Supply Chain Finance Solutions: Relevance - Propositions - Market Value
By Erik Hofmann and Oliver Belin
()
About this ebook
Related to Supply Chain Finance Solutions
Related ebooks
Capital Equipment Purchasing: Optimizing the Total Cost of CapEx Sourcing Rating: 0 out of 5 stars0 ratingsLean Management and Kaizen: Fundamentals from Cases and Examples in Operations and Supply Chain Management Rating: 0 out of 5 stars0 ratingsThe Economist Guide To Supply Chain Management Rating: 0 out of 5 stars0 ratingsStrategy, Value and Risk: Industry Dynamics and Advanced Financial Management Rating: 0 out of 5 stars0 ratingsHandbook of Integrated Risk Management in Global Supply Chains Rating: 0 out of 5 stars0 ratingsAn Introduction to Global Supply Chain Management: What Every Manager Needs to Understand Rating: 0 out of 5 stars0 ratingsFinance Unleashed: Leveraging the CFO for Innovation Rating: 0 out of 5 stars0 ratingsOperations and Supply Management 4.0: Industry Insights, Case Studies and Best Practices Rating: 0 out of 5 stars0 ratingsFinTech, BigTech and Banks: Digitalisation and Its Impact on Banking Business Models Rating: 0 out of 5 stars0 ratingsMilitary Supply Chain Management: From Deployment to Victory, Mastering the Logistics Dance Rating: 0 out of 5 stars0 ratingsGuide to Supply Chain Management: An End to End Perspective Rating: 0 out of 5 stars0 ratingsCash CDO Modelling in Excel: A Step by Step Approach Rating: 0 out of 5 stars0 ratingsPerformance Management in Retail and the Consumer Goods Industry: Best Practices and Case Studies Rating: 0 out of 5 stars0 ratingsCreating a Balanced Scorecard for a Financial Services Organization Rating: 0 out of 5 stars0 ratingsPrivate Banking: Building a Culture of Excellence Rating: 0 out of 5 stars0 ratingsMarket Microstructure: Confronting Many Viewpoints Rating: 0 out of 5 stars0 ratingsActive Balance Sheet Management: A Treasury & Investment Perspective Rating: 0 out of 5 stars0 ratingsToward Inclusive Access to Trade Finance: Lessons from the Trade Finance Gaps, Growth, and Jobs Survey Rating: 0 out of 5 stars0 ratingsThe Road to Servitization: How Product Service Systems Can Disrupt Companies’ Business Models Rating: 0 out of 5 stars0 ratingsThe Compliance Revolution: How Compliance Needs to Change to Survive Rating: 0 out of 5 stars0 ratingsThe Future of Outsourcing: Strategic Outsourcing Controls and the Backsourcing Evolution Rating: 0 out of 5 stars0 ratingsPrivate Equity Fund Investments: New Insights on Alignment of Interests, Governance, Returns and Forecasting Rating: 0 out of 5 stars0 ratingsFixed Income Relative Value Analysis: A Practitioners Guide to the Theory, Tools, and Trades Rating: 0 out of 5 stars0 ratingsGlobal Repo Markets: Instruments and Applications Rating: 0 out of 5 stars0 ratingsAnalytical Corporate Valuation: Fundamental Analysis, Asset Pricing, and Company Valuation Rating: 0 out of 5 stars0 ratingsCredit Risk Management Rating: 0 out of 5 stars0 ratingsDistribution Strategy: The BESTX® Method for Sustainably Managing Networks and Channels Rating: 0 out of 5 stars0 ratingsExport Business Success: Strategies for Profitability Rating: 0 out of 5 stars0 ratingsValue and Capital Management: A Handbook for the Finance and Risk Functions of Financial Institutions Rating: 5 out of 5 stars5/5
Economics For You
On Writing Well, 30th Anniversary Edition: An Informal Guide to Writing Nonfiction Rating: 4 out of 5 stars4/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5The Richest Man in Babylon: The most inspiring book on wealth ever written Rating: 5 out of 5 stars5/5Financial Feminist: Overcome the Patriarchy's Bullsh*t to Master Your Money and Build a Life You Love Rating: 5 out of 5 stars5/5A People's History of the United States Rating: 4 out of 5 stars4/5Divergent Mind: Thriving in a World That Wasn't Designed for You Rating: 4 out of 5 stars4/5Nickel and Dimed: On (Not) Getting By in America Rating: 4 out of 5 stars4/5Confessions of an Economic Hit Man, 3rd Edition Rating: 5 out of 5 stars5/5Capitalism and Freedom Rating: 4 out of 5 stars4/5Die With Zero: Getting All You Can from Your Money and Your Life Rating: 4 out of 5 stars4/5The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money Rating: 5 out of 5 stars5/5Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions Rating: 4 out of 5 stars4/5Wise as Fu*k: Simple Truths to Guide You Through the Sh*tstorms of Life Rating: 4 out of 5 stars4/5Sex Trafficking: Inside the Business of Modern Slavery Rating: 4 out of 5 stars4/5Multipliers, Revised and Updated: How the Best Leaders Make Everyone Smarter Rating: 4 out of 5 stars4/5Chip War: The Fight for the World's Most Critical Technology Rating: 4 out of 5 stars4/5The Affluent Society Rating: 4 out of 5 stars4/5Peak: Secrets from the New Science of Expertise Rating: 4 out of 5 stars4/5The Alter Ego Effect: The Power of Secret Identities to Transform Your Life Rating: 4 out of 5 stars4/5The Confidence Code: The Science and Art of Self-Assurance---What Women Should Know Rating: 4 out of 5 stars4/5A History of Central Banking and the Enslavement of Mankind Rating: 5 out of 5 stars5/5Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist Rating: 4 out of 5 stars4/5Economics 101: From Consumer Behavior to Competitive Markets--Everything You Need to Know About Economics Rating: 4 out of 5 stars4/5Quiet Leadership: Six Steps to Transforming Performance at Work Rating: 4 out of 5 stars4/5Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail Rating: 4 out of 5 stars4/5
Reviews for Supply Chain Finance Solutions
0 ratings0 reviews
Book preview
Supply Chain Finance Solutions - Erik Hofmann
Erik Hofmann and Oliver BelinSpringerBriefs in BusinessSupply Chain Finance SolutionsRelevance - Propositions - Market Value10.1007/978-3-642-17566-4_1
© Springer-Verlag Berlin Heidelberg 2011
1. Introduction
Erik Hofmann¹ and Oliver Belin²
(1)
Chair of Logistics Management (LOG-HSG), University of St.Gallen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland
(2)
Sumitomo Mitsui Banking Corporation Europe Ltd, 99 Queen Victoria Street, EC4V 4EH London, UK
Erik Hofmann (Corresponding author)
Email: [email protected]
Oliver Belin
Email: [email protected]
Abstract
The study's objectives are to fill part of a research gap in Supply Chain Finance by highlighting potential costs savings and revenue generations for parts of the supply chain as well as to quantify the potential market size for such Supply Chain Finance solutions.
Keywords
Supply chain financeCost optimizationCompetitive advantageLiquidityWorking capitalAutomated trade finance solutionsInternal & external collaborationImplementation
1.1 Problem Definition and Objectives of the Study
Revolutions, by their very definition, bring about fundamental changes. Arguably such an event is occurring in trade finance with new technology being the tool for transformation. As with all revolutions, such as Supply Chain Finance (SCF), new players emerge proposing different approaches and embracing new business models (Pugsley 2007). SCF is no different. The race is now on to create a viable business model for making money out of SCF solutions. New innovative solutions are poised to make major improvements, making financial flows faster, more reliable, more predictable and more cost efficient (Croft 2007).
Over recent decades, competition in nearly all industries has become more global. To cope with these challenges and also benefit from the resulting opportunities, companies have been forced to become innovation leaders and streamline their organizations by engaging in cost cutting and efficiency improvements. This highly competitive nature and the ongoing battle for cost optimization have placed pressure on every part of a business to generate competitive advantages. With the fall of international trade barriers and the shift from letters of credit to open account (O/A) trading, the introduction of automated trade finance solutions has become an important point on corporate agendas (Bougheas et al. 2009). With the current volatile climate and the lack of available credit, innovations in working capital solutions are more vital now than ever before.
Because global competition continues to get tougher and shareholders constantly demand company leaders outperform their peers, further value generation opportunities within a company’s supply chain are required. Accompanied by tighter liquidity situations, senior management is increasingly urged to ensure a stronger focus on the financial side of their supply chain and optimize their working capital. When putting these postulations into practice, however, two challenges exist. On the one hand, traditionally available trade finance solutions are either costly themselves or likely to remain with single company benefits while increasing total costs and risks in the end-to-end supply chain. On the other hand, existing, manual processes and paper-based trade finance procedures within corporate organizations make the introduction of new trade finance solutions difficult.
In an attempt to cope with these challenges, the approach of SCF has become gradually more prevalent. It represents solutions available for financing goods and products as they move from origin to final destination along the supply chain. By taking an end-to-end perspective on the whole supply chain, it aims at decreasing its overall costs while fostering internal and external collaboration as well as transparency and automation. Therefore, an engaging company is likely to experience lower costs and a financially more stable end-to-end supply chain, resulting in a strategic advantage (Fairchild 2005).
Because of the novelty of this approach, the piecemeal theoretical coverage of this area started only a couple of years ago. Some initial studies have tried to structure this new approach, but mostly they have only covered certain parts of SCF and have left many research gaps. This lack of thorough theoretical coverage might also explain why some managers still hesitate to implement SCF and to reap its benefits.
The objectives of this study are to fill part of the research gap and to offer an insight on the relevance of SCF by highlighting potential cost savings and revenue opportunities to engaging parties. From the perspective of a supply chain participant, it is crucial to obtain knowledge of the net benefit of SCF and of the required environment that favors the implementation of such solutions.
Since there have not yet been any qualified attempts to quantify the global market potential and market size, this study focuses among others on the following two research questions.
1.
How large is the potential market size for SCF solutions?
2.
How big are the potential cost savings to companies engaging in SCF solutions?
1.2 Course of Investigation
To gain an overview of the key benefits of SCF the focus of this study is first set on working capital management (WCM) and its contribution towards enhancing enterprise value (Richards and Laughlin 1980). Based on the subsequent identification of deficiencies in WCM, SCF solutions are presented as well as their main goals and key elements are determined. With a more profound understanding of SCF, the market segments and solutions are presented, resulting in a definition of an applicable SCF solution model that sets the platform for the analysis of market size and market potential.
The second part of the study identifies the global flows of trade that potentially benefit from SCF solutions. For this purpose, several company and commercial relationship characteristics are investigated with regard to their impact on SCF solutions. Finally, the potential SCF market size and the quantitative benefits for market participants are calculated and analyzed.
References
Bougheas S, Mateut S, Mizen P (2009) Corporate trade credit and inventories: new evidence of a trade-off from accounts payable and receivable. J Bank Finance 33(2):300–307CrossRef
Croft J (2007) Supply chain finance utilised to save money financial services. Financial Times, 30.01.2007, p 18
Fairchild A (2005) Intelligent matching: integrating efficiencies in the financial supply chain. Supply Chain Manag Int J 10(4):244–248CrossRef
Pugsley (2007) Global trade review, trade services and the supply chain, Sibos report
Richards VD, Laughlin EJ (1980) A cash conversion cycle approach to liquidity analysis. Financial Manag 9(1):32–38CrossRef
Erik Hofmann and Oliver BelinSpringerBriefs in BusinessSupply Chain Finance SolutionsRelevance - Propositions - Market Value10.1007/978-3-642-17566-4_2
© Springer-Verlag Berlin Heidelberg 2011
2. Relevance of WCM and Its Weaknesses
Erik Hofmann¹ and Oliver Belin²
(1)
Chair of Logistics Management (LOG-HSG), University of St.Gallen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland
(2)
Sumitomo Mitsui Banking Corporation Europe Ltd, 99 Queen Victoria Street, EC4V 4EH London, UK
Erik Hofmann (Corresponding author)
Email: [email protected]
Oliver Belin
Email: [email protected]
Abstract
Working capital and the cash-to-cash cycle are important indicators to reveal supply chain efficiencies. Thereby, the objective is to balance and optimize the amount of working capital to successfully manage a company. Until recently traditional approaches were used to improve working capital mainly focusing on a single company. In contrast, the Supply Chain Finance approach provides opportunities to improve working capital for all parties involved in a supply