Analyst insight: Natural, political and operational disruptions are increasingly normal for today's global supply chains. To manage it all and mitigate risk, supply-chain finance is becoming a must-have capability. 

Shippers and 3PLs are getting serious about supply-chain financial management, a new study shows, with many employing senior-level finance leaders into their teams.

These positions include finance vice presidents, finance managers, finance directors and financial analysts — according to research by Infosys Consulting.

Supply-chain finance allows businesses to model and manage the impacts of operational decisions within and outside of a company’s control. Given increasing complexity thanks to global trade and frequent disruptions, supply-chain finance also helps companies better control costs as they build, scale and manage overall operations.

Decision-Making Drivers

Supply-chain costs like transporting and handling freight are a top factor in shippers’ and 3PLs’ operational decisions — more than 90% for both, the study says. Other top components cited by both groups include production costs, customs, risk and overhead. These factors can vary widely based on key drivers, and developing scenarios to analyze probability and impact is important for supply-chain leaders to support corporate profitability.

To manage variability in these drivers, more than 70% of shippers and 3PLs say they’re using freight payment and audit practices. Others employ total landed cost, letters of credit, open accounts and factoring accounts receivable. 

Global Trade Impact 

Increased volatility of global trade and its impact on supply-chain management remain a concern, and 70% of shippers say they manage internally any customs costs, tariff changes and the impact of global political decisions. Meanwhile, 20% of shippers and a third of 3PLs aren’t managing these impacts on supply-chain costs at all. 

With trade variability only growing, this kind of cost management is going to become critical in balancing service and price.

Outlook

Companies neglecting supply-chain finance can’t afford to do so for much longer, as these functions become more integral to business strategy and operations. It’s the No. 1 mission-critical function as companies look for new opportunities to grow revenue, mitigate risk and lower cost in an increasingly complicated operating environment.

Shanton Wilcox is partner and head of manufacturing practice for Infosys Consulting.