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The Evolution of Supply Chain Finance

How to leverage trends—from growing liquidity stores to new technologies—to improve the efficiency and effectiveness of your supply chain.

By Sebastian Hölker | Updated on March 24, 2016
Stock illustration: Atomic globeNew technologies and new techniques are helping companies move toward a more holistic understanding of supply chain finance. Yet as the concept continues to evolve, treasurers need to be sure they are adequately educated so that they are aware of the full range of possibilities open to them.

Supply chain finance was once seen by most firms as just a single technique—an approach also known as “approved payables financing,” through which the largest company in a supply chain uses its financial heft to help its trading partners secure bank financing at lower rates than the smaller companies could get otherwise. In this approach, payables that the larger company owes to the smaller companies serve as collateral for bank loans.

Companies still use this approach, but the concept of supply chain finance has evolved a great deal beyond this limited view, as the increasing availability of liquidity among large companies has expanded their options and incentives for providing financial support to their trading partners. Meanwhile, advancing technology continues to create new opportunities at a startling rate, enabling organizations to more thoroughly understand their supply chains and to build sophisticated financing programs.

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