Theory of supply chain finance: Implementation and an organisation’s benefits
Kleemann, Konstantin (2018)
Saimaan ammattikorkeakoulu
2018
Creative Commons Attribution-NonCommercial-ShareAlike 2.0 Germany
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-201804044073
https://urn.fi/URN:NBN:fi:amk-201804044073
Tiivistelmä
The concept of Supply Chain Finance has emerged through the globalization of trade. The common sense within a supply chain is that suppliers are trying to receive their payments as early as possible while buyers are increasing their payment terms. Supply Chain Finance attempts to cope with this problem and creates opportunities for all parties.
With the development of Supply Chain Management, two approaches gained the most recognition; Working Capital Management and Supply Chain Finance. Both are considered drivers for a financially stable supply chain. A Supply Chain Finance solution is able to create a ‘win – win’ situation for both buyer and supplier by giving the buyer the opportunity to extent payment terms and pay the supplier in advance. This process allows all parties to free up operating working capital and provide financing in favour of the supplier. A Supply Chain Finance solution implementation includes three factors: First, a company must be internally in line with the solution. Secondly, the right financial provider (bank) must be identified. Lastly, there has to be the opportunity for open account trade.
Recent papers confirm that the credit crunch of 2009 was a main driver for Supply Chain Finance. Financial providers and organizations have become aware that it is of great importance to manage their capital and especially the part tied to the supply chain. This phenomenon enhanced the popularity of SCF. Supply Chain Finance attempts to cope with this problem and creates opportunities for both parties. SCF has matured yet, there are still some gaps when it comes to a single definition. Furthermore, it appears that suppliers are hesitant to adopt Supply Chain Finance because there is little evidence of the actual cost savings and its benefits. This thesis aims to provide a single definition by reviewing the theory of Supply Chain Finance and provide the reader with an implementation checklist and the benefits of it. The theory will then be backed up by expert interviews.
With the development of Supply Chain Management, two approaches gained the most recognition; Working Capital Management and Supply Chain Finance. Both are considered drivers for a financially stable supply chain. A Supply Chain Finance solution is able to create a ‘win – win’ situation for both buyer and supplier by giving the buyer the opportunity to extent payment terms and pay the supplier in advance. This process allows all parties to free up operating working capital and provide financing in favour of the supplier. A Supply Chain Finance solution implementation includes three factors: First, a company must be internally in line with the solution. Secondly, the right financial provider (bank) must be identified. Lastly, there has to be the opportunity for open account trade.
Recent papers confirm that the credit crunch of 2009 was a main driver for Supply Chain Finance. Financial providers and organizations have become aware that it is of great importance to manage their capital and especially the part tied to the supply chain. This phenomenon enhanced the popularity of SCF. Supply Chain Finance attempts to cope with this problem and creates opportunities for both parties. SCF has matured yet, there are still some gaps when it comes to a single definition. Furthermore, it appears that suppliers are hesitant to adopt Supply Chain Finance because there is little evidence of the actual cost savings and its benefits. This thesis aims to provide a single definition by reviewing the theory of Supply Chain Finance and provide the reader with an implementation checklist and the benefits of it. The theory will then be backed up by expert interviews.