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Supply Chain Finance: Is it what you really think it is?

I will be shortly publishing a report on solution vendors of supply chain finance software solutions. Want to share with you a sneak preview of the major impact points of the research:

Supply chain finance in its fundamental nature refers to the financial approaches and instruments which optimize the transactions, working capital and costs of the extended, or end to end, supply chain processes (i.e., source-to-pay; fulfill-to-service; order-to-cash)

It is a fact, though, that open account trade finance instruments (e.g., reverse factoring; post-shipment finance; invoice discounting) available and executable from a web platform represent what today is currently known as SCF.

The possibility to exchange trade transactions on web platforms, electronically match invoices with purchase orders, and initiate financial facilities triggered by electronic signals of events in the physical supply chain (e.g., goods loaded on a ship; material arrived at the warehouse; truck leaving the plant) make it clearly important to know what technology makes this possible, what is available, what applications to deploy, and who are the players of reference (i.e., who offers what).

In June 2011 Aite Group analysts sent a survey questionnaire to 41 selected players which represent almost 80% of the global SCF IT vendor market. The 24-question survey covered a variety of topics, including: target markets; software functionalities; delivery models; client segmentation; revenue range; pricing models; partnership strategies.

North America (39%) and Asia (32%) are the regions that mainly buy SCF IT solutions, with Europe (29%) following suit.

Banks of all sizes represent the primary target for IT SCF solutions: 33% of Tier 1 banks; 22% of Tier 2 banks; 18% of Tier 3 and below.

44% responded that Asia Is the most promising region for SCF IT business.

Open account buyer-centric and invoice-based solutions are the most frequently present in any one of the vendors’ offerings (72.2% reverse factoring; 66.7% post-shipment finance; 61.1% invoice discounting).

22.2% of players are partnering/ will partner to offer purchasing cards. 16.7% will do it for factoring, reverse factoring, and warehouse finance.

More than 70% of vendors deploy IT offerings that support payment-centric applications and create collaborative environments (e.g., transaction portals).

SCF IT solutions are 44% Licensed and 43.6% SaaS-based.

The annual SCF IT market is estimated to be worth $500 million.

84% of respondents rely on the bank channel to sell their SCF solution. 79% see the role of banks becoming more central to their growth strategy in the next 2 years.

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Enrico Camerinelli

Enrico Camerinelli

Supply Chain Blockchain Personal Coach

Aite Group

Member since

26 May 2008

Location

Boston

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This post is from a series of posts in the group:

Financial Supply Chain

In the world of international trade, the process of exchanging payments, information and documents between buyers, sellers, banks, and other involved parties is becoming increasingly important for financial institutions. This community aims at presenting views and innovative ideas related to this financial supply chain space.


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