Supply chain finance service providers often tout the incremental operating cash flow buyers can achieve. Unfortunately, simply implementing supply chain finance technology and providing early payment to suppliers does nothing to generate operating cash flow for the buying organization. Supply chain finance by itself can help to improve supplier relationships, enhance payment practices and reduce supplier financial risk, however, to drive working capital efficiency and incremental cash flow, buyers have to optimize their payment terms and negotiate term extensions with suppliers. supply chain finance is a tool to support those negotiations if the buyer chooses, but the buyer’s Procurement team still needs to conduct effective negotiations. So, how can the supply chain finance services provider help buyers achieve their ultimate supply chain finance objective? As Charles Dominick, President and Founder of Next Level Purchasing, stated “Championship-caliber negotiators do a number of things well.” They gather as much information as they can about suppliers, the supply base, and market conditions and they learn about best practices in the industry before they sit at the negotiating table. A recent article in the Harvard Business Review titled Extreme Negotiations by Jeff Weiss, Aram Donigian, and Jonathan Hughes called out the need to uncover supplier motivations as well as elicit buy-in from suppliers by using facts to persuade and arm them with ways to defend their decisions. As part of the supply chain finance whole product, the supply chain finance service provider must help the buyer succeed with their supplier negotiations otherwise the buyer will not achieve their reason for implementing supply chain finance. This requires customizing the supply chain finance offering based not only on the buyer’s objectives but also on payment term benchmarking, supplier business needs, etc. The supply chain finance services provider should help provide the business information, Procurement training and negotiation support necessary for successful supplier negotiations.
Published March 28, 2013