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ZHIYUAN: DIGITAL TRANSFORMATION IN SUPPLY CHAIN
FINANCING SERVICE
Junfeng Tian, Wei Li, Jing Chen, and Yanhong Si wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.
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permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
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Copyright © 2023, Ivey Business School Foundation
Version: 2023-12-21
No
ZHIYUAN
tC
One afternoon on January 10, 2020, Zhengting Chen, the chief executive officer of Sichuan Zhiyuan Digital
Finance Information Technology Co., Ltd. (Zhiyuan), was reading an internal report on the company’s
performance. Zhiyuan—founded in 2013 in Chengdu, Sichuan Province—was one of the first platform
companies to provide traditional supply chain financial services in southwest China. Since 2016, with the
application of digitalization, China’s supply chain finance market had expanded rapidly.1 However, the
surge in new entrants created new issues, such as intense competition in the market. The company
experienced a decrease in both annual revenue in 2019 and year-over-year growth rate of membership. So,
Chen wondered if Zhiyuan’s digital transformation could help attract customers and sustain the company’s
long-term growth by ensuring the authenticity and transparency of transactions. Should Zhiyuan transform
from a traditional to a digital supply chain financing service provider? What were the alternatives to its
digital transformation? How should it implement digital transformation? How should it achieve alignment
between industry service modes and digital transformation initiatives?
Do
Since Jiping Chen, Zhiyuan’s chairman, founded the company, Zhiyuan had focused on supply chain financial
services, network technology development, computer software and hardware research and development
(R&D), and communication systems tightly linked with the industry. The company provided supply chain
financial services to many enterprises and completed more than ¥1.8 billion in fund management services.2
The company’s professional and specially customized supply chain financial services meant capitalconstrained companies might consider obtaining their financing services. Over the years, Zhiyuan established
close partnerships with industries (including liquor and agriculture), industry associations, enterprises, banks
or non-bank financial institutions, and universities and research institutions. These collaborations allowed
Zhiyuan to share resources and updated data with partners, which further strengthened its interconnection with
and recognition from partners. In 2019, the company had 98 cooperative customers (see Exhibit 1) and had
achieved some renown among supply chain financial service companies in Sichuan Province.
Zhiyuan’s primary business focused on traditional supply chain financial services. But serious technical
problems arose because commercial information could not be immediately communicated, resulting in
moral hazard issues due to loan fraud. 3 In addition to technical issues across the entire industry, the
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company also suffered from customer mistrust, including small and medium-sized enterprises (SME) and
banks, which caused difficulties in internal business transactions, insufficient capital circulation, and capital
security risks. These roadblocks significantly slowed Zhiyuan’s development.
Zhiyuan’s business income primarily came from service fees paid by its customers in industries and supply
chains. In practice, it was common for the weaker party to bear the cost. “We are paid by a bank if it requires
our assistance in obtaining customer traffic through our platform when the customer is in a strong position.
When seeking financing from us, a customer pays us for the service. Depending on the negotiation, the
service fee can be a proportion of the financing amount or determined based on the volume of services and
service content,” said Siyao Song, Zhiyuan’s deputy general manager.
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Zhiyuan had never experienced a funds shortage issue since its founding. In addition, the company invested
heavily in improving the quality of supply chain financial services, focusing on developing partnerships
and retaining its customers. Although the company’s initial business income could not cover its operating
costs, the transaction volume and the number of platform members increased slightly, allowing Zhiyuan to
develop its core customers with cooperative relations. Therefore, Zhiyuan’s operating income and net profit
also increased. Between 2013 and 2018, the annual growth rate of the company’s total revenue was always
higher than the industry average (see Exhibit 2). However, faced with intense competition in digital supply
chain financial services from large firms, Zhiyuan’s total revenue dropped from ¥9 million in 2018 to ¥5.4
million in 2019 (see Exhibit 3). Further, from 2013 to 2019, although the number of members increased,
the year-over-year growth rate in membership decreased to 22.5 per cent in 2019 (see Exhibit 1). Thus, the
company’s decision makers had to decide whether to pursue digitalizing its business.
tC
With the emergence of digital supply chain financial services in China since 2017, some companies that
underwent successful digital transformation had seen an increase in revenue by properly addressing the
traditional supply chain financing services issues.4 Other companies that solely provided traditional supply
chain financial services continued to grapple with those issues and could miss out on transition opportunities
due to their hesitance.5 As a result, Zhiyuan prioritized digitalization through technological transformation
to address its own issues.
CHINA SUPPLY CHAIN FINANCIAL SERVICES
No
The Growth of Supply Chain Financial Services
Do
From 2016 to 2019, the Chinese supply chain finance market experienced an annual growth rate of about
10 per cent from 2016 to 2018, reaching ¥23.1 trillion, with a 15 per cent increase in 2019 (see Exhibit 4).6
Rapid growth was accompanied by several prominent issues, however. A typical business model for
traditional supply chain finance was the “N-1-N” model, where financial services were provided to “N”
upstream and downstream companies in the supply chain, based on the credit strength of the core company
represented as “1.” But a supply chain financial services platform had less information about the “N”
companies than the core company, so it was a challenge to maintain a larger market share.7 In this model,
the core company would provide endorsements for capital-constrained upstream and downstream
companies, and the financial services platform needed to manually verify the information through phone
calls, emails, or data in enterprise resource planning (ERP) systems.
However, the “N-1-N” model did not address SMEs’ financing difficulties for two main reasons. First, the
core company’s credit could only be transmitted to immediate upstream and downstream companies in the
supply chain, leaving other companies unable to utilize the core company’s credit for supply chain financing.
Second, financial institutions faced difficulties in obtaining transaction-related information due to limited
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technological capabilities. And risk control for various financing models posed significant challenges for
supply chain financial services, including measuring and monitoring product value in inventory financing and
assessing SMEs’ creditworthiness in strategic relationship financing.8 To address SMEs’ financing problems,
supply chain finance became a key initiative supported by the Chinese government.
Yet with the development of digital technologies such as the Internet of things (IoT), big data, and
blockchain, China’s supply chain digital financial services market increased from ¥800 billion in 2017 to
¥1,300 billion in 2019.9 Moreover, nearly half the companies offering supply chain financial services had
begun exploring digitalization of their businesses since 2017 (see Exhibit 5). The emerging industry trend
was to use financial technology (FinTech) to create a new ecosystem for supply chain finance, achieve
effective risk control, and improve operational efficiency.
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The Main Companies in the Digital Supply Chain Financial Services Sector
No
tC
Advanced Internet and FinTech development led many firms to enter the market to provide digital supply
chain financial services, resulting in competition in segmented markets.10 For example, some companies
had strong technological backgrounds like Linklogis, a software as a service (SaaS) company incubated
with support from Tencent and other Internet giants. Linklogis offered digital supply chain financial
services through its online platform, leveraging robust scientific and technological capabilities.11 Linklogis
experienced significant growth, with total revenue increasing from $383 million in 2018 to $699 million in
2019.12 Other companies could rely on specific industry resources. For instance, the Glodon Company
Limited (Glodon), an information technology company in the construction industry, announced its
transformation into an Internet platform service provider in 2015 by launching a digital construction
management platform. Glodon provided a wide range of services, including various software tools and IoT
data processing in the construction industry.13 Through offering digital supply chain financial services to
the construction industry, Glodon reversed its negative revenue growth in 2015 and achieved a 24.33 per
cent increase in 2016 (see Exhibit 6). 14 And some companies such as Eternal Asia could also provide
comprehensive operational services, including financing support. Eternal Asia was the first listed supply
chain service company in China and in 2016, it introduced the innovative concept of “New Circulation,”
which referred to a commercial ecosystem that integrated distribution, marketing, finance, logistics and
other services through the “supply chain + internet” approach, achieving flattening, sharing, and
decentralization of the intermediate link from production to consumption, and developed a supply chain
data platform that integrated online and offline resources. These changes facilitated the company’s digital
transformation and led to rapid revenue growth in 2017 (see Exhibit 7).15 In this market, supply chain
financial service firms had to continually innovate their business models to retain their competitive
advantage and seize long-term growth opportunities.
OPPORTUNITIES AND CHALLENGES FOR ZHIYUAN’S DIGITAL TRANSFORMATION
Zhiyuan’s Digital Transformation: At a Crossroads
Do
In the early stages of its business, Zhiyuan focused on providing enterprises with supply chain financial
services in three areas: accounts receivable financing, inventory financing, and advance payment financing.16
The company played a crucial role as a risk manager, and its traditional service model relied heavily on
telephone and email communication. Zhiyuan analyzed the data provided by both parties involved in the
transactions and monitored the parties’ progress. Siyao Song offered that, “Zhiyuan is like a restaurant. When
the counterparty provides us with various ingredients (information), we then identify and process these
ingredients (information) to make customized meals (schemes) based on different taste requirements.”
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Opportunities and Challenges
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Although Zhiyuan performed well (see Exhibits 1 and 2), it faced practical challenges that significantly
hindered its business growth. On one hand, assessing the credit risk of financing enterprises proved to be
difficult, so financial institutions were less willing to participate in supply chain finance. Despite Zhiyuan’s
capabilities in professional risk analysis and business scenario deconstruction, since the company could not
ensure the authenticity of information from all parties involved in a transaction, it constrained their finance
transactions between banks and enterprises. On the other, credit was usually extended by core enterprises only
to their first-tier suppliers, excluding other levels. This practice greatly limited the company’s ability to
provide financial services to these customers. Without a dedicated service platform, the company struggled to
integrate information from the entire supply chain, resulting in a lack of transparency in transaction-related
information.17 And since establishing a credit system for the entire supply chain posed challenges, Zhiyuan
was limited to serving only adjacent upstream and downstream enterprises, which excluded some enterprises
in the supply chain that lacked credit endorsements and faced difficulties in self-certification.18
Fund-strapped companies required low-cost supply chain financial products, while financial institutions
sought corporate customers with high turnover and consistent growth. As a result, developing a “risk control”
mode, with a dual intervention combining labour and technology to ensure authenticity and improve
efficiency, became a key factor for supply chain financial service providers like Zhiyuan to stand out among
its competitors. 19 Undoubtedly, the role of supply chain financial service platforms had been continually
strengthened due to customers’ increasing financing demands and risk management requirements.20
tC
Zhiyuan could demonstrate its advantages if it could transform to a digital supply chain financial service
provider by developing a data and technology-powered platform. First, the company had expertise in
deconstructing specific supply chain business scenarios that could support its transformation. With years
of experience in the traditional supply chain finance business, the company had built a substantial customer
base across various industries. These customer resources and the collected data gave Zhiyuan a
comprehensive understanding of its customers and industries. With that knowledge, the company could
offer data-driven digital supply chain financial services facilitated by new technologies. Furthermore,
Zhiyuan could use its knowledge of supply chain financing needs and concerns to analyze and extract data
from industries, enterprises, and banks to provide tailored services through digital technology.
Do
No
Second, Zhiyuan had advantages in innovating supply chain financial service models. Siyao Song stated,
“Since supply chain finance is a small business for banks, currently, there are very few customer managers
who have worked on supply chain finance and understand how to flexibly combine supply chain financial
products. We must guide them in conducting supply chain financing business and avoiding rigid
combinations of financial products to improve financing effectiveness.” The company’s decision makers
believed that traditional financing was like flood irrigation, while supply chain finance operated as drip
irrigation. Compared with traditional credit, supply chain finance introduced external funds and invested in
the supply chain business through specific business scenarios, emphasizing self-repayment. The entire
supply chain’s repayment source and stability were crucial considerations. Zhiyuan could establish a
comprehensive early warning, monitoring, and management mechanism that assisted banks and enterprises
with innovating supply chain financial modes through tailored and professional services.
Third, Zhiyuan could leverage its competitive advantages to integrate resources and address the business
needs of multiple industries and overcome regional barriers in transactions. Through its digital financial
platform, the company could seamlessly connect with the ERP systems of core enterprises across various
industries, including logistics and warehousing, e-commerce platforms, liquor, pharmacy, and car dealers. By
leveraging data mining from transaction orders, procurement contracts, and warehousing and transportation
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activities between core enterprises and upstream/downstream SMEs, Zhiyuan could design customized
financing schemes and optimize operations management methods for its customers. Siyao Song highlighted
that, “The China Banking and Insurance Regulatory Commission stipulates that banks’ offline businesses are
subject to territorial jurisdiction. For example, banks in Chengdu can only make loans to businesses registered
in Chengdu. However, through online channels, banks in Chengdu can connect with businesses in other
regions and issue loans in Chengdu. While these operations cannot be done offline, the introduction of online
business allows us to reap such benefits.” Thus, by developing a digital financial platform, Zhiyuan could
introduce high-quality customers to its cooperative financial institutions while providing efficient and highquality financial support to industrial customers, resulting in a win-win for all parties involved.
However, introducing a digital supply chain financial service platform would also present challenges for
Zhiyuan, including competition from rivals and significant changes in its business operations.
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Compared with several main companies in China’s digital supply chain financial services sector such as
Tencent and CITIC Capital, Zhiyuan lacked strong major shareholders. Hence, Zhiyuan was unable to
obtain sufficient technical and financial support in R&D, especially in the field of supply chain finance
solutions based on FinTech, as Linklogis had done. Although the company had accumulated rich business
experience in multiple industries, its resources in a specific industry were not equal to Glodon’s in the
construction industry. Further, from the perspective of comprehensive service capabilities, Zhiyuan would
find it very difficult to achieve as many service product lines, excellent operational level, and high brand
awareness as Eternal Asia in the short term.
tC
Clearly, a gap remained between Zhiyuan and its potential competitors in technology, resources, capabilities,
and other aspects. So, Zhiyuan had to find a suitable digital transformation roadmap for traditional supply
chain financial services. And the company had to consider how to generate sufficient revenue to cover the
operating costs associated with serving multiple firms in different industries while gaining a competitive
advantage through differentiated service product design and flexible industry service modes.
No
The digital supply chain financial service platform would also be a comprehensive project, involving the
digitization of the entire supply chain rather than just the internal enterprise informatization. This presented
not only technological challenges but also would bring changes and potential disruptions in business models.
Participating companies in the platform would need to reconcile conflicts between the old and new systems,
given the potential changes in traditional procurement, production, sales, management, and finance processes.
Moreover, enterprises with a high degree of traditional informatization would face particular difficulties due
to the incompatibility between their existing informatization models and the upcoming platform.
ALTERNATIVES FOR ZHIYUAN’S DIGITAL TRANSFORMATION
Do
Zhiyuan encountered difficulties with its traditional supply chain financial service business because it
lacked core competitiveness and faced increasing competitive pressure in the market. In early 2020, the
company made the decision to explore opportunities for digital transformation. After researching its
competitors, industry conditions, and its own capabilities, Zhiyuan proposed two initiatives for its digital
transformation: focus on small but specialized businesses or provide comprehensive services.
Zhiyuan considered transforming into a small but specialized supply chain financial service provider,
similar to Linklogis, which primarily offered supply chain finance asset-backed securities products payable
by core enterprises.21 Linklogis chose this specific entry point and worked toward achieving the largest
scale in China. Linklogis’ success was attributed to implementing its multi-stage circulation system in large
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companies such as the Bank of Shanghai, China Chemical, and Zijin Mining. With technology-enabled
services and an effective organizational structure, Linklogis successfully interpreted the “speed economy”
and became a listed company on the Hong Kong Stock Exchange within five years. Given the company’s
experience in designing supply chain financial products in industries like liquor, if Zhiyuan built a supply
chain FinTech service platform by first piloting supply chain-based SME financing services in targeted
industries, it would be less risky and more likely to develop rapidly. Once the business was stable and
mature, Zhiyuan could replicate and expand the successful business model into other industries.
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But since Zhiyuan had served a wide range of industries over the years, including steel, automotive,
pharmaceutical, telecommunications, construction, advertising, and logistics, they considered whether
transforming into an all-inclusive supply chain financial service provider would be competitive and
promising. While covering a broader range of business areas could help the company avoid missing market
opportunities and secure a larger market share early on, it would also require more investment capital,
labour power, time, and other resources. This could potentially create operational pressure that might
restrict Zhiyuan’s development speed and future growth. 22 Therefore, the company’s decision makers
would have to carefully assess the two initiatives’ advantages and disadvantages.
In the face of intense competition, Zhiyuan had to cautiously consider its next steps in developing a digital
transformation strategy for long-term success and sustainability. Although supply chain enterprises had
successfully leveraged digital technology to develop their businesses across a variety of industries, integrating
digital technology and supply chain financial services remained a challenging journey for any company.
IMPLEMENTATION OF ZHIYUAN’S DIGITAL TRANSFORMATION
tC
To successfully transform into a digital supply chain financial service provider, Zhiyuan intended to further
enhance its advantages and core competitiveness by developing a “smart and win-win” service platform
with a range of diverse products.
Developing a Digital Service Platform
No
Zhiyuan recognized that in developing a digital service platform it could address various issues encountered
in traditional supply chain financial services. Zhiyuan could tackle challenges like loan fraud, providing
targeted financing solutions across supply chain levels, streamlining fund transaction settlements, and
increasing the willingness of fund providers to participate by mitigating risks. As Zhengting Chen observed,
“Data are a market-configurable resource, and clean and reliable data are an important core asset in the future.”
Do
Zhiyuan had several options for the platform’s design and R&D. At the resource input level, the company
would formulate a detailed product roadmap (see Exhibit 8) and a phased plan. The time schedule and
capital costs involved in platform R&D would be carefully controlled within an economically feasible range
through professional evaluation. Zhiyuan would establish an experienced core team and consult with
experts from universities, financial institutions, and industry associations.
At the business level, Zhiyuan could leverage its understanding and familiarity with R&D, material
procurement, production, distribution, and logistics in multiple industries such as automobile, pharmacy,
telecommunications, construction, liquor, and catering, to incorporate key business node information into
the platform’s data to achieve business digitalization. This would include integrating data such as valueadded tax invoices, purchase and sales contracts, certificates of conformity, and quality inspection reports
for pledged property in the inbound and outbound process of movable property pledge financing.
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On the technical level, the platform would support the integration of approximately 100 types of ERP
systems, covering over 95 per cent of Zhiyuan’s customers. The company would utilize Alibaba’s Ant
Blockchain technology as its digital platform’s underlying architecture, which would be responsible for
developing the core application and data analysis for the upper layer. Through strategic partnerships with
renowned companies such as Ant Credit, Alipay, and JD Digits, Zhiyuan would deploy an open and
transparent online platform using SaaS cloud services to facilitate user access.
Design of Multiple Product Categories
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Zhiyuan believed that supply chain financial service offerings should be tailored to an enterprise’s actual
business scenario and guided by its financing needs. To achieve this, the company aimed to design a digital
supply chain service platform with various product categories, providing customers with diverse choices.
Zhiyuan focused on addressing traditional supply chain financial services’ pain points in proposing five
digital service products based on a modular design approach (see Exhibit 8).
The core product list included “Zhiyi Management,” “Zhiyi Finance,” and “Zhiyi Pay.” Zhiyi Management
would ensure transaction authenticity and overcome Zhiyuan’s challenges in data management and risk
management. Zhiyi Finance would address the limitations of financing across different levels of the supply
chain for upstream and downstream enterprises. Zhiyi Pay would cope with the issues of complex multichannel payment processes and time-consuming reconciliation.
In addition, the accessory product list featured “Zhiyi Insurance” and “Zhiyi Life.” These two products
would help Zhiyuan expand the functionalities of its core products and cater to its future development
needs, such as insurance brokerage and consumer finance businesses.
tC
Core Product List
No
In the core product list, Zhiyi Management was the foundational component of Zhiyuan’s digital platform.
It connected to the underlying Ant Blockchain and aggregated business data from supply chain members.
Zhiyi Pay managed the trading account and fund settlement through collaboration with payment companies.
By mining data from Zhiyi Management and Zhiyi Pay, Zhiyi Finance could execute advanced applications.
And Zhiyi Management could access fund data and account information from Zhiyi Pay. Only Zhiyi Pay
users could benefit from the Zhiyi Finance’s assistance since online electronic payment was essential.
Do
Before 2021, Zhiyi Management would be integrated into the digital service platform utilizing the Ant
Blockchain’s interface to connect all involved parties and upload business data to the blockchain. This
would enable the collection, querying, and comparison of goods’ storage status or location data (e.g.,
purchase order data, inventory data, shipment data, and transportation data) as well as acquiring transaction
data from Zhiyi Pay. Zhiyi Management would ensure data visibility, mutual verification, tamper resistance,
and automatic storage across systems and levels, not limited to immediate firms of core enterprises, among
supply chain members. Moreover, by analyzing transaction data (such as total volume of goods, total
amount of funds, and quantity of goods and funds per order) and establishing scoring models based on
algorithms, Zhiyi Management could assist in preventing loan fraud, providing credit enhancement support,
and offering risk warnings for financing.
Zhiyi Finance was expected to be completed and tested between 2021 and 2023. By processing and learning
transaction data from Zhiyi Management and Zhiyi Pay, Zhiyi Finance could analyze potential funding
needs and deconstruct business scenarios across different levels of the supply chain. Zhiyi Finance could
also cross-compare financial data, order data, and shipment data at key business nodes to build enterprise
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credit profiles by tracing data objects automatically. This would help financial institutions delve deeper into
the businesses to better identify and evaluate financing risks. As a result, banks and non-bank financial
institutions could utilize the credit support of core enterprises to provide customized financial products for
all participants in various industries within the supply chains. Thus, Zhiyuan could achieve precise
matching between financing needs and funding supply, thereby increasing financial institutions’ enthusiasm
to participate in financing.
Accessary Product List
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Zhiyi Pay was scheduled to debut in June 2022. By establishing a payment gateway to incorporate multiple
payment acquisition channels such as UnionPay, Alipay, and WeChat Pay, Zhiyi Pay could facilitate
intelligent fund account management and digitize settlement processes. This would include features such
as online electronic account opening and signing, automatic account reporting, automatic cash sweep,
automatic payment calculation, electronic invoice sending, automated reconciliation, and report generation.
Zhiyi Pay would significantly reduce errors resulting from manual operations.
To diversify supply chain financial risks and reduce default losses, Zhiyi Insurance was expected to be
completed in 2023. With its own insurance brokerage licence, Zhiyi Insurance would collaborate with
insurance companies such as Jintai Insurance and PICC Property Insurance to offer comprehensive
insurance plans and products for core enterprises and other firms, such as operators’ vehicle insurance,
corporate property insurance, public liability insurance, employer liability insurance, performance bond
insurance, borrower accident insurance, and other property insurance.
tC
In order to enhance consumer loyalty and prepare for future online consumer financial services, Zhiyi Life
was planned to be completed in 2024 and begin operations in 2025. It would provide consumers convenient
online daily services such as travel, shopping, medical care, and housing rental.
No
These five products would provide significant benefits for Zhiyuan’s digital supply chain financial service
platform. In offering these products, Zhiyuan could effectively address the challenges in traditional supply
chain financial services. Furthermore, considering both current and long-term needs, adopting various
product combinations would help the company navigate the intense market competition and rapidly
changing consumer needs. And this approach would contribute to the company’s healthy development and
establish its core competitiveness.
Building Industry Service Modes to Match Digital Transformation Initiatives
Do
Given the proposed service products, Zhiyuan considered the following three industry service modes by
employing various product mix strategies. The modes of commodity specialization and market
specialization aligned with the initiative of focusing on small but specialized businesses for its digital
transformation; the full coverage mode with providing comprehensive services.
Commodity Specialization Mode
The commodity specialization mode would specifically target commodities such as building materials and
liquor. Since the common financing mode for these commodities typically was inventory pledges, a suitable
service product mix would comprise only Zhiyi Management and Zhiyi Pay. Under this mode, the supply
chain intelligence platform would play a crucial role in synchronizing the commodity owner’s real-time
purchase data with logistics and warehousing data. By providing daily inspection services for the value of
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outbound/inbound goods, the platform would help control the risk of fraud resulting from the collusion
between logistics enterprises and fund demanders in inventory pledge financing, thereby reducing losses
for fund providers. Through collaborations with banking institutions to manage inventory and warehouse
receipt pledges, a comprehensive supply chain management service system would be established,
encompassing specific commodities, the supply chain FinTech platform, and commercial banks.
Market Specialization Mode
Full Coverage Mode
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The market specialization mode would focus on the wholesale market of agricultural products, which
involved a wide range of items and diverse financing needs. Under this mode, a service product mix would
include Zhiyi Management, Zhiyi Pay, and Zhiyi Finance, with the possibility of adding Zhiyi Insurance.
Zhiyuan’s supply chain management system would be launched through the online “agricultural product
procurement platform,” while an aggregated receipt system would be developed for the offline “agricultural
market.” Zhiyuan aimed to expand its business to cover upstream and downstream transactions that linked
the agricultural industry chain, acquired real transaction data from the supply chain, and provided financing
services to customers across different tiers in agricultural supply chains. The goal was to achieve a threein-one supply chain management service system that integrated the agricultural industry, the supply chain
FinTech platform, and commercial banks.
tC
The full coverage mode aimed to provide comprehensive services for the entire retail supply chain,
including the end consumers in sectors such as liquor, drugs, and consumer electronics. To achieve this,
Zhiyuan had to consider a mix that incorporated all five service products mentioned earlier. Under this
mode, the company would support online purchasing by retail chain stores from upstream suppliers,
enabling real-time synchronization of order purchase data to be shared with banks. The banks would then
provide purchase advance services to the stores and facilitate payment to suppliers. And Zhiyuan would
offer value-added insurance services to enterprises and daily life services to consumers, forming a four-inone supply chain management service system that included consumers, retail supply chains, the supply
chain FinTech platform, and commercial banks.
No
Zhiyuan had to carefully assess the advantages and disadvantages of these industry service modes based on
the possible service product mixes. Developing a detailed plan and determining an appropriate development
roadmap were critical considerations for Zhiyuan in this regard.
NEXT STEPS
Do
Zhiyuan had set its expectations on creating supply chain finance industry solutions for its supply chain
partners by integrating system development, product design, and risk control. It also aimed to integrate its
major service products through blockchain and IoT technology. By doing so, the company envisioned that
SMEs and core enterprises in the supply chains could endorse and interconnect while expanding the
business networks using the creditworthiness of large enterprises to support SMEs’ financing. This
approach would help Zhiyuan to overcome information asymmetry, reduce trust costs, optimize capital
allocation, and alleviate financing difficulties. Ultimately, these efforts would inject new vitality into
Zhiyuan’s development.
This case was funded by the National Natural Science Foundation of China (Grant Nos. 71972158 and 71901181),
and China Scholarship Council (No. 202106980012). Wei Li is the corresponding author on this case.
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70%
66%
98
60%
80
80
40%
60
60
48
40
20
25%
20%
15
0
2013
30%
33%
40
25
2014
2015
2016
Number of members
60%
50%
22.5%
op
yo
Number of menmbers
100
2017
2018
20%
YoY Growth(%)
120
rP
os
EXHIBIT 1: MEMBERS OF ZHIYUAN, 2013–2019
10%
0%
2019
YoY Growth(%)
Note: YOY = year over year.
Source: Created by the case authors using data from Zhiyuan’s internal reports.
EXHIBIT 2: ANNUAL REVENUE GROWTH RATE OF SUPPLY CHAIN FINANCE BUSINESS IN CHINA
AND ZHIYUAN, YEARS 2014–2019
tC
30%
16%
19%
16%
12%
17%
7%
10%
7%
0%
10%
5%
8%
5%
-10%
No
YoY Growth(%)
20%
-20%
-30%
-40%
-40%
-50%
2014
2015
2017
2018
2019
TRADITIONAL AND DIGITAL GR
Do
ZHIYUAN'S GR
2016
Note: GR = Growth rate, traditional and digital; GR = annual revenue growth rate of traditional companies and digital enterprises.
Source: Created by the case authors using data from Zhiyuan’s internal reports and the 2020 China Logistics and Supply
Chain Finance Development Report [in Chinese] (Beijing: China Fortune Press, 2020).
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Revenue of Zhiyuan(¥ ten thousand)
1,000
rP
os
EXHIBIT 3: TOTAL REVENUE OF ZHIYUAN, YEARS 2013–2019
860
900
800
740
700
620
580
600
860
540
500
500
400
op
yo
300
200
100
0
2013
t
Page 11
2014
2015
2016
2017
2018
2019
Note: ¥ = CNY = Chinese yuan renminbi; gross operating revenue was from 2013 to 2019.
Source: Created by the case authors using data from Zhiyuan’s internal reports.
EXHIBIT 4: MARKET SIZE OF SUPPLY CHAIN FINANCE IN CHINA, 2016–2019
14.9%
23.1
16.0%
14.0%
20.1
18.4
12.0%
16.7
10.2%
15
10
9.2%
10.0%
8.0%
6.0%
YoY Growth (%)
20
No
Supply chain finance market size
(¥ trillion)
tC
25
4.0%
5
0
0.0%
2019
YoY Growth (%)
Do
2016
2017
2018
Supply chain finance market size (¥ trillion)
2.0%
Note: ¥ = CNY = Chinese yuan renminbi; YOY = year over year.
Source: Created by the case authors using data from “Supply Chain Finance Industry Development Prospects and Scale Analysis
in 2022,” [in Chinese], Zhiyanzhan Industry Research Institute, July 6, 2022, https://www.zhiyanzhan.cn/analyst/1182.html.
This document is authorized for educator review use only by Nguyen Thi Quynh Nga, Foreign Trade University until May 2025. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
W34640
t
Page 12
6.90%
17.24%
rP
os
EXHIBIT 5: PROPORTION OF COMPANIES LAUNCHING
DIGITAL SUPPLY CHAIN FINANCE OVER TIME
10.34%
op
yo
24.14%
41.38%
2005-2008
2009-2012
2013-2016
2017-2020
Not explored as of 2020
Source: Created by the case authors using data from “2022 China Logistics and Supply Chain Finance Digital Development
Report” [in Chinese], NetEase, June 7, 2022, https://www.163.com/dy/article/H99KTAQ00512AE4K.html.
24.3%
2.0
29.2%
2.2
40.0%
2.2
25.2%
1.8
20.0%
-2.6%
1.4
1.5
1.1
0.0%
-20.0%
1.0
No
Revenue (¥ million)
2.5
0.5
-40.0%
-59.8%
-60.0%
0.0
2015
YoY Growth (%)
tC
EXHIBIT 6: REVENUE OF GLODON SUPPLY CHAIN FINANCE BUSINESS, 2015–2019
-80.0%
2016
2017
Revenue (¥ million)
2018
2019
YoY Growth (%)
Do
Note: ¥ = CNY = Chinese yuan renminbi; YOY=year over year.
Source: Created by the case authors using data from Glodon Software Company Limited, 2015 Annual Report [in Chinese],
April 1, 2016, http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?bc0e8acc-e3dd-43d6-8ef0-2ab4964b8615;
Glodon Company Limited, 2016 Annual Report [in Chinese], April 1, 2016, c88e4f-eb45-43c8-87ab-439ca22afda2; Glodon
Company Limited, 2017 Annual Report [in Chinese], March 29, 2018, http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?
9f57028e-f4ba-4a30-a5bb-9058f05a33dc; Glodon Company Limited, 2018 Annual Report, of Glodon Company Limited,”
March 27, 2019, https://glodon-en2021.oss-ap-southeast-1.aliyuncs.com/uploads/public/614/2e6/e6b/6142e6e6b1f12389127460.pdf;
Glodon Company Limited, 2019 Annual Report, March 24, 2020, https://glodon-en2021.oss-ap-southeast-1.aliyuncs.com/
uploads/public/60e/bb4/eac/60ebb4eac12a8527728656.pdf.
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t
Page 13
rP
os
EXHIBIT 7: REVENUE OF SUPPLY CHAIN FINANCE BUSINESS
IN ETERNAL ASIA, 2016–2019
12.0
1000.0%
891.6%
8.0
YoY Growth (%)
800.0%
9.6
600.0%
6.0
400.0%
4.0
21.5%
31.3%
2.0
1.0
0.0
2016
1.1
op
yo
Revenue (¥ million)
10.0
1.4
-88.1%
2017
2018
Revenue (¥ million)
200.0%
0.0%
-200.0%
2019
YoY Growth (%)
Note: ¥ = CNY = Chinese yuan renminbi; YOY = year over year.
Source: Created by the case authors using data from Eternal Asia, 2016 Annual Report [in Chinese], April 28, 2017,
http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?e81b15e7-cee7-4ba3-8527-0718e39dc52b; Eternal Asia, 2017
Annual Report [in Chinese], April 20, 2018, http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?31c312a4-a00d-4f34b07d-889496433e94; Eternal Asia, 2018 Annual Report [in Chinese], May 11, 2019, http://www.szse.cn/disclosure/listed/
bulletinDetail/index.html?6abd9af2-61b6-423c-8584-32b9f119279d; Eternal Asia, 2019 Annual Report [in Chinese], April 8,
2020, http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?76dc6398-042e-4c64-ad16-cbf789ab9c72.
tC
EXHIBIT 8: PRODUCT COMPOSITION OF DIGITAL SUPPLY CHAIN
FINANCIAL SERVICE PLATFORM
Accessary Products
Zhiyi
Finance:
Provide
support for the
financing
scheme
design
No
Extension
Zhiyi
Insurance:
Diversify
financial risks
and reduce
default losses
Data
acquisition
Do
Zhiyi
Management:
Responsible
for data
management
Zhiyi Life:
Enhance
consumer
stickiness and
consumer
finance
Extension
Big
data
analytics
Financial
Project
advisory
risk
management management
Ensuring the
authenticity of
transactions
Data
acquisition
Core
Addressing pain points in traditional supply chain financial
Products
services
Zhiyi Pay:
Account
management
and fund
settlement
Support
cross ERP
system
integration
Data
acquisition
SAAS
cloud
service
deployment
Blockchain
and IoT as
underlying
architecture
Financing for
customers across
tiers
Simplifying the
payment and
reconciliation
Fintech
providers
Supply chain
enterprises
Financial
institutions
Insurance
agency
External Partners
Source: Created by the case authors based on Zhiyuan’s internal reports.
This document is authorized for educator review use only by Nguyen Thi Quynh Nga, Foreign Trade University until May 2025. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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t
Page 14
rP
os
ENDNOTES
Hai Xiao, "Big Point! Digital Thinking Has Been Integrated into the ‘Blood" of Supply Chain Finance’” [in Chinese],
Wanlianwang, May 20, 2022, https://www.10000link.com/gyljr/newsdetail.aspx?doc=2022052090002.
2
¥ = CNY = Chinese yuan renminbi; US$1=¥7.25 on July 1, 2023; “Company Overview,” Zhiyuan Digital Finance Information
Technology, accessed July 10, 2023, https://www.zhihuigyl.com/.
3
“2013–2018 Deep Research and Investment Prospect Report on China Supply Chain Finance Industry” [in Chinese], CIR,
May 12, 2022, https://www.cir.cn/DiaoYan/2012-09/yinxinggongyinglianjinrongfazhanshen.html.
4
“2022 China Logistics and Supply Chain Finance Digital Development Report” [in Chinese], NetEase, June 7, 2022,
https://www.163.com/dy/article/H99KTAQ00512AE4K.html.
5
iResearch Consulting Group, “2019 China's Blockchain + Supply Chain Finance Report” [in Chinese], Docin, May 13, 2020,
https://www.docin.com/p-2361610560.html?docfrom=rrela.
6
“Supply Chain Finance Industry Development Prospects and Scale Analysis in 2022” [in Chinese], Zhiyanzhan Industry
Research Institute, July 6, 2022, https://www.zhiyanzhan.cn/analyst/1182.html.
7
“Supply Chain Finance Awakens and Moves Forward in 2016” [in Chinese], iyiou, last updated September 3, 2017,
https://www.iyiou.com/news/2017030940629.
8
iResearch Consulting Group, “2018 China’s Supply Chain Finance Industry Report” [in Chinese], Docin, January 10, 2021,
https://www.docin.com/p-2576212128.html.
9
iResearch Consulting Group, “2022 China’s Supply Chain Digital Upgrade Industry Research Report” [in Chinese],
iResearch, May 23, 2022, https://www.iresearch.com.cn/Detail/report?id=3998&isfree=0.
10
“Supply Chain Finance Awakens and Moves Forward in 2016.”
11
“Company Overview,” Linklogis, n.d., https://www.linklogis.com/en/about.
12
Linklogis Inc., Annual Report 2021, March 29, 2022, https://ir.linklogis.com/static/investor/financialReports/ANNUAL
%20REPROT%202021.pdf.
13
Glodon Software Company Limited, 2015 Annual Report [in Chinese], April 01, 2016, http://www.szse.cn/disclosure/
listed/bulletinDetail/index.html?bc0e8acc-e3dd-43d6-8ef0-2ab4964b8615.
14
Glodon Company Limited, 2016 Annual Report [in Chinese], April 01, 2017, http://www.szse.cn/disclosure/listed/
bulletinDetail/index.html?89c88e4f-eb45-43c8-87ab-439ca22afda2.
15
“Eternal Asia: The Road to Supply Chain Digitization in China” [in Chinese], China Financial Times, January 30, 2019,
https://baijiahao.baidu.com/s?id=1624049421960029783.
16
Jean Murray, “Inventory Financing and How it Works,” The Balance, October 18, 2019, https://www.thebalancemoney.com/
what-is-inventory-financing-398052; “What is Advance Payment Financing,” IGI GLOBAL, May 18, 2022, https://www.igiglobal.com/dictionary/a-general-introduction-and-overview-of-supply-chain-finance/69699; Fanghua. “China Supply Chain
Finance Enterprise Ranking in 2018” [in Chinese], eNet&Ciweek, August 15, 2018. http://www.enet.com.cn/article/2018/
0815/A20180815052519.html.
17
Viacheslav Oganezov, “Lessons of Supply Chain Finance Transparency,” FINVERITY, May 20, 2021, https://finverity.com/
insights/lessons-of-supply-chain-finance-transparency.
18
Anita Hawser, “World’s Best Supply Chain Finance Providers 2020,” Global Finance, February 5, 2020, https://www.gfmag.com/
magazine/february-2020/worlds-best-supply-chain-finance-providers-2020.
19
“Digital Supply Chain, Supply Chain Management and Supply Chain Finance” [in Chinese], Sohu, September 3, 2019,
https://www.sohu.com/a/338632817_761214.
20
Bing Li, “The Role of Financial Institutions in the Fintech Market Is Increasing and the Construction of Risk Control Is Still
Facing Challenges” [in Chinese], Securities Daily, October 29, 2021, https://baijiahao.baidu.com/s?id=17149489165762345
86&wfr=spider&for=pc.
21
“Company Overview,” Linklogis, n.d., https://www.linklogis.com/en/welcome.
22
Anita Hawser, “World’s Best Supply Chain Finance Providers 2022,” Global Finance, January 30, 2022,https://www.gfmag.com/
magazine/february-2022/worlds-best-supply-chain-finance-providers-2022.
Do
No
tC
op
yo
1
This document is authorized for educator review use only by Nguyen Thi Quynh Nga, Foreign Trade University until May 2025. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860