Trade Finance
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Priorities and Perspectives

by Helen Sanders, Editor

According to Jim Owens, former Chairman and CEO of construction equipment manufacturer Caterpillar, “the competitor that’s best at managing the supply chain is probably going to be the most successful competitor over time. It’s a condition of success.”[1] While optimising the physical supply chain to anticipate and respond to changing conditions is an essential element of success, the financial supply chain deserves equal attention.

How important is it?

A common perception is that the supply chain drives a company’s success, while the financial supply chain is a by-product, in that it deals with the financial inputs and outputs to the physical supply chain such as payments and collections. In fact, the two must be considered hand in hand. Without a highly efficient and responsive physical supply chain, customer demand would not be satisfied, costs would  spiral and revenues would be compromised. However, investors do not invest because the company is good at making semiconductors (or providing consultancy, producing oil, or manufacturing chemicals) they invest because the company makes money from doing so. Financial efficiency must therefore be a key driver in all companies’ strategic decision-making, alongside or even in precedent to supply chain efficiency.

A treasury response to supply chain challenges

As we move into the next stage of the economic cycle, the supply chain risks to which companies of all types are exposed are also changing. According to the McKinsey research outlined in the accompanying article, “The challenges ahead for supply chains”, two thirds of respondents see supply chain risk continuing to grow, despite the fact that many firms have invested millions into developing highly automated, sophisticated processes. This is reflected in the priorities identified by respondents in the McKinsey research referenced above. Reducing costs is less immediate a consideration than it has been in recent years, as many firms have achieved the greatest efficiency they can. However, improving product or service quality (29%) improving customer service (36%) and getting products and services to market faster (34%)2 are greater priorities than they have been in the past. While treasurers and finance managers with responsibility for financial supply chain management may find it difficult to influence the first of these issues, they can directly contribute to the second and third.