23 August 2017
Enrico Camerinelli

Enrico Camerinelli

Enrico Camerinelli - Aite Group

58Posts 409,431Views 63Comments
Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Supply Chain Collaboration: Why Banks Should Care

23 June 2017  |  16093 views  |  0

As soon as a bank places the corporate customer at the center of its delivery strategy, that bank has to follow the peculiar business dynamics that influence and shape the corporate client’s business decisions. Almost any business decision has an impact on the supply chain, and in a globalized world, supply chain collaboration is one of the most highly prioritized corporate objectives.

Two or more independent firms that work jointly to plan and execute supply chain operations, with the intent to run a cooperative strategy in which all participating companies create mutual benefits, are building a collaborative supply chain.

The kinds of skills and capabilities needed to manage supply chains will evolve and may require much more collaboration with previously unrelated functions, such as treasury and IT systems management. While internal collaboration between operations and finance takes place, banks must dedicate continuous attention to those factors at the foundation of supply chain collaboration. By knowing these factors, banks can take advantage of an existing collaborative environment and play a vital role in supporting corporate clients to achieve strategic objectives. It is a fact that every business decision has an impact on the supply chain and that supply chain executives see finance experts as strong contributors to overall company success.

Business partners have to agree upon a series of elements to build a solid collaborative supply chain, and banks must be aware of these elements to proactively offer solutions and increase their reach to supply chain clients. These elements are product, place, time, quantity, quality, complexity, source, price, cost, and service.

PRODUCT

Collaborative supply chain partners exchange information and data on the products they trade by using common definitions and the same part-number coding. To know the product means to know its merchandise category and therefore the bank can correlate the product category with the appropriate supporting financial structure: A commodity- for instance- will most likely be subject to currency fluctuations and/or multitrading buy/sell options, triggering foreign exchange and trade finance services.

PLACE

Businesses are seeking greater, more centralized control over their supply chains, so supply chain practitioners expect to see fewer links in their supply chains. Whether supply chain flows move upstream or downstream, solidity of supply chain partners requires constant attention to their financial health, which banks are in the best position to ensure.

TIME

Collaboration between supply chain partners demands strict adherence to agreed delivery times of goods and of payments. On-time payments are a prerequisite for healthy collaboration, and visibility of payment terms may trigger a bank to offer payables and receivables discounting schemes.

QUANTITY

With inventory finance, a bank can help its corporate customer to maintain the level of delivery service while minimizing the impact on the balance sheet.

QUALITY

“Quality” refers to not only that of the product but also that of data exchanged. Quality of data also helps to accelerate the adoption of electronic trade finance that represents a significant enhancement of banks’ business opportunities.

COMPLEXITY

Supply chain collaboration allows companies to quickly react to crises and disruptions. A digitally achieved visibility of business transactions may allow a bank to mitigate the effects of supply chain complexity by offering cash management, cash forecasting, and liquidity management solutions that cater to a company’s needs to cope with variable and unexpected financial situations (e.g., late payments, bankruptcy, product returns, peaks in demand).

SOURCE

Companies are seeking to improve their ability to trace the origins of materials and goods in their supply chain. Sustainable sourcing becomes the collaborative platform to ensure fair trade, and funding providers are starting to adopt it to gauge a company’s credit risk.

PRICE

The price that supply chain participants pay for traded goods measures the strength of the collaboration. If a bank is capable of detecting a company in the effort of reaching a price level that could represent a good starting point for a new collaborative endeavor, that bank could intervene to offer the company a financial support to propose the right price level. 

COST 

Supply-chain-related costs are a top concern among businesses globally, particularly as customer expectations for product quality increase. Banks know that collaborating partners keep continuous control over cost structures, and unforeseen deviations are jointly approached to find mutually beneficial solutions. 

SERVICE

Cutting costs is a logical reaction to higher levels of market uncertainty, but collaborating businesses should be focused on delivering value to customers. Banks may assist their corporate clients throughout all the dynamics that characterize corporate internationalization strategies, getting into new and relatively unexplored territories.

 

BOTTOM LINE

Collaboration between supply chain partners increases visibility and trust. Banks must be alert to detect signs of their corporate clients’ cooperation in order to anticipate their needs and offer appropriate solutions and services.

 

TagsInnovationTransaction banking

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Enrico's profile

job title sr. analyst
location Boston
member since 2009
Summary profile See full profile »
Senior Analyst for Corporate Banking, based in Europe. Current research focuses on Global Transaction Banking, Supply Chain Finance and Working Capital Management.

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