Supply chain management facing challenges in establishing trickle-down value
Taking care of the weakest links in the supply chain with adequate financing is now well recognised as being fundamental to preserving economic stability and growth. June 02, 2011 | Peter HoflichWith the growth of global trade from Asia in a fragile state brought on by pressures around the global financial crisis, debt concerns in Europe, a possible bubble in China and natural calamities in Japan, pressure is growing on the components of the supply chain to find more efficient financing solutions in order to stay robust. Banks are looking for solutions in developing open account trade and supply chain financing, with a broad range of options on the table, but also a range of challenges holding back development. Trying to embed themselves in all parts of the supply chain, banks have for the past five years been seeking to add value to an industry that needs to receive payments as early as possible from suppliers, while making payment as late as possible themselves. Noting that this behaviour has a trickle-down effect that ultimately raises costs throughout the whole supply chain, banks can latch onto the largest, most credit worthy component in the chain—an anchor buyer—and use their lower cost of financing to help cross-border procurements and trade. “The value point is that you have stability in your supply chain, —stability not in the physical side but the financial side,” said Ravi Saxena, head of trade, Asia Pacific, Global Transaction Services, Citi. “And we note that two years back there was really a breakdown in financing, especially for the smaller customers. So if you can inject stability for them, that is significant.” Saxena notes that in the US, where the auto industry was one of the many that was highly stressed in the recent economic downturn, it was the US government that had to step forward to create a backstop to suppliers by providing competitive financing in order to prevent that industry’s supply chain from dissolving. With bank-led supply chain finance solutions, companies may also be able to take advantage of opportunities to enjoy discounts for early payment offered by suppliers. Buyers ty... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Trade Finance, Transaction BankingTrade Finance,Transaction Banking, Trade Finance,Transaction Banking, Keywords:Supply Chain, Misys supply chain, Misys
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