Chapter 5 Future developments
Ensuring an efficient supply
chain: integrating cards,
e-invoicing and supply chain finance
Mark Ling,
Head of Trade and Supply Chain
Origination, Transaction Services UK, RBSMichael Hyltoft,
Independent ConsultantTom Kelly,
Head of Relationship Management,
Commercial Cards,
Transaction Services UK, RBSSaeed Rezavi,
Global Head of e-Invoicing,
Markets and International Banking, RBSMark Ling: Economic commentary across Europe is the same. There is no expectation
that we will return to pre-2008 economic growth in the near future, if at all. The news
from economies further afield is that UK and European companies cannot expect to be
able to increase exports rapidly either. So, to increase profitability, companies have a
powerful incentive to try to identify ways to make current processes much more efficient.
Improving the efficiency of the supply chain is one way that corporate treasurers
can work to add value to their businesses. In this discussion, we will look at three
elements – supply chain finance, the use of purchasing cards and e-invoicing – to
identify ways in which these techniques can be used to add value across the length
of a supply chain.Terminology
The term ‘supply chain finance’ means
different things to different people. For
the purposes of this discussion, we are
concentrating on a buyer-led proposition,
where the buyer arranges the financing
which its suppliers can use.
Purchasing or procurement cards
(P-cards) are normally used by businesses
to pay for smaller-value items (the average
value item is GBP 200), although they can
also be used to pay for higher-value items.
Electronic invoicing (e-invoicing) is
another concept which has a range of
meanings. In this discussion, we will
use the concept of e-invoicing to mean
a fully automated process, from invoice
generation, through its submission by
the supplier to the buyer, to the receipt,
processing, approval and final archiving
of the invoice. In this definition, there is
no paper or manual process.Description of market place
As with any financial transaction, supply
chain financing is made against the
perceived risk. Each time this perceived risk
changes is a potential trigger point at which
an asset could be financed. For example,
it is possible to differentiate the level of
risk assumed by a lender against shipped
goods: there are significant differences
between non-audited shipments, externally
validated shipments, and those in which all
items have RFID tags.
This perception of risk affects whether
lenders are prepared to offer financing and,
if so, at what cost. For example, although the
provision of finance against a purchase order
currently represents too high a level of risk
for most lenders, lenders’ perceptions of, or
appetite for, risk may change in the future.
Today, the most common form of supply
chain finance is made against an invoice
approved for payment by the buyer. It may