Big Data and Supply Chain Finance

By Kurt Cavano | 24 August 2015

Big data generated by complex supply chain activities can be harnessed and used to make funding decisions that help buyers and suppliers trade efficiently and effectively. The use of big data in this way has the capability to change how supply chains are financed.

Today, supply chain finance decisions are made by assessing key figures from the balance sheet. It’s a largely manual process that takes time. It doesn’t have to be like this. All the information finance providers need already exists in supply chain data – it offers a dependable view of business performance that funding decisions can be based on.

Tap into this and reliable funding can be provided and accessed more quickly by suppliers. The sound basis on which the funding has been extended makes the supply chain stronger and more resilient.

Technology is the Enabler

The ability to get at supply chain data comes from technology used in the supply chain. Collaborative, cloud-based platforms that connect suppliers and buyers for the efficient operation of the physical supply chain can also connect finance providers for the financial supply chain. With data integrity guaranteed, funding can be offered at competitive rates for a healthy supply chain.

The size of data in question here is huge, and invaluable. It includes trading history, payment performance and order delivery track records. Through it, finance providers can gain unprecedented insight into buyer and supplier trading.

Real-time

More businesses are realising the value in the data they have at hand. Many already use it to understand sales performance and customer demand better. For their physical supply chains, they use the data to collaborate more closely in real-time with partners to streamline transportation, and adapt orders and deliveries as conditions dictate.

Now, companies are starting to take this approach to finance their supply chain as well. They are making data work for them by enabling decisions that impact the smooth running of their business.  

Re-Defining Supply Chain Finance

Supply chains depend on capital to work. Without it, business ceases. Supply chain finance needs to be successful along the length and breadth of the chain. Suppliers need reliable funding to invest to meet orders; buyers want good payment terms, a slick operation between purchase order and payment and good cash flow. Finance providers need confidence in the order to payment cycle.     

Traditional supply chain finance looks at company profitability, costs, sales and growth predictions. It relies on gathering data that is fixed at a moment in time. Documents of varying types containing information in a range of formats have to be gathered and interpreted to reach a decision on funding. This can take weeks, is inefficient, inflexible and can cause hold-ups to business operations, revenue generation and growth.

The activities of today’s supply chains are too fast-paced and dynamic to be supported by a finance process that is largely manual and paper-based. Just as the right goods need to be in the right place at the right time at the right cost, so does funding to support complex supply chains and ensure their effective operation without obstacles or delays.

Insights

By taking advantage of the insights the big data of the supply chain offers, financing is starting to change. Take for example how trade finance solutions provider SeaburyTFX now offers a funding programme through the GT Nexus platform that gives suppliers simpler access to low cost capital.

The integrity of the data keeps costs and risk down, while capital-related barriers that can cause delays and impact customer service are removed.

The cloud-based platform connects buyer, supplier and financial institution for the simple management of transactions, invoices and payments. The platform streamlines processes, provides visibility of activity and enables rapid alterations to be made to assure continuing supply. It holds the big data that supports supply chain finance programmes.  

It’s no longer about credit. Funds are provided based on the platform data, indicating past performance history. It’s the historical data that makes it work, allowing funds to be injected as needed, more frequently and at competitive rates.

Access to capital

For suppliers, such programmes provide access to funding at the right times for their business, for example at the time of order placement so they can rapidly scale up resources as needed to start order fulfilment as early as possible. It means access to capital in days instead of weeks.

Through improved cash flow and reliable payment timescales suppliers can pursue growth strategies with the reassurance that the funds they need will be there to fulfil orders. A collaborative supply chain automates processes, carrying information forward from one stage to the next for consistency across purchase orders, invoices and more.

For buyers, it means a healthier supply chain with a reduced risk of delays, security over the uninterrupted supply of goods, a positive impact on delivery to customers and an efficient back-office operation supporting the chain.

Finance providers have the opportunity to take advantage of big data to offer innovative, completely different forms of supply chain funding. One that unlike traditional programmes that work with individual providers on a transactional basis, provides funding on the strength of pooled data.

Successful supply chain partners will use the data that is generated by their many activities through the complex global supply chain to drive new and better approaches to supply chain financing. 

 

By Kurt Cavano, founder and chief strategy officer, GT Nexus

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