Manufacturing News

B2B integration platforms to take centre stage in 2009

AS physical supply chains have grown longer and more complicated due to globalisation, manufacturers have responded by applying new technologies to achieve a more collaborative and automated approach.

However, whilst manufacturers have traditionally focused on making improvements to the physical supply chain, many are yet to address an even more challenging area – their financial management.

As the only player in a position to have visibility over the entire supply chain, both upstream and downstream, manufacturers are best placed to take ownership of the synchronisation of the financial and physical supply chains.

At the same time, market uncertainty has led manufacturers to demand increasing flexibility from banks and more banking choices, such as open account, and new payables and receivables financing have emerged.

An Aberdeen Group study conducted in 2006 found that 90 per cent of enterprises would describe their global supply chain technology as “inadequate to provide the corporate finance function with the timely information it requires,” leading them to demand flexible and creative financial solutions.

Traditional instruments such as Letters of Credit and Documentary Collections are being superseded by Supply Chain Finance (SCF) packages. Aberdeen Group defines SCF as “a combination of Trade Financing provided by a financial institution, a third-party vendor, or a corporation itself, and a technology platform that unites trading partners and financial institutions electronically and provides the financing triggers based on the occurrence of one or several supply chain events.”

SCF requires manufacturers to share Purchase Order and Invoice data with a bank or financial services provider. It includes products such as bank assisted Open Account processing, where invoices are paid electronically on receipt, and Export Trade Finance where banks provide financing for various points within the Order-to-Pay cycle based on purchase order or invoice data.

In order for the SCF community to flourish, all participants in the supply chain must invest in the process, involving technology costs and process changes. B2B integration platforms will continue to make their presence felt in 2009 providing better flow and view of data within the financial and operational functions of manufacturing organisations, and amongst the different communities within their supply chains.

However, complexity will remain a huge issue for most manufacturers. Many have complex supply chains with multiple tiers. It can be useful to think in terms of an ecosystem of communities: demand, supply, delivery management, business partners and financial communities. Each community plays a role in fulfilling orders within the supply chain and only by understanding this complex eco-system can pertinent financial decisions be made.

Ultimately, synchronising the physical and financial supply chains will provide manufacturers with the necessary agility to respond more quickly and intelligently to market conditions in the year ahead, offering a point of differentiation in a competitive market, and tighter control of costs.

* Josh Brammer is director of supply chain solutions, Sterling Commerce.

Leave a Reply

Send this to a friend