A recent article on the World Trade Magazine web site asked are we there yet in reference to Supply Chain Finance. To this, I must answer an emphatic NO!
Why?
First of all, thousands of business went out of business last year simply because customers, who obviously have no understanding of how financing should flow through the supply chain, wouldn’t pay on time and simply extended DPO as their method of “financing” themselves. (See They Killed Kenney.)
Secondly, as noted by Michael McKenzie of JPMC in the article, factoring is the “financing method” receiving the most attention. Factoring is not financing. It’s just a high-interest loan in reverse. “Here’s 80% of the value of your receivables.” How is that better than “here’s a 20% interest loan”? Think about it.
Thirdly, as noted by David Gustin of GBI, bank-assisted Trade Finance Products account for less than 15 percent of Trade Financing. Banks have all the money … and, generally speaking, they haven’t gotten it.
I could go on, but I don’t see the need because these three examples alone clearly demonstrate that supply chain finance, for the most part, is still far on the horizon.