Streamline Your Supply Chain Finance Request for Proposal (Part 4)

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This is a continuation of yesterday’s post which discussed factors in a Request for Proposal for Supply Chain Finance.  Today we look at Execution, and in particular, supply chain finance onboarding.

Many companies I have spoken to me about their supply chain finance programs complain to me that the supplier onboarding side can inhibit success in achieving utilization.  I hear comments such as,

  • The supplier onboarding process is a bit cumbersome with our smaller suppliers and detracts from many companies coming on to it. They see it as too complicated and interferes with existing banking arrangements. When it works well, key cog to our supplier finance product offering.   Aviation & Defense Manufacturer
  • You need to do contracts, you need to travel, and set them up on a platform, and you need to run it, and you need to do payments, on the other hand, it could be more efficient to put in Supply Chain Finance because we have a streamlined process which make it less costly in some cases. Global Consumer Appliances

On-boarding requires hard work and intensive dialog with top suppliers. It is important to ask service providers what their approach will be to on-board domestic and international suppliers.  Many banks and platform providers will perform a crossover analysis of your supply base against their already participating suppliers on their platform to first see how many they have put through their KYC process.  They also use the crossover analysis to support the development of a segmentation strategy for your supply base.  During this segmentation process, suppliers will be classified into various buckets for marketing the program based on the overall credit capacity.

We strongly believe at TFM that Procurement must “own” this process because they have the relationships with the suppliers.  While the funders have their own requirements to enroll and fund suppliers, Procurement must drive this.

The challenge with on-boarding is making sure the benefits are clearly enumerated and laid out so all parties see the issues and benefits (CFO, Procurement, Treasury, Suppliers, etc.) and roles are clearly defined.  Emails and Letters can be a callous and ineffective method.  One program manager said, ”we did not want  emails or letters sent and from that point on put the supplier in contact with our bank.  We did a lot more hand holding than we needed to but worked out very well.  We’ve done some surveys with the suppliers and got high scores and were impressed with time and effort we took explaining things to and giving them tools to calculate the benefits.  They seem to appreciate that.”  Program Manager, Large Manufacturing Company

I’ve written a four-part series on Supplier Onboarding called Dont shortshift Execution if you are interested in a further read.

If you are interested in comparing notes or plan to issue an RFP, please contact me at dgustin at tradefinancingmatters.com to chat further.

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