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A Paradigm Shift in Supply Chain Finance

I see a change in the way supply chain finance (SCF) is being perceived in the market. I still have to form myself a more structured opinion so I'll just jot down my thoughts as they come.

"Old" SCF: Basically the management of cash and capital to support the execution of supply chain processes (e.g., delivery of the goods).
"New" SCF: Financial instruments that extract liquidity from supply chain (SC) processes.

"Old" SCF: Financial instruments that generate liquidity/cash FOR the SC processes.
"New" SCF: Financial instruments that generate liquidity/cash FROM the SC processes.

"Old" SCF for large corporates: Optimize working capital and minimize risk. "New" SCF for large corporates: Generate better yield from extra cash (which comes from bettter managed SC operations).

"Old" SC for SMEs: Get liquidity to run the business (i.e., FOR the SC operations).
"New" SCF: Get immediate payments from buyers through receivables (i.e., which come FROM better managed SC processes).

My brain dump is finished at this hour of a Friday evening but I hope you get my point: The paradigm of SCF shifts from SCF=liquidity/cash FOR the supply chain to SCF= liquidity/cash FROM the supply chain.

In the first case the focus is on the (financial) PRODUCTS that generate liquidity.
In the second, the focus is on the PROCESSES FROM which liquidity is generated (i.e., extracted). This should make bank product managers think...

Enjoiy your weekend.


Comments: (1)

Enrico Camerinelli
Enrico Camerinelli - Aite Group - Boston 19 February, 2012, 15:43Be the first to give this comment the thumbs up 0 likes

A comment from a reader:

<<Hi Enrico, agree with you. Anchor (e.g., buyers, sellers) and their supply chain collaboration (SCC) will shift from passive to active (or driving the) SCF. Integrators can play a role by bridging banks trade finance products to SCC balance sheets>>.

Enrico Camerinelli

Enrico Camerinelli

Supply Chain Blockchain Personal Coach

Aite Group

Member since

26 May 2008



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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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