So You Need a Supply Chain Finance Platform — What You Need to Know
This post originally appeared on Trade Financing Matters.
Supply chain finance is a very broad category as some define it. But we look at it as something very specific, typically centered on a solution that enables suppliers/ vendors to sell their invoices “approved” for payment by their buyer before the payment due date. Still, hold that thought for a moment and consider the broader landscape – as well as how these tools must interact with a technology ecosystem that already exists.
Looked at from this perspective, purchase-to-pay (P2P) technologies to support early payment functionality for your suppliers can come from several different sources. The segments offering early pay functionality include:
- Vendors that dominate the market for traditional invoice automation. Basware and their venture with MasterCard is an example.
- Source-to-pay providers that are focused on eProcurement but offer e-invoicing and discounting – for example, Ariba
- Vendors that are pioneering the platform-as-a-service (PaaS) model, combining cloud-based solutions for data and document management along with apps – Nipendo and Tradeshift are good examples.
- Financially oriented vendors that bring a holistic package of invoice automation (or just e-invoicing) and dynamic discounting or p-card capabilities. Think Taulia and Tungsten.
- Next generation EDI vendors that are moving beyond the limitations of a one-to-one traditional EDI model – see Crossflow and again Nipendo.
- Finally, there are those vendors that offer Approved Trade Payable Finance programs and third party funding providers to their platform and include vendors such as PrimeRevenue and Orbian. If you’re a purist, this last category of providers contains those that fall under the true definition of “supply chain finance.”
The above list only represents a small sample of vendors in the respective segments. And remember that vendors can go across segments as well. Substitution is rampant!
For example, PrimeRevenue now competes head-on with Taulia for the indirect spend early pay solution. And Taulia can go in and offer to rip out a competing e-invoicing solution (it has its own).
Where to start? It’s more complicated than it appears.
So, from the above list, if you are a large corporate looking to add early payment functionality to your existing infrastructure, there is no simple point A to point B progression. It really depends on what you are setting out to do, your current infrastructure, and how you would like to do it (use others’ balance sheets to fund suppliers, your own cash, or a hybrid model).
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