Assignment Writing Help on Supply Chain Finance (SCF)

SUPPLY CHAIN FINANCE (SCF)

With increased competition in the local markets, firms, both small and medium-sized enterprises (SMEs) and large enterprises (LEs), are opting for direct export and participation in international production networks (IPNs) as an alternative market segment. There are, however, a number of obstacles to a firm’s participation in international production. Research points to access to finance as the chief obstacle for firms in their quests to stamp their participation in international production (Yann & Chorthip 2014). A number of financing techniques are available to boost a company’s international production effort, some of these include; Supply chain financing (supplier credit), bank financing, non-bank financing (e.g., factoring companies) and credit from the informal sector (Yann & Chorthip 2014).

Supply chain financing (supplier credit) appears to be the most common and significant technique of financing an organization’s international operations. The technique is founded on the practice of vending invoices at discounted prices in exchange for advance cash payments from a third party (Truel, 2008). The technique is preferred because it brings with it a number of benefits: gives access to cheap working capital as well as improving cash flow and borrowing for the supplier. Benefits also exist for the buyer in the form of reduced total financial cost and therefore the total ownership cost, strengthened relationship with the supplier due to availability of working capital. It is also important to note that SCF is not treated as debt on the company’s book (Truel 2008).

Different environments call for different business operational techniques, as countries such as Brazil and South Africa have differing business environments, political landscapes and cultural preferences and practices. For this reason, it is important for any business firm venturing into a new environment to alter its tactics to those that blend with the new region or country.

References

Truel, C., 2008. Supply chain finance 101. Supply Business.  Retrieved 19 Dec 2014 from http://www.supplybusiness.com/previous-articles/summer-08/heads-up-w07/tactics-supply-chain-finance-101/

Yann, D., & Chorthip, U., 2014. Enabling Participation of SMEs in International Trade and Production Networks: Trade Facilitation. Trade Finance and Communication Technology, ESCAP Trade and Investment Division, TID Working Paper No. 03/14, 25 June 2014. Bangkok. Retrieved 19 Dec 2014 from http://www.unescap.org/publications