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Platform economy and supply chain today

March 16, 2022

We are experiencing a moment of dramatic and sudden reorientation in the definition of supply chains, under the blows of geopolitical tensions, the pandemic and now the open conflict in Ukraine, which has replaced the oldest trade route on the planet, that between Europe and Asia, with a giant black hole combining war and economic conflict. The logic of this redefinition is largely already mapped out: shorter supply chains, so as to reduce logistical vulnerabilities and hopefully also their environmental impact.

This also means hard work in relocating production close to their markets. An activity that will require investments, skills transfers and a lot of financial support.
The change in supply chains, at least the manufacturing ones, will also impact the logics of supply chain financing, leaving less room for the traditional and prevailing purpose of optimising the working capital of large-scale buyers, to shift to a logic of supporting those components of the supply chain that are most involved in redesigning and sustainability.

Managing this process will require the adoption of strategies projected over the medium and long term, instead of the maximisation of short-term results that has characterised the history of at least the last two decades. What can supply chain finance platforms do within this evolution?

A platform is nothing more than a set of tools that aim to facilitate the achievement of the goals of different parties, through the use of technology and a certain degree of engineering and standardisation of the underlying contractual relationships. But platforms are not all the same and the claim that they do everything equally well is just marketing.

It is therefore important to move away from the logic of empty labels and to think concretely about the structure and characteristics of individual solutions. It is not enough to be or define oneself as a platform, it is necessary to understand and evaluate the actual improvement that each specific solution guarantees with respect to the partners' objectives and the as-is situation. This is particularly important precisely because we are at a turning point in relation to a traditional mainstream made up of short-term financial objectives, a mainstream that has also marked the structure of supply chain finance solutions. In this context, it is not necessarily the case that successful solutions designed twenty years ago with an impressive track record are the best answer to today's problem.

To measure oneself with a logic of effective support for the suppliers that make up the supply chains, overcoming the logic of concentration on the most important players, means trying to overcome the limitations of traditional solutions: the emphasis must therefore be placed on effectiveness and horizontal applicability, rather than on volumes and short-term financial results. There is a need to redefine the traditional logics of the financial products being supported, rather than being subjected to them. There is a need to incorporate the suppliers' point of view into the platform logics, without considering them as mere passive subjects.

Taking this challenge seriously means adding a greater focus on user experience and horizontal sharing of rules and processes to an activity focused on application integration between different systems, which essentially benefits the large players. In this way, a supply chain finance platform can become a tool to support the supply chain ecosystem on a scale no longer limited to small fringes of suppliers, albeit volumetrically significant.

With this approach, we have designed Polaris, with the aim of providing a scalable solution, designed to encourage suppliers to join and give the buyer all the levers and flexibility needed to manage the transition.

Context and paradigm shift: from globalisation to relocation
1. Geopolitical tensions
2. Pandemic
3. Open conflict
4. ESG sustainability

> Shorter chains, relocation of production closer to their markets, sustainability
+ financial support + skills transfer + investment

> Redefinition of the logic of supply chain finance: from a short term financial driver (for the buyer) to a support component for the supply chain, with an important extension of the actors involved

Platform economy and supply chain finance
Platforms are a potential enabler for this mainstream, but what challenge do they face?
Supporting an ecosystem vs. optimising the working capital of an entity > the financial instrumentation may be the same, but processes, structures and user experience need to be revised to become usable by a larger number of entities

The actors
From the prevalence of finance to the prominence of supply chain managers, who must become more polyvalent: not only logistics and production, but also finance and a lot of investment in supplier knowledge.