Category Archives: Trade Financing

Demica’s Three Core Supply Chain Finance Solutions

Demica is owned by J.M. Huber, a diversified multi-billion dollar family-owned company headquartered in the U.S. with operations and staff located globally. I had to ask what a company of this size is doing owning a vendor in the supply chain finance market. After all, J.M. Huber is a diversified multi-national company dealing with engineered materials and natural resources. Huber established a financial services division in 1997 and started working with Demica in 2001. In 2002, they acquired the platform. But just what does Demica do? Their three core products are focused on supporting supply chain finance, invoice discounting, and trade receivables securitization.

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Physical and Financial Supply Chain Convergence: It’s Real But Harder Than It Looks

- July 16, 2014 10:32 AM | Categories: Innovation, Supply Chain Management, Trade Financing

My Trade Financing Matters colleague David Gustin has been talking quite a bit about the convergence of financial and physical supply chains. But there’s both hype and reality, as he points out in a post titled "The Hype of Physical and Financial Supply Chain Convergence." Still, the value of business networks that operate between companies in such scenarios is indisputable. And they’re becoming even more so as supply chains operate in a globalized context.

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For Investors, ICC’s 2014 Trade Register Report Lacks Credibility

- July 1, 2014 4:20 PM | Categories: Trade Financing

I know I won’t be popular with this post, but I never choose the popularity route. To me, I’ll take quality over quantity any day. And so I have to point out that I think the 2014 International Chamber of Commerce (ICC) Trade Register Report has a ways to go. The report concluded trade transactions for all intent and purposes have practically zero losses. That’s right -- zero losses. The problem is that the people who matter don’t believe it. Who matters? Well, investors matter. And if investors don’t find your data credible just because the banks say so, then they will buy something else.

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E-Invoicing and Trade Financing Intersections – Courtesy of Billentis

E-invoicing is just a piece of the bigger trade financing puzzle (a market that is still largely un-intermediated with debits and credits sitting on the balance sheets of those companies engaged in trade). Beyond e-invoicing, it’s critical to explore the intersections with broader purchase-to-pay (P2P), direct materials procurement, services procurement, and related systems – not to mention understanding all of the related capabilities and requirements of supplier on-boarding (e.g., know your customer – KYC) and management.

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Tungsten’s Completed Acquisition of FIBI Bank Makes the Front Page of the FT

- June 18, 2014 2:22 AM | Categories: Industry News, M&A, Trade Financing

_DSC3068 Tungsten made the headlines – the front page in fact – of the Financial Times’ Companies and Markets section: “Tungsten Bank sets its sights on providing small business finance.” The FT covered the news that Tungsten had completed its planned acquisition of FIBI Bank, which will now be renamed Tungsten Bank. The FT writes that “the move means Tungsten will not only be able to process billions in suppliers’ invoices for large companies such as General Electric, but also advance cash to suppliers that need money immediately … [through] a cheap form of funding in the form of bank deposits.”

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So You Need a Supply Chain Finance Platform — What You Need to Know

- June 17, 2014 3:33 PM | Categories: Supply Chain, Trade Financing

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.

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The State of Supply Chain Finance Programs: Seven Quick Facts

- June 2, 2014 4:48 PM | Categories: Supplier Management, Trade Financing

I recently had a few discussions with corporates who have rolled out Supply Chain Finance (or Approved Trade Payable) programs with their supplier base. These corporates have been running programs for several years so I thought it would be good to get some feedback on how the programs are progressing. Here are seven quick facts that seem to be consistent with programs.

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Banks and Supply Chain Finance Technology Deployment

- May 27, 2014 4:36 PM | Categories: Supply Chain, Trade Financing

Many banks are trying to figure out how to provide supply chain finance capabilities to their clients and what technologies they need to support their infrastructure. Trade is now becoming just another specialized lending product at banks, and leading banks are trying to figure out how to integrate trade finance with their factoring, commercial finance, asset based lending, invoice discounting and other bank lending areas.

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Why Procurement, Treasury, and Finance Need to Be a Team (Especially Today)

The old way of doing things, with procurement, treasury, and finance acting in silos, no longer makes sense. This post gives some of the basics of why procurement needs to start paying attention to supply chain finance, but if you want deep analysis, join me tomorrow from 12-1 pm Central on a webinar called Supply Chain Finance: Where Are Leading Corporates Going? But first, the basics.

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Breaking Down the Accounting behind Receivables

- May 19, 2014 3:34 PM | Categories: Commentary, Trade Financing

Since the Enron and WorldCom crisis when independent auditor Arthur Anderson failed to report illegal accounting practices, the SEC has been monitoring public corporations more closely. Thus, we all should have some basic knowledge of accounting, especially as the interest in financing trade receivables by third parties is as high as ever. More than ever Receivables are being used to raise cash. When you think of a sale, it’s pretty simple: Debit “accounts receivable” and credit “credit sale."

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Do Suppliers Push Back on Dynamic Discounting and P-Card Programs?

- May 15, 2014 4:05 PM | Categories: Procurement Commentary, Trade Financing

Do you see suppliers fighting back by raising prices when buyers use dynamic discounting or p-cards to settle more traditional supply chain spend? I hear that comment from Procurement officers sometimes, but there really is no data anywhere that I can find. Both dynamic discounting and p-card programs charge high annualized percentage rates. In the case of p-cards, the business model of interchange must support both the merchant and issuing card member bank. In dynamic discounting, it's a risk free return for treasury. These high rates beg the question regarding when suppliers will just swallow the interchange in order to keep the customer and when they will push back (including refusing to accept a p-card in the first place).

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Where is Orbian Now?

- May 12, 2014 3:15 PM | Categories: Solution Providers, Supply Chain, Trade Financing

Orbian was one of the first companies to really start the ball rolling with supply chain finance. It was conceived and developed in the late 1990’s as a joint venture between SAP and Citibank and became independent a few years later. Orbian’s sole focus is to provide a supply chain finance working capital solution for corporates. Orbian’s SCF model was built to provide an agnostic funding model to large corporations and their suppliers, in essence eliminating the dependency on single bank funded programs. Their stated objective is to create the lowest cost, greatest capacity and greatest security of liquidity upon which the buyer’s working capital goals can be achieved.

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