now loading...
Wealth Asia Connect Middle East Treasury & Capital Markets Europe ESG Forum TechTalk
Treasury & Capital Markets
How to sustain a growing supply chain
Operating in a complex and ever unpredictable business environment, having a stable and efficient supply chain could mean the difference between the success and failure of a business. While all companies strive to grow and expand, many of them are often unprepared to handle the increasing complexity of their respective supply chains.
Darryl Yu 22 Sep 2016
Operating in a complex and ever unpredictable business environment, having a stable and efficient supply chain could mean the difference between the success and failure of a business. While all companies strive to grow and expand, many of them are often unprepared to handle the increasing complexity of their respective supply chains.
The lack of attention towards a company’s supply chain often leads to reduced visibility on payments and delivery of goods. Other problems arise from the inability of businesses to deal with bouts of demand variability for their products. In a report by Thomson Reuters in association with Asset Benchmark Research that surveyed over 1,000 CFOs and treasurers in Asia, attempting to optimize supply chain management was the second (38%) top pressing pain point for Asian finance/treasury departments.      
As a result of these issues, businesses have started to pay closer attention to the health of their supply chains by implementing a number of bank-backed supply chain programmes for their SME (small-medium enterprises) buyers and suppliers who normally experience difficulty in obtaining independent financing. According to the “2016 Trade Finance Gaps, Growth and Jobs Survey” published by the ADB around 56% of SME trade finance proposals were rejected by financial institutions compared to only 10% for multinationals (MNCs).
This high rejection rate for SMEs stems from the fact that many banks don’t have a full picture about the financial health or credit worthiness of these “mom and pop” type organizations. However, this narrow approach may change following some banks’ willingness to understand the entire supply chain of beyond the primary customer. “Banks are organized in different silos to service different client segments,” observes Alex Manson, global head of transaction banking at Standard Chartered Bank. “Historically banks would focus on providing financing services to a particular client. Banks should move on from the traditional way.”
For Manson sustaining the overall supply chain is about focusing on the impact of counterparties beyond the initial banking client. “Banks should think how they should acquire a deeper understanding of the client’s supply chain relationships, which have become increasingly complex and increasingly global in recent years,” he says. “If we really take a deep dive into a client’s ecosystem and understand what the challenges are then we can actually come up with solutions not just for the main anchor client but everybody else in the supply chain.”
The key for banks in understanding various supply chains lies in the inclination of clients to give information about their counterparties. “Clients are increasingly demanding this because they are realizing how important their supply chain is for their sales. Clients are taking a holistic view of their business beyond their own organization,” states Manson. “If we can engage with an anchor of the ecosystem and make use of that data to get us insights about the ecosystem that obviously would help everyone. It will inform credit decisions. We have to use technology to achieve this.”
 

    

Conversation
Anh Duong Nguyen
Anh Duong Nguyen
director, department for general economic issues and integration studies
Central Institute for Economic Management (CIEM)
- JOINED THE EVENT -
Fitch on Vietnam
Overcoming challenges, sustaining growth
View Highlights
Conversation
Anand Rengarajan
Anand Rengarajan
global head of sales & head of Asia Pacific, securities services
Deutsche Bank
- JOINED THE EVENT -
Asset Servicing Leadership Series
How digital assets are transforming Asia's investment landscape
View Highlights