Webinar – Procurement and the Circular Economy: Trade Financing and Payment

One of the notions of the circular economy centers on the optimization and use of contained systems rather than a collection of individual components or tiers. In this regard, a supply chain is not necessarily linear, but rather consists of a collection of integrated physical, information and financial flows, which may shift and change over time. Tomorrow, Feb. 18, at 1 p.m. CST, I’ll be debating the merits of the circular economy with Tradeshift’s Christian Lanng on a Spend Matters webinar. We will be talking about what the circular economy means for procurement, finance and supply chain teams. See our past coverage (and introduction) to the circular economy here, here and here.

One area where we see circular economic thinking taking ahold within procurement is in the area of trade financing, where it will increasingly be in the interest of larger corporates and OEMs to facilitate and encourage such programs – even if they are partially or entirely funded by outside sources of capital (bank or non-bank). Walter Stahel, an economic and philosophical advocate of circular economy theory, posits that one of the benefits of the model is that “diverse systems with many connections and scales are more resilient in the face of external shocks than systems built simply for efficiency – throughput maximization driven to the extreme results in fragility.”

Resilience is a key reason for companies to put into place trade financing mechanisms and systems (e.g., supply chain finance, invoice discounting, etc.) in the first place. Doing so, provided capital is readily available at reasonable rates of interest, can significantly reduce supply risk as well as create greater linkages between buyers and suppliers. For example, by enabling financing liquidity further up the procurement lifecycle (e.g., when a PO is issued), companies can curry favor with suppliers by enabling capital at rates far below that of factors and encourage vendors to co-invest in longer-term joint innovation programs and worry less about every day cash flow.

If you’re curious to learn more about the circular economy, we invite you to join our live webinar this week on Feb. 18 at 1 p.m. CST. Can’t attend, but want the slides? Register anyway to download the materials and watch at a later time.

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