead of schedule in addition to paying the buyer to ease the buyer's financial burden.
In this approach, the seller procedure entails the following: the supplier issues a bill of lading and invoice to the buyer after the buyer puts an order with the supplier, and the supplier then delivers the products in accordance with the specifications. Following receipt of the invoice and bill of lading, the seller is required to return the verified certificate and the acceptance bill issued by the commercial bank to the supplier. Suppliers demand payment from commercial banks using this information. The buyer must pay the commercial bank the financing amount owed on the due date once the commercial bank reviews the documents and registers the buyer's financing amount. The seller procedure entails the following: the business issues a purchase order to the supplier, who then sends a copy of the order to the commercial bank. The commercial bank then funds the supplier's before-shipping purchases in accordance with the terms of the financing agreement, enabling the supplier to make the goods and buy the raw materials. A copy of the invoice and bill of lading are submitted to the commercial bank by the supplier when they deliver the items to the business. Following confirmation, the bank gives the supplier post-shipment funding; it then records this financing and deletes the previous financing record. As agreed upon, the buyer will pay the commercial bank.
3. SF Supply Chain Finance Business Model
3.1. Warehousing Financing Model
This concept is predicated on SF’s robust information exchange network and storage capacity, SF owns and operates more than 1.1 million square meters of warehouse space, and it has operations and storage facilities for logistics and storage in over 80 cities [4]. SF signed logistics agreements to use SF Express when e-commerce sales are realized, and SF Express deployed goods nationwide in accordance with its own logistics network. SF also signed warehousing and storage agreements with major e-commerce platforms to provide their own warehousing centers to the e-commerce platforms for the storage of goods. These platforms can also rely on the storage of goods to SF Express financing loans. The e-commerce platform receives excellent express delivery services from SF Express, in addition, to saving money by leveraging SF's warehousing centre. Simultaneously, e-commerce can experience fewer financial challenges and risks thanks to the fund loan from SF Express. At the same time, using the close delivery criterion can help SF to cut logistics costs and the whole process can increase the stickiness between express delivery business and customers [5-6]. SF Express can also charge interest on borrowing, which boosts revenue.
3.2. Order Financing Model
Customers with a long-standing cooperative relationship and deep engagement with SF Express are the primary target audience for the order financing model. The primary procedure is as follows: after the downstream buyer makes a purchase, the purchase order is forwarded to the SF platform, which then pays the necessary funds and completes the purchase, SF Express also handles the logistics of transit and storage for the purchase process [3-6]. Throughout the process, SF Express not only offers financing to clients based on their credit score, but also manages the logistics and storage operations, strengthening client loyalty and fostering deeper collaboration.
3.3. Small Loan Model
Small loans will be offered by SF Express to businesses that demonstrate a high credit standing and a track record of cooperation. SF Express has a thorough evaluation of the transaction data, credit standing, and payback capacity of its partners thanks to its robust information collection network. Assign varying sums of modest loans to varying degrees of credit level. This increases client stickiness while generating interest costs on loans, in addition to partially resolving the issue of funding challenges faced by certain small and medium-sized enterprises.
4. USP Supply Chain Finance Model
4.1. Partnership between Walmart and UPS
Walmart, a well-known retailer, is a powerful customer and typically demands that Southeast Asian exporters and suppliers pay the entire amount upfront. The payment will be completed a period of time after the goods arrive. This has put significant financial strain on its upstream small and medium-sized businesses [3]. However, United Parcel Service(UPS)'s supply chain finance services guarantee that Walmart can keep extending the account period and allow its suppliers to use Walmart's credit to secure financing for accounts receivable at competitive interest rates, resolving this issue crafty.
4.2. The Characteristics of the Logistics Enterprise-Led Model of UPS
In order to supply logistics services for Walmart and its suppliers, UPS first secured multi-party agreements with them. UPS acts as a middleman to settle payments with tens of thousands of exporters in Southeast Asia on behalf of Walmart. To ensure the prompt operation of the UPS logistics agency's money, the United Parcel Service Credit Department(UPSC), promises that the exporter will receive payment for the items within two weeks after delivery. The export company will pay UPS the appropriate logistics service fees as well as certain financing charges, and undertake all freight business, including export customs clearance. Lastly, UPSC conducts a unified settlement with Walmart on behalf of UPS holding the goods.
The following three benefits are primarily responsible for UPSC's ability to play a significant part in UPS supply chain financial services: First, UPSC was the forerunner of the First International Bank of the United States, and because of its extensive background, it can offer financial services with the professionalism and risk management of more established financial institutions; Second, UPSC has sufficient capital to undertake large-scale financing operations because it is the financial division of UPS, the world’s best logistics company. Lastly, UPS can successfully manage credit risks and prevent information asymmetry as a direct participant in supply chain operations.
5. Differences between SF Express and UPS
There are three different primary areas that SF Express and UPS have. First off, UPS is the industry pioneer in supply chain finance in the US. It has been around for hundreds of years and is supported financially by a powerful capital business. It has a reasonably developed supply chain finance management and operating style [2]. SF Express began operating in the supply chain financing space in 2010, developing quickly and adopting a business strategy that was more in line with China's current stage of economic development. Second, the business scope of SF Group may be summed up as follows: financing, circulation, and logistics. It primarily consists of express, cold transport, and warehousing services from the standpoint of the logistics industry. Wealth management, integrated payment, and supply chain financial services are the primary offerings from the standpoint of the financial industry. In comparison, UPS's primary business may be broken down into four categories: retail services, supply chain finance financing services, supply chain solution services, and express services.UPS establishes several subsidiaries for various service objects so that they can work together to finish building the supply chain architecture. UPS Capital, which provides financial support for the entire supply chain financial operation, UPS Parcel Express, which supports the entire supply chain's cargo circulation, storage, and transportation, UPS Logistics, and UPS Consulting, which offer solutions for the entire supply chain management, were established in 2001 when UPS acquired the First International Bank of the United States. When comparing the two companies' business distribution, SF Express still has a lot of space for improvement, but UPS's supply chain financing services are more developed. SF Express mostly depends on self-financing sources for its funding needs, which results in high financing costs and restricted financing size. On the other hand, UPS changed its name to UPS Capital Company in order to finance the acquisition of the First International Bank of the United States in 2001, which allowed it to obtain a banking license. UPS Capital Company can raise capital on a wider scale and at a lesser cost because it has access to more finance sources. As a result, UPS is able to offer supply chain financial services with a more accommodating credit policy and a bigger credit line.
6. Conclusion
This paper mainly studies the Supply Chain Finance of third-party logistics and makes a comparison between SF Express and UPS by analyzing their operating modes respectively, then finding out the differences between them. It is concluded that in terms of Supply Chain Finance, UPS has developed more mature, while China’s SF Express Group has a relatively large space for development. This article has not discussed deeply the aspects to be improved for SF Express and given solutions. Therefore, future research should focus more on the existing problems of SF Express and areas that can be improved, and analyze which methods can effectively solve such phenomena.
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Cite this article
Qian,Z. (2024). Research of Third-Party Logistics Supply Chain Finance Model of SF Express. Advances in Economics, Management and Political Sciences,93,203-207.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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References
[1]. Liu, G. P., et al. (2021). From virtual reality to meta-universe: New directions in online education. Modern Distance Education Research, 33(6), 12-22.
[2]. Ng, J. (2021). Virtual reality: Confinement and engulfment; replacement and re-placement. In The Post-Screen Through Virtual Reality, Holograms and Light Projections: Where Screen Boundaries Lie (pp. 107–154). Amsterdam University Press.
[3]. Bekele, M. K. (2021). Mixed reality: A bridge or a fusion between two worlds? In E. M. Champion (Ed.), Virtual Heritage: A Guide (pp. 93–104). Ubiquity Press.
[4]. Jones, P., Osborne, T., Sullivan-Drage, C., Keen, N., & Gadsby, E. (2022). Conclusion: Next steps in VR research. In Virtual Reality Methods: A Guide for Researchers in the Social Sciences and Humanities (1st ed., pp. 136–142). Bristol University Press.
[5]. Engelke, P., & Mann, R. (2022). Appendix 2: VR technologies. In Virtual Reality for Global Climate Leadership. Atlantic Council.
[6]. Jones, P., Osborne, T., Sullivan-Drage, C., Keen, N., & Gadsby, E. (2022). Working with existing VR material: Activities with participants. In Virtual Reality Methods: A Guide for Researchers in the Social Sciences and Humanities (1st ed., pp. 48–74). Bristol University Press.
[7]. Ten guidelines for private equity. (2010). Finance and Accounting Study, 2010(6), 76-77.
[8]. Preiß, C. M. C. (2021). Interfaces in zeitgenössischer kunst. In Kunst Mit Allen Sinnen: Multimodalität in Zeitgenössischer Medienkunst (1st ed., pp. 59–70). Transcript Verlag.
[9]. Lippit, A. M. (1999). Three phantasies of cinema—Reproduction, mimesis, annihilation. Paragraph, 22(3), 213–227.
[10]. Marler, T., Abdurahaman, Z. F., Boudreaux, B., & Gulden, T. R. (2023). The metaverse and homeland security: Opportunities and risks of persistent virtual environments. RAND Corporation.
[11]. Bright, C. D. (2020). Diversification: The hedge for survival. In The Jet Makers: The Aerospace Industry from 1945 to 1972 (pp. 133–148). University Press of Kansas.
[12]. Rogers, A. (2019). ‘Taking the plunge’: The new immersive screens. In C. Buckley, R. Campe, & F. Casetti (Eds.), Screen Genealogies: From Optical Device to Environmental Medium (pp. 135–158). Amsterdam University Press.
[13]. Salter, A., & Moulthrop, S. (2021). Queer twine and camp. In Twining: Critical and Creative Approaches to Hypertext Narratives (pp. 205–230). Amherst College Press.
[14]. Church, D. (2022). Mortal kontroversy; or, dispatches from the console wars. In Mortal Kombat: Games of Death (pp. 71–96). University of Michigan Press.
[15]. Bermingham, C., & European Investment Bank. (2021). Private equity and venture capital. In Finance in Africa: For Green, Smart and Inclusive Private Sector Development. European Investment Bank.
[16]. Hurdle, Z., Stanford, A., Nix, K., & Perry, N. (2021). Turning on the three-dimensional switch. Science and Children, 59(1), 32–36.
[17]. World Health Organization. (2020). Overview of the fund financial model. In A Financial Model for an Impact Investment Fund for the Development of Antibacterial Treatments and Diagnostics: A User Guide. World Health Organization.
[18]. Cheng, Z. (2021). Applicability analysis of valuation model for high-tech industry based on life cycle perspective. Science and Technology Economic Journal, 2021(3), 23-24.
[19]. Yuan, Y., & Xu, Y. (2023). Value assessment of photovoltaic enterprises based on free cash flow model--Taking L Co. as an example. China Collective Economy, 2023(3), 82-85.
[20]. Li, Y. (2020). The fuzzy evaluation method of coastal enterprise’s assets based on EVA evaluation model. Journal of Coastal Research, 266–270.
[21]. Zhou, Y. (2023). Equity incentives, corporate innovation and corporate value. National Circulation Economy, 2023(3), 96-99.
[22]. Zhu, Y., Yin, M., & Wang, S. (2023). Research on the impact of green bond issuance on corporate value -Based on investor concern mediation effect test. China Business Journal, (8), 119-123.
[23]. Agrrawal, P., Borgman, R., Clark, J. M., & Strong, R. (2010). Using the price-to-earnings harmonic mean to improve firm valuation estimates. Journal of Financial Education, 36(3/4), 98–110.
[24]. Uzsoki, D., Wuennenberg, L., Perera, O., Bassi, A. M., & Pallaske, G. (2020). SAVi results of the financial analysis. In Sustainability Assessment of an Onshore Wind Portfolio in Germany: An Application of the Sustainable Asset Valuation (SAVi) for B Capital Partners, Zurich. International Institute for Sustainable Development (IISD).
[25]. Zhai, J. (2021). Research on the assessment of SaaS enterprise value - based on market-to-sales ratio valuation method. Research on Economic and Social Development, (26), 71-73.
[26]. Shi, Y. (2012). Market value management of Tianshili--Maximising corporate value by fulfilling corporate social responsibility. Modern Enterprise Culture, (4), 69-70.