Downturn may hit supply chain finance

31 January 2008
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31 January 2008

The increasing interest in supply chain finance (SCF) could be harmed by the economic downturn, an expert has warned.

Under the terms of SCF, financial institutions pay suppliers on behalf of buyers, allowing the purchaser to extend payment terms. Viktoriya Sadlovska, research analyst at the Aberdeen Group and author of a report into the SCF market published this month, told SM: "If the worst economic predictions come true and global trade and sourcing get hit, this could have a negative impact on the SCF market. Some companies may find it harder to get financing for their inventory or work-in-process in the tightened credit markets."

But she added some firms might turn to the system as they start to look for more flexible finance and payment options. The report by the research group revealed just under three-quarters of firms planned to, or already use, SCF in 2008. It warned, however, of the "desperate lack of best practice examples and specific guidelines" for companies to improve their processes.


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