Supply Chain Finance

Supply chain finance came to the fore during the financial crisis and recession of 2008/2009, when credit froze, buyers and suppliers struggled to get products to market. Cash, always important, was suddenly strategic, and many companies issued internal decrees to uncover and preserve as much liquidity as possible.

In the broadest sense, supply chain finance refers to any payment arrangement between buyers and sellers linked to the process of getting a product to market. Traditionally, it is initiated by the buyer- usually a large company that wants better terms- for example a longer payment cycle, from a supplier. In return, and in order to preserve that supplier’s financial health, the buyer offers some type of recompense, such as access to more affordable credit through a banking partner, or participation in a solution that manages and optimizes payments among many participants in the supply chain.

For several years, Tecnocap has worked with key suppliers and partner banks to develop and utilize various financing options for its supply chains, in order to support growth and drive working capital productivity. Recently, it has developed an integrated corporate SCF Program approaching to innovative financial solutions for Supply Chain Finance. Amongst these, Reverse Factoring and Vendor Managed Inventory deserve a special mention: the first one, , an attractive financing tool, allows the buyer to benefit of longer payment terms, while providing high risk suppliers with immediate working capital, while the second one, optimizes Supply Chain performance in which the manufacturer is responsible for maintaining the customer/distributor’s  inventory levels and have full access to inventory data via an Electronic Data Interchange Platform.

Tools and methods of supply chain finance realize their benefits and spread their functionality, giving Tecnocap Group management more options than ever before, from proprietary systems offered by global banks, to bank-neutral platforms that can accommodate different funding feeds. Additionally, the introduction of the bank payment obligation, or automated letter of credit, could help make it easier for smaller, less-known suppliers to get needed credit and even pre-shipment finance.

Massimo Santomauro, Tecnocap Group CFO, confirms that “Supply chain finance (SCF) is more known: thanks to it there’s much more information now than before and it has emerged as a critical strategic function in Tecnocap Group that ensures the stability of its supply chains and improve working capital efficiency.” He then added “SCF is a good way not only to improve working capital metrics and preserve liquidity, but also to support our global strategy of supply chain management, based on full transparency, automation and efficient structures that maximize the benefits for all our stakeholders”.

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