Logistics and Supply Chain Management, 6th Edition

Financing global supply chains

Inevitably, extended global supply chains will lock up greater amounts of working capital as longer pipelines imply a greater inventory requirement. In conventional international trading arrangements it has usually been the vendor who has to finance the pipeline, often having to factor invoices at a discount to improve cash flow.

More recently a different approach has emerged which is rapidly gaining acceptance, sometimes known as ‘supply chain finance’. The idea is that because often the customer is bigger than its suppliers and sometimes more soundly based financially, they – the customer – can access finance at a lower cost than the supplier. Using a financial intermediary – usually a bank – the buyer’s credit ...