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Supply chain finance: 3 core components for a best-in-class SCF solution

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The value of a supply chain finance (SCF) solution has never been clearer than in recent months, with many companies opting to boost the resilience of their supply chains and support their suppliers in volatile trading conditions.

But while SCF has much to offer, it’s important to remember that not all solutions are made equal. With that in mind, here are three components that buyers should focus on when setting out to implement a best-in-class SCF solution:

1. Intuitive technology for supply chain finance

It’s no secret that a best-in-class SCF solution should be anchored on intuitive technology that caters to suppliers of all sizes, spend categories and levels of tech savviness.

For one thing, it’s essential to be able to get suppliers up and running with the program quickly and easily. A complicated or time-consuming onboarding process may deter suppliers from taking part — so the smoother the process, the easier it will be to drive momentum, gain early buy-in from internal stakeholders and ensure the program’s success. Companies should consider carefully whether their intended SCF solution provider has a strong track record in this area.

It’s also important to note that a best-in-class SCF solution may extend further than supply chain finance alone. By integrating other services into the program, such as user-friendly electronic invoicing solutions, companies may be able to encourage their suppliers to automate more of their processes. This, in turn, can reduce the risk of error and speed up invoice approval times, thereby allowing suppliers to access early payment as soon as possible after submitting an invoice.

In addition, the chosen SCF solution should provide the buyer with robust, real-time data and analytics. This can give buyers a clearer view over how suppliers are using the solution, as well as any areas where adjustments can be made. For example, solutions that incorporate predictive analytics can evaluate the probability that suppliers will request early payment on particular invoices, bringing greater visibility over future cash flows.

2. Bank agnostic solution

There is a notable difference between single-bank programs and bank-agnostic programs — not least because even a large global bank may not be able to support every country included in the company’s supply chain.

Unlike single-bank SCF models, bank agnostic solutions give companies a broad choice of funding options. Using a bank agnostic solution, buyers can include their relationship banks in the funding model — while also ensuring that the solution precisely matches the needs of the company’s supplier base. With a well-designed funding model, suppliers should be able to find funding that aligns with their geographic footprint, and that supports the currencies they need.

What’s more, a bank-agnostic solution avoids dependency on a single financial institution. This mitigates the risk that a particular bank may choose to exit the market, while also making it easier for companies to adjust their funding model when the need arises.

3. The people behind the SCF program

A successful SCF program isn’t only defined by its technology and funding model. Another important ingredient is ensuring that the right people are tasked with driving the program’s success, both internally and externally.

Where the SCF solution provider is concerned, this means having dedicated teams in place to drive supplier onboarding and outreach. It’s also essential to choose an SCF provider that will offer accessible support services for all users once the program is up and running.

Executive alignment is another key consideration, particularly given that SCF programs can include involvement from a number of different groups within the buyer organization. In order to maintain momentum, the company adopting an SCF program should agree upon a collective set of objectives for that program. And of course, have the right resources in place to make the program a success.

Communication can also make a difference to the effectiveness of the supplier onboarding process. While intuitive technology is key to a streamlined onboarding process, this should be accompanied by a robust communication strategy: Suppliers will need a clear understanding of the benefits of SCF if they are to weigh up the value of the program to their businesses. In practice, this might mean adopting different messaging for different groups of suppliers.

Conclusion

While no two SCF programs are the same, the factors detailed above can help ensure that a program achieves its intended goals.

Intuitive technology plays an important role in facilitating supplier participation, while sophisticated analytics can give buyers deeper insights into the program’s effectiveness. A bank-agnostic solution enables buyers to work with their relationship banks, while mitigating risk and providing flexibility. And crucially, having the right people in place — both internally and externally — can help to maximize supplier participation and ensure that the program achieves its goals.

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