Much has been said about Supply Chain Finance (SCF) and the benefits this type of financing brings to all parties involved.
Nevertheless, the success of an SCF program depends, among other factors, on the participation of as many suppliers of the companies that initiate these programs as possible.
Well, while it is true that the benefit these programs bring is easily recognized by large suppliers, the same cannot be said when the proposal to join these programs is aimed at a more modest-sized supplier who, in most cases, sees the proposal to join an SCF program as a tool through which the customer can lengthen the payment terms of its invoices.
The question that arises, then, is to understand how best to present the proposal to suppliers and what aspects are taken into consideration by suppliers to accept and adhere to it.
In other words, what are the factors that lead a small/medium enterprise to accept the SCF program proposed by its client?
There is no single answer and it all depends on the specific cases. However, the various analyses conducted allow us to identify some categories or groups of issues, namely:
The supplier must be able to compare the benefits of this solution with those brought by an alternative financing method (one that does not result in a deferment of payment times).
In this category, it should be noted that in cases where the supplier is very small and/or in an uncertain economic situation, the comparison may not be possible due to the inability to access other working capital financing solutions.
When comparison is possible, the provider should find, for example, that, through SCF programs, the applicable rates will tend to be more competitive than those that would be applied to him with other solutions, also taking into account the presence of costs implicit in the different solutions (inquiry fees, account keeping, etc.) which, especially in the case of transactions of small amounts, can substantially change the cost of the individual transaction.
In effetti, sono ugualmente pertinenti:
The more fluid, transparent, and detailed this process is, the greater the provider's interest;
suppliers (particularly small ones) often need training on the product itself, and it is worth emphasizing the spirit of collaboration behind the initiative and the positive impacts this solution represents;
As anticipated, the supplier tends to think that the only purpose of implementing this type of program is to lengthen invoice payment times and, as a result, will only result in greater economic pressure. Therefore, it is critical to demonstrate the necessary openness and willingness to provide all clarifications (with the cooperation of all Buyer departments) so as to assure the supplier that everything will be implemented with the intent of creating value for all stakeholders in the process.
At TXT WCS, thanks to our team's expertise, we are well aware of the obstacles that a buyer faces and the specific needs of suppliers; to meet them, we have developed the SCF Polaris marketplace that enables a buyer's working capital management in a centralized and transparent manner.
We collaborate with the Buyer and its suppliers throughout the lifecycle of SCF programs and are an active part of the supplier onboarding process, thus enabling the overcoming of difficulties encountered by suppliers throughout the proposal evaluation process, bringing greater clarity to the objectives of the collaboration and strengthening their confidence in the choice made. All with the support of the most advanced technology, at a competitive cost.