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How Can Blockchain Technology Disrupt Supply Chain Finance?

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How Can Blockchain Technology Disrupt Supply Chain Finance?

How Can Blockchain Technology Disrupt Supply Chain Finance?

Supply chain finance is essential for ensuring smooth transactions and cash movement amongst supply chain players. The traditional supply chain finance system, on the other hand, is frequently plagued by inefficiencies, a lack of transparency, and expensive costs.

With its decentralized and transparent nature, blockchain technology has the potential to revolutionize supply chain finance. This article will look at how blockchain technology can disrupt supply chain finance while also providing major benefits to organizations involved in supply chain operations.

Recognizing Supply Chain Finance

The financial activities and processes involved in managing cash flow and working capital within a supply chain are referred to as supply chain finance. It covers a wide range of financial services, including invoice finance, trade credit, factoring, and supply chain risk management. Traditional supply chain finance systems rely primarily on intermediaries, manual processes, and paper-based paperwork, which causes delays, inaccuracies, and inefficiencies.

Blockchain Technology is Disrupting Supply Chain Finance

Increased Transparency

Blockchain technology creates a decentralized and transparent ledger that records and validates supply chain transactions. All supply chain actors, including manufacturers, suppliers, distributors, and financial institutions, can access a shared, immutable ledger in real time.

Cost savings and increased efficiency

Traditional supply chain finance processes entail a lot of paperwork, manual verification, and a lot of middlemen. These procedures are time-consuming, prone to errors, and have substantial administrative costs. Blockchain technology automates and simplifies these operations, removing the need for intermediaries and minimizing the requirement for manual intervention.

Transaction Settlement in Real Time

Transaction settlement delays in the traditional supply chain finance system are common, affecting organizations’ cash flow and working capital. Blockchain technology provides real-time transaction settlement since it runs on a decentralized network that instantaneously validates and executes transactions.

Improvements in Supply Chain Visibility and Traceability

Blockchain technology allows for complete visibility and traceability of goods and transactions throughout the supply chain. Each blockchain transaction provides information such as product origin, manufacturing methods, transportation, and funding.

Access to Alternative Financing Alternatives

Blockchain-based supply chain finance platforms can help organizations gain access to alternate financing solutions. Physical assets or bills can be turned into digital tokens and traded on blockchain networks through tokenization.

Read more at How Can Blockchain Technology Disrupt Supply Chain Finance?

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Five tips and five questions to ensure supply chain finance success

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Supply Chain Finance (SCF) can, and should, be a force for good in ensuring much-needed liquidity reaches all suppliers, regardless of their size and meets the objectives of buyers.

However, many suppliers, particularly SMEs, struggle to access necessary working capital, and buyers lack the motivation to set up or expand these programmes.

Wayne Mills, founder and managing director at Atom Advisory, shares his top five tips for buyers and five questions for suppliers to ensure SCF fulfils its potential to accelerate growth and underpin robust supply chains.

Five tips for buyers thinking about Supply Chain Finance

The importance of building and maintaining resilient supply chains has been well-understood for decades, but COVID-19 brought into sharp focus the need to reassess and reimagine supply chains, including supplier relationships.

The importance of building a resilient supply chain has been known for decades, but the impact of COVID-19 highlighted the need to reassess modern supply chain structures.

These five tips are a good starting place when setting up or expanding a SCF programme.

1. Define the programme objectives

2. Ensure business-wide stakeholder engagement

3. Actively support supplier understanding and onboarding

4. Review the changing external landscape

5. Align physical and financial supply chains

 

Five questions for suppliers to ask themselves

Whilst certainly not true in all cases, there is often an imbalance between the size and financial strength of buyers and suppliers. Careful consideration and individual assessment of SCF can deliver significant benefits to suppliers, but these five questions can help ensure positive outcomes.

1. Which buyers run a SCF programme?

2. Is SCF the right solution for me?

3. Is my working capital optimised by using SCF?

4. What is the best use of my time?

5. Which solution offers the most flexibility?

 

Read more at Five tips and five questions to ensure supply chain finance success

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Reefknot Investments launches $50 million fund to invest in logistics and supply chain startups

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Reefknot Investments launches $50 million fund to invest in logistics and supply chain startups

Reefknot Investments launches $50 million fund to invest in logistics and supply chain startups

Reefknot Investments, a joint venture between Temasek, Singapore’s sovereign fund, and global logistics company Kuehne + Nagel, announced today the launch of a $50 million fund for logistics and supply chain startups. The firm is based in Singapore, but will look for companies around the world that are raising their Series A or B rounds.

Managing director Marc Dragon tells TechCrunch that Reefknot will serve as a strategic investor in its portfolio companies, providing them with connections to partners that include EDBI, SGInnovate, Atlantic Bridge, Vertex Ventures, PSA unBoXed, Unilever Foundry and NUS Enterprise, in addition to Temasek and Kuehne + Nagel .

Dragon, a veteran of the supply chain and logistics industry, says Reefknot plans to invest in about six to eight startups. It is especially interested in companies that are using AI or deep mind tech, digital logistics and trade finance to solve problems that range from analyzing supply chain data and making forecasts to managing the risk of financing trade transactions. Data from Gartner shows that about half of global supply chain companies will use AI, advanced analytics or the Internet of Things in their operations by 2023.

“There is a high level of expectation from vendors that because of technology, there will be new methods to do analytics and planning, and greater visibility in terms of information and product, materials and goods flowing throughout the supply chain,” says Dragon.

Read more in Reefknot Investments launches $50 million fund to invest in logistics and supply chain startups

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King Trade Capital Provides Supply Chain Finance Solution to Startup

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King Trade Capital announced it has established a $1 million supply chain finance solution for a Texas based startup. KTC was contacted by a nationwide factor to help accelerate the startups sales growth in the apparel industry. The owners of the startup have extensive relationships with small to mid-size retailers and years of experience sourcing goods from overseas factories. Through their relationships in the apparel industry they were able to secure annual production programs to manufacture branded goods on behalf of several men’s and women’s brands.

Due to the fact the client was a newly established entity with no financial or operating history, they were unable to obtain funding through traditional financing sources. The client was in need of a financial partner capable of providing the capital and structure necessary to have fabric sourced and garments manufactured overseas.

Initially the client’s factories wanted cash deposits in order to purchase fabric that would then be cut and sewn into finished garments. Payment for the cut and sew operations would then be due upon shipment. The owners, knowledgeable of the risks associated with sending cash deposits overseas, were seeking a safer solution to finance their inventory purchases.

King Trade Capital evaluated the experience of the owner’s and their customer and factory relationships, ultimately gaining comfort in their ability to perform. After negotiating with the factories, King Trade Capital and the client were able to structure individualized solutions for each factory, utilizing letters of credit that allow them to purchase fabric, complete the cut and sew manufacturing process and get paid according to their terms with the Customers.

Read more at King Trade Capital Provides Supply Chain Finance Solution to Startup

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Financing the Supply Chain with Big Data

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To many, supply chain finance still leans primarily on approved invoices and credit. And yet, over the past 15 years, there’s been a complete transformation in the way financial processes are handled within the supply chain. Fifteen years ago, letters of credit predominated the payment interactions between buyers, suppliers and financial institutions. Financing was arduous and expensive. Today, online, cloud-based platforms are revolutionizing both payment and financing.

Data is the driver. Today, we have unprecedented visibility into all the transactions and interactions that take place in the supply chain. The cloud, as a central information hub, not only can host these interactions and provide a real-time picture of them, but it can also keep long-term records.

This gives financial institutions what they always wanted—a better way to assess risk.

Big Data Financing

Credit rating was historically the key factor for financial providers to assess risk. In many cases, it’s the buyer’s credit rating that counts most, even when the supplier is the one receiving the financing. The problem with credit rating, though, is that it depends on a lot of factors, not just on how reliable a supplier is in delivering goods or how reliable a buyer is in paying on time.

But as far as risk assessment goes, proven transaction history is what lenders prefer to set their decisions and rates upon. But for the longest time, financial providers didn’t have a good way to assess risk independently of credit rating. Now, thanks to big data, they do.

Read more at Financing the Supply Chain with Big Data

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Sustainability Drives Supply Chain Professionals to Learn New Finance and Accounting Concepts

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At JDA’s Focus event, Rich Beck, the Sr. Vice President of Global Operations at PepsiCo, gave the keynote on the second day of the conference. Rich said that their supply chain goals included “digitizing the value chain” (JDA was a key solution provider in this area) and “sustainability.”

I’ve been covering supply chain management for twenty years. Last year, I spent 20 percent of my time on the road. And I hear many, many supply chain speeches. I can count on a few fingers of one hand the number of supply chain executives I have heard say sustainability was one of their major goals.

That will change. 72% of the companies included in The S&P 500 Index® publish sustainability reports, up from just under 20% in 2011. Over time, companies’ sustainability efforts become more mature and corporate sustainability goals filter down and become key supply chain goals as well. And these are not incompatible goals. At PepsiCo supply chain sustainability includes “reducing their inputs while optimizing outputs;” but really, that has always have been a goal for supply chain organizations.

The CDP, formerly the Carbon Disclosure Project, is the best known of the organizations that are helping (or pressuring, depending on your point of view), companies to do better. Thousands of companies work with the CDP to measure, disclose, manage and share environmental information.

The CDP scores companies on their performance. “A high performance score signals that a company is measuring, verifying and managing its carbon footprint, for example by setting and meeting carbon reduction targets and implementing programs to reduce emissions in both its direct operations and (the extended) supply chain.” Companies score higher if they are focused not just on internal emissions, but the emissions caused in their extended value chain. This causes a ripple effect as big companies with sustainability goals request their suppliers to also reduce their emissions.

Read more at Sustainability Drives Supply Chain Professionals to Learn New Finance and Accounting Concepts

What is your opinion towards “sustainability”? Do you think it is a priority? Share your thoughts with us in the comment box below.

Six trends changing the face of supply chain finance

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Six trends changing the face of supply chain finance

Supply chain finance is revolutionising the way companies buy and sell, but its full potential has yet to be realised.

The amount of cross-border SCF conducted today is just a tenth of what could be done say European banks. One reason is the complexity of SCF. However innovations in both developed and emerging economies promise to change that modest uptake in the coming years.

Making SCF easier to use and understand is essential if it is to become the norm in financing global trade. Several trends should speed that process:

1. SCF is becoming widely accepted in cross border trade

Bankers expect the European and US crossborder markets to grow 10-20 per cent a year for the rest of this decade. Already some banks have seen annual growth of 30-40 per cent andin the UK and Germany that figure is closer to 70 per cent, according to Demica.

2. More buyers are financing their suppliers

SCF has traditionally focused more on the relationship between suppliers and their banks. This is changing. New technology is helping buyers use SCF to help their strategic suppliers at better rates than they might find elsewhere, thanks to often higher credit ratings.

3. Non-bank players are emerging as an alternative source of SCF

New entrants, including peer-to-peer lenders, dynamic discounters and early payment marketplaces help buyers and suppliers exchange purchase orders, invoices and accelerate cash transfers. Private investors, financial institutions or even buyers provide funding for these new solutions to invest in their own payables.

4. Providers unite to offer a global service

Fragmented banks are recognising the need to partner logistics companies, local banks, export credit agencies and other transaction banks to offer corporates solutions across the supply chain. That is a change from the more fragmented approach until now.

5. Technology is replacing the paperwork

Electronic documentation is playing an ever greater role in international trade business as corporates automate trade supply chains toimprove speed and efficiency. That means corporates who use a number of banks require them to deliver electronic solutions on a common platform.

6. Countries are getting involved

Governments around the globe are paying more attention to supply chain finance. The UK for instance has initiated an SCF programme with some of Britain’s leading companies and banks. In the US, the Treasury’s Invoice Processing Platform uses electronic invoicing to ensure that suppliers are paid on time or even early.

Do you have any opinions about supply chain finance? Share it with us in the comment box.

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Managing the Financial Supply Chain

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Managing the Financial Supply Chain

Manufacturers devote considerable time and resources to managing their physical supply chain, but often it’s their financial supply chain that needs the most attention. As costs continue to escalate, managing cash and capital is just as important as managing relationships among supply chain partners. And in many cases, the integration between the physical and the financial supply chain is such that any weak links in one of the chains will threaten the vitality of both chains.

By way of definition, “the financial supply chain refers to the transactions that occur between trading partners that facilitate the purchase of, and payment for, goods and services, such as sending purchase orders and invoices, and making payment,” explains Scott Pezza, senior research associate with analyst firm Aberdeen Group.

Just as finance involves much more than just “bean counting,” the financial supply chain represents the actual lifeblood of an organization, as it provides the cash flow needed to ensure the doors are kept open, the lights are kept on, the employees are being paid and products are being made and shipped.

What do you think about this topic? Share your thoughts in the comment box.

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Five New Supply Chain Risks and Regulations

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Five New Supply Chain Risks and Regulations

Supply chain risk is a major issue, and new sources continue to pop up. Adverse weather, natural disasters and factory fires have historically grabbed the attention of CPOs, but there are other risks procurement leaders must be aware of that are just as hazardous. The world of procurement is constantly changing, and supply chain managers must be on top of their game. Here are 5 new threats that you might not be ready for:

1. Financial Fraud

Financial fraud can come in the form of collusion, poor monitoring of employee expenses, or misconduct from the vendor, including falsified labor and inflated bills. Did you know that less than one-third of executives are utilising data-analytics tools that can detect fraud or vendor waste?

2. Cybersecurity Threats

Many companies have lax procedures in protecting critical data, leaving businesses vulnerable to attacks that could harm customers, operational processes and brands. Even if you have security measures in place, the suppliers you work with may not.

3. Supply Chain Management Regulations

New rules and regulations continue to pop up in the supply chain, and companies need to be ready to disclose information about their sourcing and supply chain practices. For example, the Transparency on Trafficking and Slavery Act requires companies to file annual reports with the SEC, disclosing efforts to address specific human rights risks in the supply chain.

4. The Talent Gap

Baby boomers are retiring and there are few up and coming procurement gurus to take their place. CPOs are scrambling to find a solution to this problem, as the implications of this issue are likely to last for at least a decade.

5. Rising food costs

Droughts are worsening across the United States, increasing food prices and ultimately raising the cost structure for many firms. Overall food prices are expected to increase by 2.5-3.5 percent this year, with fruit up 3.5-4.5 percent and vegetables up 2-3 percent.

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Inventory Analysis: Affordable, Available, Actionable

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Inventory Analysis: Affordable, Available, Actionable

For any manufacturer or distributor, the problem with inventory management is easily stated. Simply put, there’s often too much of the stuff that isn’t selling—and far too little of the stuff that is selling.

The result? Disappointed customers, stock-outs and lost sales—combined with shelves groaning with inventory that nobody wants.

Put like that, the mismatch sounds almost comic. But to companies wrestling with just this problem, it’s a quandary that’s very real, and far from laughable.

For in today’s business climate, lost sales and disappointed would-be customers can be very bad news indeed. What’s more, the financial drain of financing unwanted inventory can be crippling. Because while banks are admittedly more willing to lend than they were at the height of the financial crisis, borrowing limits are tight, and terms are expensive.

So what’s to be done?

Inventory analysis: cheaper than ERP, easier than best-of-breed.

Fancy inventory optimization algorithms can help, of course. So can advanced forecasting techniques.
The latter help you to more accurately predict the customer demand that you’ll face; the former help you to better meet those customer demands with available stock.

Inventory analysis: under control, faster and cheaper.

Which is why, of course, so many manufacturers and distributors—especially those with elderly or partially-implemented ERP systems—try the ‘sticking plaster’ approach of spreadsheet-based analysis.

Inventory analysis: self-financing actionable insights.

At Matillion, we know that most of our customers come to us wanting a low-cost, effective Cloud BI solution that can be implemented quickly. And usually, financial reporting and analysis is fairly high on their agendas.

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