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Contents

1. BlockChain........................................................................................................................................... 2
What is BlockChain?............................................................................................................................ 2
Short pitch:...................................................................................................................................... 2
Technical Definition: ....................................................................................................................... 2
Block Chain Advantages: ................................................................................................................. 2
Block Chain Disadvantages: ............................................................................................................ 3
BlockChain Types: ........................................................................................................................... 3
2. Sustainability ....................................................................................................................................... 3
Sustaibality .......................................................................................................................................... 3
What is Sustainability / sustainable development? ........................................................................ 3
Sustainable Development Goals ..................................................................................................... 3
Triple bottom line ........................................................................................................................... 4
Greenwashing ................................................................................................................................. 4
PNB Fraud ............................................................................................................................................... 4
What is the fraud allegation about? ................................................................................................... 5
How did the PNB fraud come to light? ............................................................................................... 5
1. BlockChain

What is BlockChain?

Short pitch:

You (a "node") have a file of transactions on your computer (a "ledger"). Two government
accountants (let's call them "miners") have the same file on theirs (so it’s "distributed"). As you
make a transaction, your computer sends an e-mail to each accountant to inform him or her.

Each accountant rushes to be the first to check whether you can afford it (and be paid their salary
"Bitcoins"). The first to check and validate hits “REPLY ALL”, attaching their logic for verifying the
transaction ("Proof of Work"). If the other accountant agrees, everyone updates their file…This
concept is enabled by "Blockchain" technology.
Technical Definition:

A Blockchain is a digital, immutable, distributed ledger that chronologically records transactions in


near real time. The prerequisite for each subsequent transaction to be added to the ledger is the
respective consensus of the network participants (called nodes), thereby creating a continuous
mechanism of control regarding manipulation, errors, and data quality.

Block Chain Advantages:


1. immutability > Data integrity > reduces fraud
2. Transparency
3. Reduced transaction costs
4. Faster transaction settlements. Due to security protocols, conventional banks verify
transactions only during working hours or so
5. Decentralized > empowered users > No central authorithy
6. Ecosystem simplification
Block Chain Disadvantages:
1. Signature verification – Computationally complex
2. Consensus mechanism – More efforts to reach consensus among the node of distributed
database
3. Redundancy – In centralized database, transactions are processes only once, but in
blockchain every node process the transaction
BlockChain Types:
1. Public 2. Permissioned 3. Private

2. Sustainability

Sustaibality
What is Sustainability / sustainable development?
Sustainable development is the organizing principle for meeting human development goals while at
the same time sustaining the ability of natural systems to provide the natural resources and
ecosystem services upon which the economy and society depend.

To be sustainable, a process must not ...


1. Use energy faster than it can be replenished
2. Use material resources (fossil fuels) faster then they can be replenished.
3. Pollute faster than the polluted system can clean itself.
Sustainable Development Goals
The Sustainable Development Goals (SDGs) are a collection of 17 global goals set by the UN.
The broad goals are interrelated though each has its own targets to achieve. The total number of
targets is 169.

The SDGs cover a broad range of social and economic development issues. These include

1. No poverty 10. Reduced Inequalities


2. Zero hunger 11. Sustaining cities and communities
3. Good health and well being 12. Responsible consumption and
4. Quality Education production
5. Gender Equality 13. Climate Action
6. Clean Water and Sanitation 14. Life below Water
7. Affordable and Clean energy 15. Life on Land
8. Decent work and Ecnomic growth 16. Peace, Justice and Strong Institution
9. Industry, Innovation and Infrastructure 17. Partnership for the Goals

 The SDGs are also known as "Transforming our World: the 2030 Agenda for Sustainable
Development" or 2030 Agenda in short.
 The goals were developed to replace the Millennium Development Goals (MDGs) which
ended in 2015.
 Unlike the MDGs, the SDG framework does not distinguish between "developed" and
"developing" nations. Instead, the goals apply to all countries.
Triple bottom line
 Triple bottom line (or otherwise noted as TBL or 3BL) is an accounting framework with three
parts: social, environmental (or ecological) and financial.
 For example, if a corporation shows a monetary profit, but their asbestos mine causes
thousands of deaths from asbestosis, and their copper mine pollutes a river, and the
government ends up spending taxpayer money on health care and river clean-up, how do
we perform a full societal cost benefit analysis? The triple bottom line adds two more
"bottom lines": social and environmental (ecological) concerns.
Greenwashing
 a form of spin in which green PR or green marketing is deceptively used to promote the
perception that an organization's products, aims or policies are environmentally friendly
 Example : the hotel industry's practice of placing placards in each room promoting reuse of
towels ostensibly to "save the environment." Westervelt noted that, in most cases, little or
no effort toward reducing energy waste was being made by these institutions—as evidenced
by the lack of cost reduction this practice effected.

3. PNB Fraud

India’s Punjab National Bank (PNB), the second-biggest public sector lender, stunned the country’s
financial sector when it announced this Feb 2018, it had discovered fraudulent transactions worth
$1.77 billion (about Rs11,400 crore) at a single branch in Mumbai.

This comes at a time when PSU banks are already facing Rs.10 trillion bad loans on their book

Despite tight fiscal conditions, the government recently gave Rs88,000 crore to ailing PSU banks as
part of a broader $32 billion bank recapitalisation plan.
The banking sector also faces higher capital requirements by next year to meet new global banking
rules known as Basel III.

What is the fraud allegation about?

On 29 January, a PNB official from Mumbai filed a criminal complaint with India’s CBI against 3
companies and 4 people, including billionaire jeweller Nirav Modi and Mehul Choksi, the MD of
Gitanjali Gems Ltd, saying they had defrauded the bank and caused a loss of Rs280 crore ($43.8
million).

Nirav Modi. Mehul Chowski

The bank alleged two junior employees at the Mumbai branch had helped the companies and
people managing them get “letters of undertaking” (LoUs) from it without having a sanctioned
credit limit or maintaining funds “on margin”.

The LoUs were used to obtain short-term credit from overseas branches of other Indian banks, PNB
said.

PNB said in a regulatory filing it had discovered fraudulent and unauthorised transactions totalling
Rs11,400 crore at the Mumbai branch.

How did the PNB fraud come to light?


PNB says that on 16 January the accused firms presented a set of import documents to the Mumbai
branch and requested buyers’ credit to pay overseas suppliers. Since they had no pre-arranged
credit limit, the branch official asked the companies to put down the full amount as collateral so the
bank could issue LoUs to authorize the credit.

When the firms argued that they had used such facilities in the past without keeping any money on
margin, PNB scanned through records and found no trace of any transactions, according to the
bank’s account.

It then found that two junior employees had issued LoUs on the SWIFT interbank messaging
system without entering the transactions on the bank’s own system (Core Banking System –
Infosys’s Finacle Software). Such transactions went on for years without detection, PNB said.

Who are the people and companies accused of involvement and


what have they said?

PNB has accused three companies—

1. Solar Exports,
2. Stellar Diamonds
3. Diamond R US

it said belong to Nirav Modi, a high-end jeweller who runs his eponymous Nirav Modi stores that
spread from New York to Hong Kong.

Modi is worth $1.73 billion according to Forbes rankings.

Modi’s companies colluded with the bank staff, PNB said, adding that it suspected some officials at
foreign branches of other Indian banks that extended credit were also involved.

It also named Gitanjali Gems, Gili India and Nakshatra — companies promoted by another jeweller,
Mehul Choksi, who is Modi’s uncle.

Gitanjali last week denied Choksi had any involvement with the alleged fraud, saying he would take
“necessary legal steps” to get his name removed from the CBI case.

Modi has not commented on the case. His flagship Firestar Diamond has said it had no involvement.

PNB said it has begun criminal action against two staff members and suspended some others.
Reuters was not immediately able to contact the two staff members.

What are the authorities doing?

Federal investigators swung into action on Thursday, conducting searches at PNB branches and also
at Nirav Modi’s home and offices, local media said.

The finance ministry has issued an advisory to all banks to review their large customer exposures,
according to media reports. The Enforcement Directorate, which investigates frauds involving
foreign exchange transactions, was also conducting a probe, Mint newspaper said.

Who assumes the liability?


PNB has said the transactions are “contingent” in nature, and it will decide on the liability based on
the law and the genuineness of underlying transactions.

Banking sources have said several other banks who have extended loans based on the PNB LoUs that
were later found to be fraudulent are at risk of losing money.

Some of the banks say PNB is liable to pay since it issued the LoUs, although PNB, in a 12 February
“caution notice” addressed to chief executives of 30 banks, including two foreign banks, said the
other banks also have a share in the blame as they “overlooked” certain Indian central bank rules.

It also said none of the overseas branches of India-based banks had shared with PNB any documents
or information at the time of extending buyers’ credit to the companies.

PNB said Nirav Modi had written to the bank but had yet to offer any formal proposal for a
repayment. Reuters

In a letter to the chiefs of several banks, a general manager of PNB said the letters of undertakings
(LoUs) are were opened in favour of branches of Indian banks for import of pearls for a period of
one year, for which the Reserve Bank of India (RBI) guidelines stipulate a total time period of 90
days from the date of shipment.“This stipulation was overlooked by overseas branches of Indian
banks that are also required to follow the RBI guidelines.
LoU fraud, the key
The latest fraud uses an age-old method employed to defraud the banking system. It involved LoUs
raised at the PNB’s Mumbai office by firms owned by Modi and his family. A LoU is issued by a bank
to an importer (in this case Modi). It works like a bank guarantee, which the importer can sell to
other banks at a discount. The importer receives the money, or letter of credit, and pays his client.
The issuer bank messages overseas branches of other banks through the SWIFT network, and that
bank immediately pays the client against the LoU. The bank that holds the LoU then goes back to the
issuer bank (PNB in this case) and gets its due.

The issuer bank (PNB) recovers its due against the LoU from its client (Modi). Since the LoUs are used
for importing goods and involve foreign currency, a vostro account (client’s overseas account) is
used to deposit the credit by the bank accepting the LoU. However, issuance of the LoU involves a
lot of process and to mitigate the risks of fraud, banks insist the client deposit an equivalent amount
of assets, mainly cash, in the local branch, to avail of the overseas facility.

4. Impact of GST on Supply Chain.

How is Goods and service tax (GST) relevant for supply chains?
 Supply chain costs consist of
o fiscal costs (central and state taxes)
o physical supply chain costs (transportation, warehousing costs, inventory, etc.).
 Traditionally, the fiscal costs have predominantly determined the supply chain
configuration.
 Hence, organisations tend to have a supply chain structure that is more distributed and
fragmented – a warehouse in each state, suppliers in same state as the manufacturing plant,
multiple but smaller manufacturing facilities.
 However, under GST as locations will become tax neutral.
 Under GST, largely the supply chain costs and efficiencies are set to drive companies’
supply chain configuration.
 Existing supply chains may no longer be efficient or optimal post GST and therefore they
can adversely impact cash flows and operation costs if not addressed.
Accessing GST Impact

What are the cash flow implications of GST on supply chains?


 Most of the planning under the GST regime is likely to focus on optimising the cash flows.
 Cash will be locked up as a result of time gap between GST payment and recovery and will
therefore impact the inventory valuation
 Organisations will have to re-assess their supply chain design and optimise inventory to
minimise the cash lockup
 Supply chain velocity will be a key metric to determine the cash flow impact.

How does GST impact the procurement function?


 The concept of local suppliers (same state as the manufacturing plant) to lessen the burden
of cascading effects of Central Sales Tax (CST) and achieve certain service levels has driven
fragmentation in the supplier network. Multi-tiered procurement will have to be re-
evaluated to determine true cost saving opportunities within the supplier network.
 Contracts renegotiations and supplier network consolidation will be some of the
opportunities to improve efficiency, cost-savings and risks.
 With GST rollout, the suppliers will have an opportunity to consolidate operations to gain
efficiencies in their own supply chain.
 Manufacturing process redesign to support the above might also be on the cards.
How does GST impact the supply chain downstream design?

 Consolidation of Distribution/Warehouse centres: We currently find distribution centres or


warehouses in almost every state to lower the burden of CST. Hence the distribution
footprint is largely fragmented with higher operational costs, capital investments and
restricted geographies that they serve. With GST’s rollout, the distribution footprint will be a
key area to optimise for cost savings and operational efficiencies.
o Identify warehouse locations (latitude/longitude) post-GST basis demand
demography Changes in primary and logistics volumes.
o Redraw geographies and support an operationally-efficient network
o Map warehouse to market/territories to be covered
o Assess inventory levels for warehouses
o Reduction in intra-state inventory transfers, if not eliminated, due to its direct
impact to cash flow and associated logistical costs
 Serviceability constraints would be key while redesigning the downstream supply chain
 GST is likely to impact planning functions in the following ways:
o Local planning to Centralized planning
o Integrated S&OP planning with more accurate demand forecasting and inventory
optimization

With GST rollout, can I consolidate and optimise manufacturing


plants?

Yes, you can and probably should:

Re-evaluate manufacturing locations


Re-allocate products to manufacturing plants to drive operational efficiency and enable larger batch
runs.

How will 3PL/4PL evolve post GST?

GST is likely to enable organised 3PL/4PL players to aim for a bigger play in the market
3PL/4PL value proposition through shared service model becomes relevant:
 Inter-State indirect tax will be eliminated
 Large warehouses become attractive.
 Elimination of state boundaries
 Creditable tax
 Level playing field when evaluated against fleet owners.
reengineering as well as for providers of network optimisation tools such as Transportation
Management Systems (TMS).
We foresee the consolidation of primary hubs by 3PLs across core locations and evolution of hub
and spoke model.

What is the possible impact of GST on the logistics sector?

 Re-organised countrywide networks should decrease the cost of primary freight


 3PL players are likely to improve their offering
 3PLs are likely to focus on owning primary transportation
 Usage of high capacity trucks Resulting in improved efficiency.
 Secondary transportation will largely be driven by unorganised and regional fleet owners.
3PL might play the role of aggregators.

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