Unless commitment is made, there are only promises and hopes.- Peter Drucker
Ultimately, Supply Chain Finance is a supplier relationship management tool. It reduces costs and improves cash flow visibility for suppliers thus reducing cost, capital and risk throughout the supply chain. As a result, I’m always interested in articles on Supplier Management and Forbes ran a good article by Jon Bovit last month on the subject. It hit on some familiar themes around the importance of supplier management in driving enterprise value. As this article discusses, a comprehensive approach to supplier management is critical due to the high percentage of value added in corporate supply chains. Long gone are the days when iron ore and coal went into one end of the Ford factory and cars came out the other. Most articles on supplier management, like this one, focus on gather data, measuring performance and identifying supplier risk areas. Few however focus on tools organizations can use to address the issues once they’ve been identified, particularly with regard to financial flows within the supply chain. Cash flow is the lifeblood of companies, and therefore supply chains, yet many companies have yet to incorporate pro-active tools such as Supply Chain Finance into their supplier management strategies. SCF provides low cost, on demand cash flow to suppliers which not only reduces supply chain costs and working capital but also mitigates supplier risk. Identifying supplier risk is great but it isn’t very helpful without tools such as Supply Chain Finance to mitigate that risk.
Published October 21, 2010