Supply Chain Finance to Play a “Strategic” Role in Uncertain Climate

“The only certainty we can get is the creation of a healthy supply chain,” he added.

By Rebecca Spong November 28th, 2019

Supply chain finance programmes are increasingly being used as a “strategic” move to mitigate the risks supply chains face in today’s uncertain economic and political climate, according to panellists at SCF Forum Europe.

Rather than just being a tool to improve working capital, risks that threaten suppliers such as Brexit, are now starting to define the use of SCF.

“We see that things are becoming more challenging,” Anne Romer, CFO for the logistics division of Danish shipping company DFDS, told delegates, noting that Brexit is a concern given that 45 percent of DFDS’s business goes in and out of the UK. “What happens there will affect the business no matter what,” she says.

DFDS partnered with tech provider PrimeRevenue to set up a supply chain finance programme to help mitigate such risks. Additionally, it wanted to use the tool to convince hauliers to work with them amid a wider lack of haulage capacity.

The haulier business has suffered a shortage of drivers due to declining numbers of young people interested in working in the sector, a lack of female truck drivers and issues such as Brexit and the challenges posed by refugee camps in Calais putting some drivers off from using that particular route.

Given the lack of truck drivers, DFDS needed to be able to convince companies that are active to work with them, Romer told delegates. Using SCF and the promise of earlier payment options was one way to win over haulier companies and ensure the health of the supply chain. Since the programme launched, 93 percent of suppliers are now trading invoices.

Romer noted the acquisition of the Turkish shipping company UNRR last year, coupled with unexpected crash in the Turkish lira later that year as challenges to DFDS’s working capital position.

Fellow panellist Clint Boamgard, accounting services, operations manager at South African company Sasol told delegates it set up a dynamic discounting solution, in partnership with Taulia, to create an opportunity to make early payments to suppliers.

Suppliers had already started contacting Sasol for early payment and a legacy manual system was proving to be overly time-consuming and required a lot of checks and approvals.

The programme has improved relations with suppliers, Boamgard explained. To-date 92 percent of invited suppliers are enrolled on the programme.

Simon Allen, global programme manager at PrimeRevenue, also on the panel, said he has also seen the impact of economic and political uncertainties on the usage of SCF programmes, particularly with reference to Brexit.

He said the company has noticed a general increase in upload volume. “[There is] a lot more flow coming on to the platform,” he said. Companies are looking to receive more cash in advance due to uncertainty, he explained. “We are keeping a close eye on it,” he said.

“The only certainty we can get is the creation of a healthy supply chain,” he added.

About the Author: Rebecca Spong

Rebecca Spong is the editor of SCF Briefing. She has been a business and financial journalist for over a decade working in both London and Dubai.