Supply Chain Finance Innovation

Don’t be afraid to give up the good to go for the great- John D. Rockefeller

CFO Insight Magazine ran an article today titled “CFOs Should See Cheaper Supply Chain Finance in the Future.” It highlights the fact that supply chain finance is becoming a more standard business practice among large corporates. Recent announcements by DuPont, Procter and Gamble and Mondelez International further support that view. As the article goes on to say, “At the same time, many survey respondents expect that those companies that have yet to establish a supply chain finance programme will be forced to introduce one in the near future.” One of the most interesting things that the article points out is that the rapid growth of supply chain finance is driving a lot of innovation among supply chain finance service providers. Innovations such as the use of electronic agreements for suppliers are extremely helpful in speeding up supply chain finance rollout. Also, the ability to incorporate credit memos offsets into the flow of information has been a great help to Procurement professionals. The recent innovation I’m most excited about is that some supply chain finance vendors are using new financial instruments that allow suppliers to participate in supply chain finance without attaching liens to their receivables. In the US, this eliminates the need for suppliers to negotiate lien releases with existing bankers and allows some suppliers to participate in supply chain finance who otherwise cross border SCF programs, it allows the use of the buyer’s preferred legal jurisdiction rather than the use of many different supplier legal jurisdictions. These innovations and others will continue to drive greater SCF availability.