Executive Briefings

Recession Put Spotlight on Need for Supply Chain Finance

The credit squeeze resulting from the recession put the focus firmly on supply chain finance as major corporations got to grips with the fact that some of their suppliers were struggling to finance their activities.

As a result, much of the discussion has centered on upstream activities, ensuring that suppliers are supported and can guarantee the supply of components.

But new research by Demica, which specializes in supply chain finance, has highlighted the fact that downstream activities can also be vulnerable. Many SME distributors in high-growth regions are confronted with high cost of funding, exacerbated by sellers' pressure to increase sales, Demica's research revealed.

As a result there is growing interest in distributor finance schemes which support the working capital needs of a corporate seller's distributors and gives them access to affordable finance, enabling them to increase sales and grow business volumes with lower capital requirements.

Demica found that for large corporates, the primary objectives for implementing distributor finance were: to increase sales in high-growth regions without applying more of their own working capital; to give the offered product a competitive advantage; and to reduce SME distributor risk.

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As a result, much of the discussion has centered on upstream activities, ensuring that suppliers are supported and can guarantee the supply of components.

But new research by Demica, which specializes in supply chain finance, has highlighted the fact that downstream activities can also be vulnerable. Many SME distributors in high-growth regions are confronted with high cost of funding, exacerbated by sellers' pressure to increase sales, Demica's research revealed.

As a result there is growing interest in distributor finance schemes which support the working capital needs of a corporate seller's distributors and gives them access to affordable finance, enabling them to increase sales and grow business volumes with lower capital requirements.

Demica found that for large corporates, the primary objectives for implementing distributor finance were: to increase sales in high-growth regions without applying more of their own working capital; to give the offered product a competitive advantage; and to reduce SME distributor risk.

Read Full Article