Supply Chain Finance Agreement

Physical and informative control is the key to a GSCF. Logistics service providers and financial service providers need to work together to develop accurate transparency tools that provide KICs and global supply managers with the data and lenders they need to provide capital. According to a November 2006 Aberdeen Group study, large companies plan to spend more than $500,000 on supply finance technology four times more often over the next 18 months. Once a robust information-based system is established, business partners, logistics companies and banks must be able to access this information quickly and efficiently. The main advantage of supply chain finance is that the buyer does not pay a fee to extend his payment terms, and the supplier only pays a small discount if he wants to be paid prematurely. Given the competitive nature of the GSCF (Authorised Paid Financing) market and the fact that transactions are covered by customer and bank secrecy, sources of information on size and market participants are limited and are not widely shared with the public. Therefore, the data related to the market size is mainly based on estimates. The current size of the global supply chain finance market is estimated at $275 billion[4] of the annual trading volume, or an outstanding amount of approximately $46 billion, with an average of 60 days of payment terms. Other methods of bill financing, such as factoring, remain relatively small relative to the size of the market, which remains the most important segment of trade finance and remains the most important domestically. The potential supply chain finance market for OECD (Organisation for Economic Co-operation and Development) countries is large and is estimated at $1.3 trillion per year[5].

The market for European supply chains is around $600 billion. [6] Based on these figures, the potential size of the supply chain finance market for the United States is estimated at approximately $600 billion per year. [7] A recent comprehensive research paper[8] estimated that 200 GSCF programs are currently in place on a large scale. These programmes are implemented both on the national territory and across borders and in several currencies. Nevertheless, the potential of the market is far from its capacity. Looking at the spending of large organizations, such as Lowe`s $33 billion spending, it`s clear that supply chain financing programs typically require a multi-bank platform due to bank-related credit and capital issues. [9] Supply chain finance (SCF) is an essential chapter of supply chain management. It connects buyers and sellers with financial institutions.

As a result, it helps companies reduce financing costs and improve efficiency….