Bajaj Electrical sought to achieve straight through, real-time transaction processing and financing for all participants in its supply chain because it wanted to reduce the turnaround time of order to pay. It looked to its partner bank for a fully automated process. The result is a unique solution based on APIs, enterprise service bus integration and virtual private network connectivity.

Using APIs to create a real-time supply chain dealer financing programme

The challenge

Bajaj Electricals Limited is one of the leading names in India’s engineering sector. It has a pan-India presence featuring a network of up to 400 dealers who purchase goods from the company and who then sell these on to end-users.

Bajaj Electricals’ existing dealer finance process was dependent on cheques for payment from the various dealers’ contact points. In this case, Bajaj Electricals, as the supplier, would raise an invoice following an order and, before releasing goods to the buyer (the dealer), would have to wait for the appropriate credit in its account. Following confirmation of the receipt of funds, Bajaj Electricals would be able to release the goods to the dealer.

However, since cheque clearing takes between two and three days, there was often a delay in funding the Bajaj Electricals’ payee account. Subsequently this resulted in a delay in the release of goods by the firm to its dealers, and potentially onwards to the end-users.

Improving this situation required the close collaboration of all three main parties: the dealers, Bajaj Electricals (referred to in the process as the ‘Anchor Corporate Seller’), and the financing institution, which was YES Bank.

The solution

The result of this co-operative approach to problem-solving was a concept aimed at reducing the turnaround time of order to pay via a fully automated process to plug the gap.

The solution that has been delivered and is now in operation is based on an API development and enterprise service bus (ESB) integration that has been designed to achieve straight through, real-time transaction processing for all participants. This requires virtual private network (VPN) connectivity to be established between the client’s servers and those of the bank.

In practice, the Anchor (in this case, Bajaj Electricals) initiates its request with the bank through an ‘API call’ to pull funds from dealer accounts. The bank is then required to validate the dealer’s details, and the anchor’s and the dealer’s limits and, if satisfied, can then book the drawdown request in the bank system. At this stage, it is then able to release the pay out to the anchor. The relevant dealer then repays the amount within or on the credit period or due date and the loan is then knocked off the bank’s book. Throughout, a real-time transaction status update in Bajaj Electrical’s SAP ERP system is maintained.

Best practice and innovation

The solution has established a process in which there are no manual interventions required at any step of transaction processing. It also means there is no requirement for the bank to step in and execute verification of cheques as these are no longer used.

The automation of the flow, from start to end, is such that it ensures there is no daily account reconciliation required by the bank either. And, as such, this also means that there is no manual reporting on the status of transactions to the clients; the system will send the necessary response files, on a real-time basis to Bajaj Electricals’ own ERP system. Ultimately, this leads to improved levels of customer satisfaction.

Key benefits

The system offers a number of immediate benefits to Bajaj Electricals and its dealers (and of course its own customers). These include:

• No manual intervention required for sharing transaction details with the bank.
• Real-time transaction processing.
• Funds credited instantaneously.
• Seamless transaction execution.
• Real-time transaction status update in Bajaj Electricals’ SAP ERP system.
• Improved buyer-supplier relationship.