Cost is the main barrier to the widespread adoption of more advanced supplier finance techniques, according to a study by The Supply Chain Finance Community.
The report, Costs and benefits of Supply Chain Finance solutions: is it always worth it?, analyses the costs involved in implementing a range of SCF solutions and compares them to the benefits they deliver. It finds that innovative solutions such as invoice auction are, in general, costlier in their life cycle for two main reasons:
- The limited presence of traditional players that offer a precise subset of solutions
- The need embedded in these solutions to involve a wide set of participants.
Solutions which the authors describe as ‘innovative’ differ from more traditional offerings in their ability to provide different solutions to different companies, whether small and medium-sized enterprises or large buyers. However, when the report analyses the total cost of operation (TOC) for these solutions its finds that higher costs partially explain their relatively low degree of adoption.
The report goes on to suggest that planning and implementation costs will reduce drastically over time, with a subsequent impact on related use costs.
“Innovative solutions, in fact, have the chance to lead to a win-win situation, with the focus on the benefits that extend beyond the short-term,” says the report.
Costs and benefits of Supply Chain Finance solutions: is it always worth it? s available for download at SCFAcademy.com