Throughout this series, we have explored the role that the risk of rising interest rates and reduced bank lending to small and medium-sized businesses is likely to play in driving up supply risk, along with some of the foundational procurement-centric technologies that can help. Today, as we conclude this exploration in the final installment of this series, we’ll highlight just a few of the trade financing techniques and technologies that can help procurement organizations play a leadership role in proactively preparing for and addressing supply risk.
Anti Bullying messaging is all the rage. We all are hyper focused on the subject for our kids, as many of us were probably the victims of some form of mental (and to a lesser degree) physical bullying. So as a supplier, how can your buyers “bully” you? Well there are several ways. According to a poll by the UK’s Federation of Small Businesses, almost 1 in 5 of their members felt they faced unfair practices in the past two years. According to them, the top five “most resented practices” were: Pay to stay. Also known as “supplier assessment charges” […]
A Technology Foundation to Reduce Supply Risk With Higher Interest Rates and Restricted Bank Lending
The combined specter of rising interest rates, reduced bank lending to small and medium-sized businesses, demand/supply variability and economic growth prospects in a number of European and Asian countries – most notably China – suggests a rather dangerous supply risk cocktail is brewing for procurement organizations.
In the first installment of this series, I provided an overview of why these challenges matter and can contribute to supply risk. Today, I’ll share how specific solutions can help address these challenges – and build into applying trade financing techniques in the most targeted and strategic manner.
While the recent market correction may call into question the Fed’s expected trend to raise interest rates, it is inevitable that interest rates are going to climb in the coming years – the question is “when” and not “if.” But whether a rise in rates is combined with further restrictions on lending to small (read: risky) businesses due to the need to maintain more conservative lending standards – thanks to the latest Basel III restrictions – is perhaps just as important a question to ask.
Certainly, even a double whammy of higher interest rates combined with restrictive bank lending could have a significant impact on the ability of suppliers to access capital on reasonable terms. In the coming weeks on Trade Financing Matters, we’ll explore the potential impact of these challenges as well as potential approaches to proactively reduce supply chain risk. Today, we’ll start by tackling how such a climate could impact suppliers – and procurement.
Love it or hate it – you’re likely in the latter category if you need a new hip or knee – the National Health Service (NHS) is a model of transparency compared with many health systems throughout the world. But that transparency has not extended to accounts payable and supplier management activities on a systematic basis to date, although individual health trusts have worked their own efforts with solid results. (As an example, Steria and Tradeshift have success with a small corner of the NHS.)
Yet change is coming. In a recent column in The Information Daily, Basware’s Steven Carter highlights how UK central government is taking steps to make prompt payment standard within the NHS, which depending on your perspective, requires e-invoicing.
My colleague Jason Busch has written recently about if you should proactively Finance Chinese Suppliers given the Chinese devaluation and increased supplier performance risk due to the lack of capital availability to non-state owned companies. The financing issue Jason is focusing on is the availability of pre-shipment and post-shipment credit and liquidity for the supplier as the Chinese economic engine slows and the yuan is devalued to support exports. If you a reseller or distributor without leverage, Chinese factories will want you to pay for the goods either in advance of production (or a deposit) or via letter of credit. This […]
The level of nuanced arguments surrounding China’s dual-move to a more freely floating currency, combined with an immediate devaluation – close to 5% at the time of writing this piece – has reached a fever pitch in international business circles. Aside from my own views about China’s general behavior from a business context, I personally believe it’s an ingenious move of desperation that would have been difficult to predict ahead of time.
From a sourcing perspective in terms of negotiation with suppliers over price decreases, we recently shared some advice for our subscribers on Spend Matters in a research brief, What a Devalued Chinese RMB Means For China Sourcing Strategies. But speaking more broadly than negotiating price decreases as a result of the devaluation, there is the broader question of supply risk with Chinese vendors – and the level of action companies should take to protect their supply chains through active trade financing programs.
McKinsey compiled a cheat sheet for the future of tech and it has been a good conversation piece for the many doomsayers concerning the current state of sluggish to no growth in most countries. Below are the 12 technologies that they believe will remake future business. I provide this list because some of them may impact the way trade finance and trade credit is done. Think 3D printing, where a buyer will select a design or buy a pattern to make something once or many times, as opposed to buying inventory. I admit, many on this list may have little […]