Supply Chain Finance: Even more important in times of crisis

Supply Chain Finance can be understood as the management of financial flows in a supply chain with the objective of obtaining resources, reducing the need for working capital and minimizing the costs of accessing credit. In the economic scenario designed for Brazil this year, with the worsening of the financial crisis, rising interest rates and greater restrictions on credit, this topic becomes one of the protagonists on the agenda of executives in the areas of supplies and finance.

In order to understand the practices of Brazilian companies in the management of financial flows in the supply chain and compare them with international practices, the ILOS coordinated an unprecedented survey, with support from Rutgers University, Arizona State University e Technical University of Berlin, with 59 Supply executives and 50 Finance executives from 67 companies listed among the 1000 largest in the country. The main initiatives related to Supply Chain Finance identified in the survey were: reducing inventory levels, increasing payment terms to suppliers and seeking financing between links in the chain.

With regard to the reduction of stock levels, the survey only confirmed what was already expected: the vast majority of companies (95%) make systematic efforts to reduce stock levels, something even more critical in the scenario of a significant reduction in demand. The good news is that the overwhelming majority (97%) of companies were successful in their efforts to reduce inventory levels, which averaged 21%. The point of attention is the possible impairment of product availability, evidenced by the 30% of respondents who stated that there was an increase in stockouts, an average of 10%.

A large portion of Brazilian companies (86%) were also eager to extend the payment period for suppliers, which averages 22 days, less than the average obtained from data from companies in the US, Germany, Sweden and South Africa. South. In only 5% of cases this period is greater than 60 days in Brazil, against 18% in other countries. Extension of the deadline is certainly more difficult here, due to the high cost of capital. The survey also indicates that the focus of Brazilian companies is to extend the payment term to their medium-sized suppliers (invoicing between R$10MM and R$100MM), while in other countries there is already pressure on large and small suppliers as well.

The biggest opportunity, however, seems to lie in getting cheaper credit for your suppliers. Less than half of the interviewed companies (46%) have already sought cheaper credit for their suppliers, resulting in only 20% of suppliers benefiting. Despite this, the success rate of this strategy is extremely high, with 91% of respondents stating that they have benefited their company from this practice and that they would seek this type of initiative again, which is an excellent example of “win-win” practices. in supply chain management.

Certainly, these practices are not new, but the attention of Supply Chain managers to the financial flow will make these initiatives integrated into the area's strategies, with a more appropriate analysis of the benefits and risks associated with each one of them. Also, 2016 looks like an excellent time to put them into practice!

Reference

<https://ilos.com.br/web/analise-de-mercado/relatorios-de-pesquisa/planejamento-no-supply-chain/>