Arviem, a technology company that uses internet of things (IoT) sensors to monitor cargo, has partnered with Austrian bank Erste Group to provide a new inventory financing solution for Erste’s customers across Central and Eastern Europe.
This off-balance sheet financing scheme is targeted mainly at listed companies looking to take inventory off their balance sheets. With funding provided by Erste, Arviem will deliver inventory management solutions by buying, holding and selling raw materials, as well as slow and fast moving goods, for Erste Group customers to improve their working capital position.
Speaking to GTR, Patrick Goetz, managing director for corporate flow products at Erste Group, explains: “We have seen growing demand from a number of large clients for inventory financing. What Arviem brings to the table for us is know-how around structuring an inventory finance solution for a client in a way that allows for just-in-time recognition of the asset when they really need it, as well as providing transparency and visibility on the underlying asset.”
Founded in 2010, Arviem helps firms around the world track and trace their goods by installing smart IoT sensors on containers and cargo. The sensors collect data on anything from the location of the goods-to-door status, to disturbances and conditions such as humidity and temperature.
Earlier this year, it parlayed its huge data collection abilities into a commercial trade finance service, with the launch of its working capital arm. Arviem Working Capital provides financiers the ability to track in real-time the exact location and condition of the goods they are financing – all the way from origin to the point of destination – in order to better assess risk and gain confidence to provide more and cheaper financing than they do today.
Fabio Manca, director of Arviem Working Capital, tells GTR: “When I joined Arviem, I brought with me a portfolio of solutions related to working capital optimisation through the use of inventory or assets. We believe strongly that in the 21st century, the supply chain has to be seen end to end. It cannot be done in separate silos for finance, receivables, transportation and warehousing. We believe that by unifying the dots through our technology and platform, we can ensure for the lender and the client an uninterrupted and seamless stream of data and reports that provide security and visibility of the goods, which is an essential part for any working capital optimisation leveraging on the assets.”
Current uncertainties in the global economy and financial markets are putting unprecedented pressures on companies and their supply chains, while the impact of holding excess working capital could be amplified by increased interest rates on the horizon. From Brexit-related supply chain issues to a blowout in payment terms in China, companies around the world are becoming increasingly aware of the need to focus on maximising liquidity and free cash flow. And with as much as US$460bn of liquidity trapped across the supply chains of the S&P 1500 companies alone, a growing number of firms are looking for ways to unlock cash. Inventory trading, which can be used alone or to complement other solutions such as supply chain finance programmes, allows a third party to buy and sell a company’s goods, holding them through the supply chain and delivering just-in-time or acting as an off-taker, thereby optimising the supply chain. This enables corporates to unlock cash tied up in their inventories, be that for inbound or outbound goods, consignment stock or work in progress, while positively impacting the balance sheet.
The first clients to take up the new programme will likely be Austrian corporates, says Goetz, who adds that the bank expects to carry out the first transactions in the next couple of weeks. It is also in advanced talks with other clients in its core market of Central and Eastern Europe.
Manca tells GTR that Arviem’s focus now is to work closely with Erste in its core market, while exploring co-operation with other financial institutions in order to expand out to other regions.
This is just one of many services that Arviem is able to offer on the back of the huge amount of data it is collecting. For example, it already runs a carbon footprint solution to help firms measure the carbon emissions of their logistics operations, thereby empowering them to implement changes to minimise their environmental impact.
As it builds out its working capital arm, Arviem also expects to introduce an insurance service at a later stage. This would allow firms to sign up for insurance on demand, based on the real-time data collected from the cargo.