Supply chain finance slow to take off

Logistics Insight Asia, 1/1/2008

A new Aberdeen Group research study, “The 2008 State of the Market in Supply Chain Finance”, benchmarks the trends in supply chain finance (SCF) over the past 15 months and shows that there has been a slight increase in practical activity in SCF compared to 2006. Supply chain finance is actively used by 15 percent of enterprises surveyed, with an additional 58 percent currently planning moreactive use or investigating options.

Despite the general awareness among corporate professionals that SCF holds a promise of savings and improved financial supply chain efficiencies, there is still a lack of best practice examples and guidelines for the corporate community to follow to improve SCF practices, the study found. Both buyers and suppliers responding to the survey reported that the lack of knowledge of supply chain finance best practices was the key challenge to optimizing their SCF practices.

“This finding shows that companies have not yet fully realized the potential of supply chain finance techniques in helping manage the end-to-end supply chain,” said Viktoriya Sadlovska, a research analyst at Aberdeen who authoredthe report.

“Aberdeen’s research studies in 2006 and 2007 have shown that Best-in-Class supply chain finance users have been able to use both financing and technological capabilities to help them achieve competitive advantage.

“However, a number of challenges are still preventing many companies from successfully using these practices, including the lack of purchase-to-pay process automation, poor collaboration between supply chain partners, high cost of financing for certain companies/industries and the still-evolving market of available solutions”.