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Four steps to assure effective supply chain finance

Posted: 24 Dec 2014 ?? ?Print Version ?Bookmark and Share

Keywords:supply chain finance? PrimeRevenue? supplier finance?

Supply chain finance primarily involves the optimisation of the flow of money in and out of a business across it supply chain or to its customers. The concept sound simple enough but the proper implementation of the system could be very tricky and challenging. In fact, even well-established companies could hit a snag on how to carry out this particular financial management methodology.

I'm going to remain silent about the names of companies involved, to protect the innocent and guilty, but the story I'm going to tell is of one company's experiences in deploying supply chain finance, a.k.a. supplier finance.

A few months back, we met with a multinational company, a leader in the electronics industry that was an early adopter of supplier finance. Let's call it Company X. It had deployed a supplier finance program globally several years ago, yet it called PrimeRevenue in to talk about our offering. This interest was intriguing, and we initially thought there had to be a jurisdiction issue we need to solve.

Supply chain finance

The journey to solid supply chain finance

It is common for companies to contact PrimeRevenue when they have developed supplier finance programs and have seen little or no progress after several years of implementation. The calls for assistance typically relate to the lack of meaningful working capital objectives and a structured rollout plan. The companies also want to know how we can better on-board their suppliers that have challenges such as contracting, price requirement, lien, jurisdiction and currency issues.

The journey of Company X is a common one, and it is an interesting reflection point in the maturation of the market.

Multiple regional division strategy

Multiple regional division strategy

When Company X started its supplier finance journey, it admittedly didn't know much about these programs. It didn't know the critical factors for success, and it felt this was simply a financing platform.

"We are extending terms to our suppliers and offering financing to suppliers, pretty simple," the company said. "Who do I call for financing? My relationship banks."

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