All Hail Supply Chain Finance — The New King of Spend Management

In probably over a dozen speeches this spring, I talked about how "pay" was becoming just as -- if not more -- important than "procure" in the procure-to-pay equation. It's good to see that others are validating the rise of the payment side of procurement. According to this article in Finance Week, supply chain finance, the "pay" element, is on the rise. And it's not just software companies getting into the game. Rather, it's banks (and we're not talking letters of credit here). The above-linked story notes that "There has been a surge in activity in the supply chain financing business ... nearly twice as many banks are offering the service as did last year and three times as many companies investigating it as a business solution." In fact, "Over 90% of major international banks are now offering their corporate customers supply chain financing (SCF) solutions," according to the piece.

90%? That seems high. Clearly, this number suggests that at least this one definition of supply chain finance is certainly bigger than just EIPP (electronic invoice presentment and payment), including early payment financing and discounting. Still, it's good to see financial service institutions finally realizing the importance of tying their offerings to the needs of procurement and operations rather than just treasury and cash management. And considering that only "14% of corporations" now have a live supply chain finance program in place but that "24% are now actively investigating" their options, they'll be hunting in fertile grounds. Who is the big winner in this game? Clearly, it's buyers and suppliers -- but it’s also technology providers like Ariba/Orbian, Prime Revenue, BasWare, JPMorgan Chase (Xign) and American Express (Harbor Payments), who can serve as the arms merchants to banks as they build out their solutions.

- Jason Busch

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