Supply Chain Finance Platforms – Manual, Build, or Buy?

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Going out and doing desktop research to find a Supply Chain finance platform will be frustrating.  You will find research firms lump many players together that have very different functionality, like a CGI for trade letter of credit systems with an Orbian or Taulia.

So what do you do when you are looking for a Supply Chain Finance platform?

I know many firms, from Banks, to Family Offices with balance sheet, to Private Equity firms who are spending a lot of time looking for platforms suitable for Supply Chain Finance.

Many of the firms out there selling these platforms, including the likes of Demica, HPD, PremiumIT, etc . have designed their software for other purposes and have functionality not needed by the firm that wants to deploy a solution.

The choice really comes down to:

  • Use existing product which may have been designed for other purposes (eg. a factoring solution now being used for Supply Chain Finance)
  • Spec out your requirements and have an IT company build it for you.
  • Build your own system – believe it or not, SCF platforms have been built using Salesforce and Force.com
  • Or go manual and use email, etc.

One UK corporate assessed three main options; a manual solution, an in-house technical solution, and a third party provided option.  The manual solution enabled suppliers to make manual requests for early payment via email.  As the business owner claimed, “It meant we could move pretty quickly, but we knew it wouldn’t be very scalable, and it would put pressure on the accounts available.”

The in-house technical solution would be built by the IT department, to fully interface with ERP systems.  The final technical solution was to outsource supply chain finance through a third party. While the company saw benefits to in-house and third party development, they considered the three to four month development cycle needed to build interface with their ERP system a drawback.

The manual option was chosen as the final decision, with the company initially trialling a six-month manual solution. While the pilot was a success, the company found it needed more functionality, especially the ability to negotiate discount rates.

So the tender process has begun to find a third party.  In the meantime, the firm continues to run its manual solution alongside the third party one, which, having now traded some £733 million at an average of 20 days early, has proven to be an overall success.

Trade Financing Matters will be looking at platforms in more detail.  This is certainly a hot area, as technology is an enabler to facilitate finance.

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