03 July 2008
Demand for supply chain finance (SCF) is on the increase during current tough economic conditions, according to working capital consultancy Demica.
The number of firms using a SCF system has risen from 9 per cent last year to 14 per cent in 2008. A further 24 per cent are actively looking at suppliers to provide this service.
Under SCF, banks take over payment of suppliers, allowing buyers to extend terms without harming payment to vendors or affecting cash flow.
The report said the "tug of war" between buyers and supplier payments had been exacerbated by the downturn in the economy and the resulting squeeze on payment and credit terms. Some 65 per cent of the 30 European companies examined said they wanted to extend payment terms during 2008.
Retail, automotive and the manufacturing industries were thought by banks to be the three sectors that would most benefit from adopting SCF.
Firms believed the two biggest challenges of SCF were getting suppliers on board and integrating with technology.