For organisations where supply chain finance has been successfully implemented, it has transformed not only their own balance sheets but those of their suppliers, too.
But there are many stories out there of companies that have, in a sense, successfully implemented SCF as far as the technology is concerned – but then they find that only a handful of suppliers sign up to the programme. This may be because the scheme is too complicated, too expensive for the supplier, too difficult to comply with the required legalities or even simply that the procurement team really hasn’t pushed the concept into the supply base. And this has especially been the case in Europe where there is still a lot of misunderstanding as to what SCF is and how it can be a vital part of any company’s working capital strategy.
As a consequence, there are a lot of companies that have tried to do SCF but did not make a great success of it. These companies are now being actively targeted by both banks and platform providers to buy a second SCF platform. The vendors’ logic is that they are dealing with a more mature buyer who has now learned from their mistakes and will be better able to avoid them next time – and willing to have another go.
There is also an argument that maybe the company didn’t choose the right SCF partner the first time round.
Logically, therefore, the second implementation of SCF should yield better results. The fact is, however, that experience suggests that there are usually cultural reasons why SCF programmes are not a success the first time round. These are usually to do with the corporate interplay between treasury and procurement: for example, treasury wants the programme to be successful and deliver working capital reductions while procurement is convinced that SCF is not a good thing for their negotiation strategy.
So if the buying company still has the same unresolved issues there is no reason why the second attempt will be any more successful than the first.