Supply Chain Finance Must Not Be a Treasury-Only Initiative for it to Succeed: Study

The majority of companies in Asia and Europe do not yet have a standard definition for supply chain finance (SCF), according to new research from the Aite Group.

Yet, despite the lack of a standard definition, the vast majority of companies do have an SCF strategy in place. In addition, finance departments remain the "usual suspects" to bolster SCF programs.

It was also evident that SCF mitigates a company's risk by ensuring the necessary business continuity with suppliers that are financially supported.

This financial support comes from banks, which act as the essential resource for corporate SCF, though they must break internal organizational barriers to fully deliver value to their corporate clients.

IT is also known to be a necessary support to well-run SCF programs, but adoption of IT solutions is equally split between those who have already implemented an IT solution and those still reluctant or undecided.

"We've seen that for SCF to succeed, it must not be a treasury-only initiative," says Enrico Camerinelli, senior analyst in Wholesale Banking at Aite Group. "Other departments—namely logistics, IT, and procurement—must be involved.

Camerinelli notes that companies must aim to implement SCF programs, not only to optimize their working capital and operations efficiency, but also to offer trade partners financial relief or better payment conditions.

Information is abundant on the impact of supply chain finance (SCF) on all stakeholders: buyers, suppliers, finance providers, and intermediaries. The source of such documentation is normally the "supply" side (i.e., banks, software vendors, and consulting firms).

Very little is known directly from the mouth of the "demand" side (i.e., the companies, either buyers or suppliers) about what supply chain finance means to them, according to the research.

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