When it comes to business, supply chains are integral to the efficient running of almost any sort of enterprise.
Most of us are familiar with supply chain management (SCM) solutions that are part of enterprise resource planning (ERP) systems that coexist with customer relationship management (CRM) front-end solutions too.
But this report will be focusing on supply chain finance (SCF), which is a relatively new set of technology- based business and financing processes that link the various parties in (a) transaction -buyer, seller and financing institution – to lower financing costs and improve business efficiency.
So, how does supply chain finance work? Essentially, supply chain finance utilizes business solutions that optimize working capital and provide liquidity to businesses.
There are several SCF transactions that are notable, including an extension of buyer’s accounts payable terms, inventory financing and payables discounting. The buyer can leverage this advantage to negotiate better terms from the seller, such as an extension of payment terms, which enables the buyer to conserve cash or use it for other purposes.
The seller benefits by accessing cheaper capital, while having the option to sell its receivables to receive immediate payment. The two main areas that are within supply chain finance are “dynamic discounting” and “payables financing or reverse factoring”.
In the case of “dynamic discounting”, it enables buyers to earn risk free returns on their available liquidity, while offering the opportunity to suppliers to receive cash earlier than the contracted payment date.
On the other hand, “payables financing or reverse factoring” ensures buyers have the opportunity to access additional unsecured liquidity and improve working capital by extending payment terms while still offering competitive financing solutions to suppliers who elect to receive early
All in all, this ensures the financial health of its supply chain and minimizes counter-party risk.
The report will give an introduction to supply chain finance, global outlooks, current challenges for 2020 and beyond as well as the potential of blockchain in the supply chain ecosystem. There will be an analysis of use cases, an ABR analysis and summary of the scenarios at hand as well as a holistic market forecast of the marketplace as a whole.
Just to recap, trade finance is the financing of international trade flows, acting as an intermediary between importers and exporters to mitigate the risks involved in transactions and enhance working capital efficiency in businesses.
It deals with activities related to financing of domestic and international trade. Trade finance includes issuing letters of credit (LCs), receivables and invoice finance, credit agency, export finance, bank guarantees, insurance, and others.
It is used by buyers, sellers, manufactures, importers, and exporters to ease financing activities and deals with the way cash, credit, investments, and other assets are used for trade. The key advantage of trade finance is that it facilitates a hassle-free arrangement for short-term financing.
With the onset of the global pandemic and the rapid customer-experience (CX) and Digital Transformation (DX) moves that are happening, banks are moving fast towards blockchain systems and the digitizing of supply chains are also on the cusp of great change.
Be prepared for a very enlightening read as our “Blockchain & Supply Chain Finance: A Synergy Of Excellence” report delves deep into the nuanced and complex world of supply chain finance, and helps you understand the inner workings in a simple yet straightforward manner.
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