Supply Chain Finance
The current economic downturn is having two major and
contradictory impacts on the consumer packaged goods supply chain.
First, there is a war for cash in full swing, as individual players
in the supply chain take strong action to manage their working
capital. Second, there is increasing concern over the stability of
supply, with more and more suppliers facing financial difficulties,
often exacerbated by the very measures which are being taken by
buyers. There is therefore an urgent need for an approach which
helps resolve this dilemma, helping companies to manage their own
working capital, whilst minimising the risks to continuity of
supply. Supply Chain Finance (SCF) is increasingly being seen as a
solution to this dilemma.
All players in the supply chain are increasingly looking carefully
at how they manage their working capital, with many buyers, both
retailers and consumer products companies, looking to extend
payment terms with their suppliers to help manage their cash flow.
Cases have recently been reported of payment terms of being
extended to 60, 90 or even 120 days.
However, there is a growing recognition that this approach, focused
as it is on the needs of the individual company, is resulting in a
domino-effect as suppliers respond by adopting similar measures
with their own supplier base. The result is that a huge amount of
value is being locked up across the supply chain, to the detriment
of all the players within it.
For further information, download our report '
Releasing working capital within the supply chain'.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
