Complexity of supply chain finance holding back expansion

Gurjit Degun
26 September 2014

Supply chain finance has had a slow uptake because it is a complex initiative to introduce, according to Tim Armstrong, director at KPMG.

Speaking during a panel discussion at the eWorld Purchasing and Supply conference in London last week, he said it is usually “second or third on the agenda of busy people in busy companies”.

He said: “We are hearing the same story from a number of clients that the existing method in supporting their suppliers to access working capital doesn’t work as well as they would like it to. We also find clients who don’t use or haven’t even heard of such platforms.

“The reason why the bigger companies aren’t using them is because you have to get finance to agree with procurement, and then maybe someone who is head of supply chain. If you can get them together then you will need the IT department. It’s always second or third on the agenda of busy people in busy companies.”

Rene Chinnery, head of supply chain finance at Lloyds Bank, put it in place at the organisation 10 years ago. “The key element is how efficient and well-run a supply chain finance platform makes your financing business,” he said.

Chinnery explained the sign of a strong programme is if a company has 50 per cent of its suppliers signed up. But he added that many small-to-medium enterprises (SMEs) are cash rich and are not looking for working capital.

“One of the most interesting aspects of this business is that it’s rather counter-intuitive. When we first started we thought that, particularly SME suppliers who weren’t being served by us, would take our right arm off to sign up to these programmes. It’s really not that easy. There’s quite a number of cash rich SMEs, so actually the take-up – what’s preventing us to get to 70 or 80 per cent – is, in part at least, that there isn’t that cash required in a lot of UK businesses.”

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