Executive Briefings

Supply-Chain Financing: Challenges and Successes

Douglas Schoch, vice president of Siemens Capital Co. LLC, describes the changes he's seen in the field of supply-chain finance in recent years. He also talks about the keys to successful implementation of a supply-chain financing program.

Ten years ago, there were few organizations providing financing to their suppliers, says Schoch. Things are different now. There are many more options in the market, giving manufacturers and their supplier partners a wide range of financing options.

Following the Great Recession, companies became more aware of the need for ensuring the health of their suppliers. Such concern needs to embrace financial, reputation and performance-based elements up and down the chain. “Risk management is core to what supply-chain finance can accomplish,” Schoch says. “That has always been there for companies that are conscientious.” Now, however, it’s becoming more of a “poignant focus” for chief executive officers and chief financial officers of companies with complex supply chains.

A company with a strong credit rating can bring highly favorable terms to a supplier, Schoch says. In fact, that supplier can often get its money faster than if it had to draw on a working-capital line of credit based on its own risk profile. “We make sure that’s available to as many of our suppliers as possible,” he says.

Discounts for immediate payment can help, but don’t always make financial sense, he says. “Many different sets of terms can co-exist, and they really should.”

Schoch’s keys to the successful implementation of a supply-chain finance program: “Knowing where you want to go, and communicating. One of things that I’ve learned over time is that it’s not a finance program. It’s a relationship driver between supply-chain managers.”

To view the video in its entirety, click here

Ten years ago, there were few organizations providing financing to their suppliers, says Schoch. Things are different now. There are many more options in the market, giving manufacturers and their supplier partners a wide range of financing options.

Following the Great Recession, companies became more aware of the need for ensuring the health of their suppliers. Such concern needs to embrace financial, reputation and performance-based elements up and down the chain. “Risk management is core to what supply-chain finance can accomplish,” Schoch says. “That has always been there for companies that are conscientious.” Now, however, it’s becoming more of a “poignant focus” for chief executive officers and chief financial officers of companies with complex supply chains.

A company with a strong credit rating can bring highly favorable terms to a supplier, Schoch says. In fact, that supplier can often get its money faster than if it had to draw on a working-capital line of credit based on its own risk profile. “We make sure that’s available to as many of our suppliers as possible,” he says.

Discounts for immediate payment can help, but don’t always make financial sense, he says. “Many different sets of terms can co-exist, and they really should.”

Schoch’s keys to the successful implementation of a supply-chain finance program: “Knowing where you want to go, and communicating. One of things that I’ve learned over time is that it’s not a finance program. It’s a relationship driver between supply-chain managers.”

To view the video in its entirety, click here