Opportunities in the Supply Chain Finance

Supply Chain Finance (SCF) is a set of financial instruments that optimize the working capital of supply chain management processes. Banks today offer all necessary products to finance the customers’ entire supply chain. However, these products are often not viewed as being a part of an integrated SCF service offering, but have been sold and distributed autonomously, to solve only a specific customer need in one part of the supply chain. For example, a discounting of a deferred letter of credit supports the liquidity flow after production and shipping of goods. Hence, the product only covers a specific liquidity need after shipment without any links to alternative products available. While individual products can heavily contribute to facilitate working capital management, a full SCF service offering gains leverage and added value for businesses when products and services support their entire financial value chain.
If all of the banks’ products for SCF are put into an integrated service context, many opportunities arise for the customer. Businesses would be able to focus on their end-to-end need for SCF services, instead of dealing with an array of different bank's sales representatives focusing on selling separate products. Furthermore, solutions sourced from an integrated financial supply chain perspective have the potential to improve internal process efficiency and various financial ratios. The best products for the entire chain would be used rather than the best products for an autonomous link in the chain.
With a complete overview of their financial supply chain, businesses can also take a better position on their total risk position against currencies, countries and foreign banks. In some cases, customer will identify opportunities of eliminating excess use of products. Actually, a complete SCF service is needed to provide the business customer with a possibility to optimize their use of financial products across their supply chain.
A customer-centric financial supply chain approach gives rise to several challenges for a bank’s technological channels. Technology is not a restricting factor for banks to create a complete financial supply chain services. The challenge is rather to take advantage of current systems, while simultaneously create the organizational capabilities necessary to match technological possibilities with business opportunities.
An increasing amount of trade is conducted over an open bank account. This means that banks lose visibility of the information flow related to trades. This visibility can be recaptured with a complete SCF service offering approach and also provides possibilities to finance a larger deal of the customers’ transactions by the creation of new financing solutions.
Additionally, banks are able to
Differentiate on competence rather than product pricing.
Build closer customer relationships by achieving better knowledge and understanding of their customers’ businesses and financial ambitions.

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