The majority of our project are confidential. We will never disclose our customer details unless they explicitly request it for branding, marketing or sales reasons.
CS1: Lean Engineering 2.0
A transportation company A in the Netherlands was using third party owned tracks, on top of its own, to run its loads. As is usually the case an independent shipping agent is booking the cargo while the trailers and the containers that contain the loads belonged to a third party or they were rent. Loading of the tracks may or may not happened by the transportation company in which case one or more parties were getting involved. Cargo, drivers, tracks, liabilities were all insured while payments from the owners of the cargo, that could be many, was coming in various dates partly before and partly after deliveries.
Within this business ecosystem, can one imagine how many transactions a truckload entails? How many people need to work for such a logistical operation to be completed between at least a dozen businesses?
How many computer entries in disperse IT and accounting systems, how many phone-calls and emails where used for these transactions to be completed?
Can you imagine if a payment fails within this supply chain how many businesses will be affected and how much additional effort is needed to be corrected?
Now imagine two payment failures in a multi-customer shipment, which by the way is not unusual, and multiply this by 200 truckloads or more that happen each day...now multiply that by 225 working days per year.
There must be a better way of doing this they thought and they were right. There was one 2DVVI.
Imagine a service which does all of the above on behalf of the whole business ecosystem. A service delivered through a platform (memeplexes™) and controlled by intelligent algorithms built on demand for this specific ecosystem.
In this case when the customer is booking the service his payment is deposited in an escrow service. When the cargo reaches its destination and the system acknowledges the fact, the algorithm will extract from the e-wallets of the customers through the escrow service the money needed (Conditional Liquid Payments) and split the payment electronically (Parallel & Chain Payments) to all businesses that made this possible based on the invoices they entered into the system.
From the leasing bank to the third party track owner used ...to the shipping agent, to the cargo insurers, to the container owner....to the forklift operator that loaded the cargo.
While at the same time the platform will update all business accounting or ERP systems in the background without anyone to get involved.
The whole process will be repeated for every load arriving in its destination until all invoices (for the cargo, the leasing, the services etc.) are paid and without any human intervention.
We calculated that they could reduce manual labour by as much as 98% or reduce, if you want, transportation costs by as much as 30% by using this service!
Logistics at its simplest and complexity to near zero.
CS2: Minimising Risk across a supply chain
Lets take one of the less risky and simple supply chains and the ecosystem of businesses that support it in country A. The oil refinery, the franchise, the logistics company, the transportation company (from our previous example) and the petrol station. If you include the business that purchase the diesel to fill up its cars as well, then you end up with 5 at least different type of transactions.
Every single one of which has its own terms that include a time-delay element. The franchise may pay the oil refinery’s invoices every 45 days and the logistics company every 60 days, the petrol station the transportation company in 30 days, the franchise in 60 days and finally the business/consumer its diesel from the petrol station in 45 days.
Depending on consumption at the points of sale which triggers a new load to be shipped by the logistics / shipping company:
- the refinery may have shipped hundreds of loads to various franchises without having received a penny
- the logistics company may have arranged equally hundred or thousands of loads as they serve more than one franchise ,without receiving a penny
- ...and so forth.
So how do all these businesses sustain operations? The answer is by “passing” part of the problem to their suppliers, using their own capital and, of course, bank loans to cover the lack of liquidity which is inevitably created due to the way this ecosystem operates and of course by increasing consumer prices.
There are a couple of parameters here that dictates the cost of the “borrowed” liquidity:
- the business’ risk profile - how many times your customers failed to pay you in the past or how many of these “type” of businesses went bust in the past as a ratio of your whole customer base
- the ratio between own capital to the borrowed one and, of course,
Time is the most critical one as it is always a multiplier in every equation that calculates risk. The longer the loan the more risk (i.e. of non payment) it contains and the most impact it has on the above mentioned ratio.
So what can you do to reduce your risk? The “easy” solution and the most common presently, is to take a trade credit insurance against potential non-payments which though comes at a cost as you cannot insure against just one customer but you will need to “surrender” to the insurer/ underwriter your yearly revenue.
At the end the initial five transactions in the ecosystem have become fifteen (15) by adding two additional ones on top of every existing one and all that because of time.
Now instead of all this logistical and accounting nightmare for what is supposedly one of the simplest supply chains picture the 2DVVI equivalent, with you in the place of an observer.
A car driver of a company B parks his car next to a petrol pump fills up his tank and drives away. ...and that is all!
What is happening in the background is:
- a plate recognition software read the car plate and communicate the data to a remote server
- the server checked that the car was not reported stolen, it identified that the business it belongs to is actually a registered customer of the garage and allows the pump to start dispensing fuel
- the petrol’s pump electronics transmitted the fuel amount dispensed and communicated the data to the server/platform
- algorithms extracted the amount of credit needed from the business B e-wallet hold by an escrow service and debits the accounts of all parties participating in the chain (Chain & Parallel Payments)
- the platform updates all accounting and ERP systems of all businesses participating in the ecosystem (even the customers, if needed)
The end result is nothing but spectacular, as:
- The fifteen (15) transactions became one (1)!
- No credit or debit card payment mechanisms were used eliminating this cost element
- Accounting mistakes disappeared
- Risk of non-payment was reduced by 98%
- No banks or insurance companies got involved (beyond the ones that runs 2DVVI as our partners)
- Businesses involved liquidity was increased by 250%
- Their doing business (operational) cost was reduced
- Profit margins for all enterprises in the supply chain were increased
- No credit facilities were used reducing even further the product cost
- Their working capital was invested in business expansions
- An army of managers and administrators in the accounting departments was offered a more fulfilling role
- ...and company B bought its petrol CHEAPER than before without the need of any fuel card scheme’s involvement
CS3: Minimising the cost of FX in international trade
Company K, a profitable business with a strong cash-flow that is manufacturing elevators of all types and automated escalators for public spaces wanted to increased its sales margin in Russia. To do so it developed a new strategy based on extending both the credit facility and the repayment period to its resellers in order to book more business. That was before the US imposed suctions to Russia and the drop of the oil prices that affected Russia’s currency.
The new strategy was successful and several new contracts were signed. With terms of payment though for the new strategy being at 180 days, contract terms dictating payment in Roubles and prices that targeted 50% gross margin from its operation in that country the company ended up in an impossible situation after the Rouble price collapsed expecting a loss of 15% for 14-15.
Even if it could buy insurance and futures contracts (contracts that warranty future currency exchange in a predefined ration) to cover both the 180 days deriving risk and Rouble volatility its strategy seem to have backfired until we offered them a solution.
We call this service Conditional Liquid Payments and it is based on the principal that when flexible gradual payments (hence liquid) replace a payment at the end of the contract you can actually passively reduce your risk exposure by 50% (over a period of 180 days).
How that works exactly?
It operates in three levels.
- It builds a shared risk structure (mutual benefits based business ecosystem) in this case the construction companies, the reseller/maintenance contractor and the manufacturer that act now as one business (virtually integrated) that sells a product and a service.
- It modifies based on incentives and mutual benefits (reduce maintenance cost in this case) the existing contract terms from an one-off payment at the end of the 180 period with 15 days flexible (that can be changed in duration) instalments
- It modifies the terms of buying futures to cover the excess risk (beyond the passive reduction caused by the instalments)
So in our case:
- The contracts were modified based on a mutual agreement with us acting as the warrantor/escrow service.
- All businesses registered on our platform and created e-wallets hosted in one of our Ripple gateways (see details of this technology above)
- The constructions company used its cash reserves (or a short term bank loan in Rubles) to debit its e-wallet with the value of at least two instalments
- An new mutually agreed algorithm was build-to-order to serve the agreement
- The one-off payment at the end of 180 days was replaced by instalments paid in Roubles and managed by the algorithm
- Every time the value of currency pair EUR/RUB changed the algorithm was adjusting the instalments accordingly (hence the term Conditional). For example if the rouble was loosing its value above a limit then the algorithm will modify initially the period (i.e. from 15 days to 14 or 13) and, if that was not enough, increase the instalment amount payable.
- The remaining currency risk was covered by a liquid form of currency futures based on the outstanding only amount every time. This arrangement reduced the cost of buying the futures by at least 50%.
The end result was no short of spectacular as:
- Currency risk was reduced (varied by contract) by up to 93%
- Profit margins were maintained to 90% of what was initially the strategy’s target
- Trust-based bonds between the businesses increased by 200%
- Liquidity of our customer and its reseller were increased by 100%
CS4: Increasing liquidity for a multinational Construction Company
Even the carefully structured construction contracts are tail heavy with most funds coming at the end stage of any contract. Cash reserves is must and the most precious of any construction company assets after their people. Time delays that is the norm only add to this liquidity problem. The inevitable credit lines with banks help but simultaneously erode profitability.
The most cash demanding function by far for any multinational construction company is payroll, irrespectively if the company operates through agencies or hires directly.
It is not unusual 50% of every months liquidity to cover payroll to derive from banking credit facilities that are distributed to Bank accounts around the globe depending on personnel or agency contracts.
Equally severe is the impact of currency exchange needs and the human effort (labour) needed from the individual Programme Offices, the central accounting and financial departments and the local and central logistics and vendors management ones.
Now all this weekly, bi-weekly or monthly activity is not just automated but eliminated all together including the vast majority of labour. All it takes is for the company to utilise the power of our Bi-Directional Prepaid Cards (b-DPC). The process works as following.
- We help them issuing them as a separate program through our Banking partners.
- The cards are distributed to all personnel and a new dedicated database is created in one of our Ripple Gateways
- e-Wallets for every employee or worker are created each connected to one or more b-DPCs
- As an option a dedicated Ripple gateway trading all needed currencies can be created
- Generic Payroll e-wallets in various currencies according to the existing payroll or beyond that
- Salaries instead of leaving on weekly, bi-weekly or monthly basis the company’s account are now added as funds to individual cards through an automated process
- Incentives are offered to personnel to delay expenditure through their cards
- Additional cards are offered to all employees that until now were using third party services for remittance and are directly connected to their personal ones (Remittance 2.0). These new cards are send empty to their recipients and can be funded manually by the employee or automatically using algorithms in predefined or ad hoc intervals
- e-wallets are connected through APIs to the company’s accounting, payroll and ERP systems
The end result?
- The company’s liquidity increases by at least 100%
- FX cost is reduced by at least 50% through the ability of the company to act as a Market Maker
- Labour in all payroll, accounting, finance and logistics are reduced by up to 98%
- Employee moral is increased due to their incentives-based profit sharing ability and the lowering of their remittance cost
- The company earns additional income from everything spend through the employee or remittance cards
- The company has the option to expand this facility to local sub-contractors or micro-suppliers to further increase its liquidity and reduce Programme Office admin, accounting, payroll and vendor management costs.
CS5: Advertising 2.0
Impulse Purchasing (IP) is a powerful tool for any marketeer. The trouble with it is that you need to bring the consumer (buyer) to your shop to utilise it, which means that it is a no go area for online only retailers. The lack of this ability is driving partially the recent trend for the most successful of the online retailers like Amazon to open High Street Shops.
Most retailers spend millions in advertising in vain without being able to utilise the power of IP.