Global Supply-chain Finance - Benefits of GSCF

Benefits of GSCF

The role of GSCF is to optimize both the availability and cost of capital within a given buyer-supplier supply chain. It does this by aggregating, packaging, and utilizing various information generated during supply chain activities and matching this information with the physical control of goods. The coupling of information and physical control enables lenders to mitigate financial risk within the supply chain. The mitigation of risk allows more capital to be raised, capital to be accessed sooner or capital to be raised at lower rates.

The need to increase capital or inject capital into the supply chain more quickly is being caused by several factors:

1.) Market trends with respect to the global supply chain have caused companies to demand an integrated approach/solution to physical and financial supply chain challenges: a.) Buyers are looking to optimize their balance sheet by delaying inventory ownership. b.) Suppliers are looking to obtain funds earlier in the supply chain at favorable rates, given buyers’ desire to delay inventory ownership. c.) middle-market companies are looking to monetize non-US domiciled inventory to increase liquidity. d.) There is wide interest in integrated supply chain finance solutions.

2.) Globalization of the United States and Western Europe’s manufacturing bases has resulted in fewer domestic assets that can be leveraged to generate working capital.

3.) Most small and medium suppliers to US and European businesses are located in countries that lack well-developed capital markets. Without access to efficient and cost-effective capital, production costs increase significantly or the suppliers go out of business.

4.) Letters of credit, a long-standing method of obtaining capital for suppliers in less developed countries, are on the decline as large buyers are forcing suppliers to move to open account.

5.) There is a desire to ensure stability of capital as supply chains elongate. Another Asian financial crisis (such as the one in 1997) would severely disrupt US buyers’ supply chains by making capital unavailable to their suppliers.