How Supply Chain Finance Leads to Greater Resilience
The Supply Chain Finance Hub 2022 in Heilbronn provided new insights into effective strategies.
Worldwide crises such as the COVID pandemic, the Ukraine war, or a container ship stuck in the Suez Canal: the past few years have shown how fragile global supply chains are. This challenge threatens the existence of many companies and suppliers. Because the failure of one player can, in the worst case, bring everything to a standstill.
Those affected are asking themselves numerous questions: What strategies can turn the tide? Are companies able to avert at least part of the collapse with resilient supply chains, or influence the value chain itself? And can supply chain finance (SCF) contribute to greater resilience?
"We need innovative approaches."
Last year’s Supply Chain Finance Hub on the topic of “Increasing Resilience with Supply Chain Finance” shed light on the subject. Once again, top-class experts from business and academia accepted the invitation. Together with around 200 interested parties from 25 countries, they discussed how global supply chains and thus the global economy can be made more stress-resistant in the future.
The virtual TUM event series was moderated by Prof. David Wuttke, Professor of Supply Chain Management at TUM Campus Heilbronn. “We need innovative approaches to tailored resilience that are as individual as companies’ supply networks,” Wuttke emphasized. “Companies need to understand their supply processes in detail, have a good understanding of the flexibility of their networks and also the limits of the same in order to better manage the unexpected.”
Prof. David Wuttke's research at TUM Campus Heilbronn focuses on supply chain management.
More Liquidity in the Supply Chain
This is where supply chain finance comes in. Like an apple supports health, SCF supports the functioning of supply networks. Purchasing companies extend payment terms in the event of a crisis and still pay their suppliers. Interim financing is provided by a financing partner. For suppliers, the improved creditworthiness of their customers results in an interest rate advantage. This extra liquidity stabilizes supplier relationships and thus increases the ability to act and the flexibility of a company and its trading partners. In the end, this increases resilience – and risk management benefits.
“The requirement to be able to react flexibly to unforeseen events will lead to a rethinking of risk management,” predicts Prof. Wuttke. This, he says, requires harmonizing the flows of goods, information, and finance along the supply chain, as well as balancing the often competing goals of “efficiency” and “resilience.” “On this issue, each company must find its own balance. Supply chain finance, however, can help to establish it,” Wuttke sums up.
In current studies, Prof. Wuttke himself is investigating the extent to which innovative financing concepts for suppliers can lead to greater resilience. At the interface of management and technology, he is also researching in a project funded by the German Research Foundation (DFG) how, for example, the use of blockchain technology can support these approaches.
