Critical thinking On Supply Chain Finance

Supply Chain Finance

The local markets have experienced increase in competition that has driven small, medium and huge businesses to focus on direct export as their option. Furthermore, these organizations have also found an alternative to be part of the market segment by joining the international production networks (IPNs).

However, as these companies engage in international production, they have also encountered numerous obstacles. According to research, it is clear that majority of these organizations lack sufficient funds.  As a result, this hinders them to be part of production which takes place on international level. This has led to various techniques in financing to boost the production levels of a firm on international level. These approaches incorporate seeking credit from other informal sectors, use of finance chain credits, use of both bank and non bank finances.

Supplier credit is a way of financing that seems to be vital and common strategy of financing in organizations. This further extends to operations on international levels in which vending of invoices facilitated the start of this approach. These invoices were done at discounts to enhance exchange of cash payments in advance which is generated from a third party. This approach is of significance to various firms due to its benefits (Truel, 2008).

Clearly, it benefits firms by allowing them to operate with cheap capitals, upgrades the flow of money and lending for those who supply. Buyers also benefit when they incur reduction in their total financial expenses. Based on their total costs of ownership, this aids to enhance good relationships with suppliers because of the presence of capital to operate with. In this regard, it is vital to identify that the firm’s book does not take SCF to serve as a debt. In addition, various environments need to engage in businesses that are different. This implies that companies that intend to operate in different locations should change their tactics to blend with the new place.

 

References

Truel, C., 2008. Supply chain finance 101. Supply Business.  Retrieved 19 Dec 2014 from http://www.supplybusiness.com/previous-articles/summer-08/heads-up-w07/tactics-supply-chain-finance-101/

Yann, D., & Chorthip, U., 2014. Enabling Participation of SMEs in International Trade and Production Networks: Trade Facilitation. Trade Finance and Communication Technology, ESCAP Trade and Investment Division, TID Working Paper No. 03/14, 25 June 2014. Bangkok. Retrieved 19 Dec 2014 from http://www.unescap.org/publications

 

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