The Handbook of Global Corporate Treasury

Chapter Fourteen

Financing the Supply Chain

IN THIS CHAPTER, we take on the concepts learned earlier in Chapter 11, and look at some of the solutions available for financing the supply chain today. We start by looking at financing across various legs of the supply chain, and the elements of risk associated with each. We look at creating a supply chain risk index and conclude with a case study on assessing credit risk of the suppliers, an area in which Treasury teams are now getting more involved.

PHYSICAL AND FINANCIAL SUPPLY CHAINS

Technological advancements and service sector capability growth has begun to fully integrate the physical and financial supply chains. For each leg or element of the physical supply chain (see Figure 14.1), there is a corresponding equivalent arm of the financial supply chain that provides support, liquidity, and communication to enable the physical supply chain to work more smoothly and seamlessly than in the past.

FIGURE 14.1 Integration of the Physical and Financial Supply Chains

The growth of value-added services apart from regular banking products and the long-term thinking of institutions and the trade have resulted in a number of pioneering activities and processes to reduce uncertainty and processing effort, and increase visibility and speed financial settlements for all concerned parties. These span the areas of financing, processing, regulatory, ...