Supply chains and financial supply chains are not mutually exclusive but are, in fact, symbiotic as their key components are intricately linked.
A supply chain is a complex network that includes organizations, individuals, resources, activities, and information required to create and deliver a product or service to the customer. It encompasses all the processes involved in the production, storage, transportation, and delivery of goods or services from the point of origin to the point of consumption.
The key components of a typical supply chain include suppliers, manufacturers, distributors, retailers, and customers. To ensure that the product or service is delivered to the customer on time, with the desired quality, and at the lowest cost possible, the supply chain process involves the coordination of these key components using information, logistics, and communication technologies. Effective supply chain management is essential to reduce costs, minimize waste, and improve overall customer satisfaction.
The financial supply chain plays a central role in supply chain management and refers to the financial activities and transactions that occur between businesses as they work together to produce and distribute goods and services. For small and medium-sized enterprises (SMEs), the financial supply chain typically includes interactions with suppliers, customers, and financial institutions.
The financial supply chain for an SME may involve a range of activities, such as procurement, inventory management, sales, financing, and risk management. To handle growth, SMEs need to ensure that their financial supply chain is robust enough. A robust financial supply chain can help improve cash flow, reduce financing costs, and increase profitability. SMEs can consider several options to improve the robustness of their financial supply chain, including implementing financial management tools and processes, building strong relationships with suppliers, exploring a range of financing options,(eg: Receivables Finance, Trade Finance, Supply Chain Finance, Asset Based Lending ) using technology to automate financial processes, conducting regular risk assessments, understanding the trading cycle, and ensuring that existingsecurity structures with banks/financiers provide sufficient flexibility to support growth
By considering these options and implementing appropriate measures, SMEs can improve the robustness of their financial supply chain, support growth, and position themselves for long-term success. It’s important for SMEs to recognize the critical role of the financial supply chain and not overlook its significance in their overall business strategy. Furthermore ,SMEs must be proactive in discussing options with their financial partners/bankers to ensure that they have the right level of flexibility to assist with profitable growth.
Thane Commercial Pty Ltd specializes in flexible working capital solutions for SMEs. If you would like to discuss options that suit your business and unique circumstances, please visit us at www.thanecommercial.com.au or contact us by email at neil.tunstall@thanecommercial.com.au.
