A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.- Winston Churchill
Reuters recently reported that “Airbus is in talks to buy a majority stake in one of its German suppliers that is facing a liquidity squeeze.” This would not be the first time that Airbus has stepped in to help a supplier in a bind. It provided France’s Latecoere industrial and financing support last year. I expect to see a lot more of this as the economy recovers. Suppliers, particularly in capital intensive industries like automotive and aerospace, cut to the bone to reduce break even points during the recession and simply don’t have the production capacity to meet the coming increase in demand. Further, many suppliers face limited and expensive working capital financing options. This is the ideal role for Supply Chain Finance– reducing cost, capital and risk in the supply chain by providing inexpensive, on demand, working capital to suppliers to help them grow their businesses. It’s certainly much less costly for the procurement organization than buying suppliers or lending them money to ensure supplies.
Published September 23, 2011