The Inter-Dependencies Of Supply Chain Finance by Shaun Sanko – MD at Generis Trade
The current crisis has exposed weaknesses within global supply chains and trade financing. This wake-up call presents the opportunity for businesses globally to innovate and digitize to improve the resilience of their supply networks. Shaun Sanko, MD, Generis Trade, explains more in his insightful article – The inter-dependencies of Supply Chain Finance by www.generistrade.com
Our QC process is designed to ensure the manufacturer produces goods that meet customers’ requirements. In turn, the goods match the bill of lading, and our stewardship of the goods and the complete transparency of those goods through the supply chain via our strategic partner Gravity Supply Chain Solutions ensures that we know exactly where they are at any point in time, and we do not release them until we are paid.
Trade has been one of society’s longest held necessities, initially through bartering village to village and over time to a now interconnected world of multi-billion dollar daily global exchanges.
Consumer product demand grows insatiably as the third world strives to emerge from poverty to become middle class.
For many years, most of this trade was funded by traditional banks, investment houses and insurance companies. Recently we have seen the first world banks stepping away from funding trade. Banks now invest their capital almost solely with the objective of getting the best risk weighted return, while always compliant to the myriad of new lending rules.
Political aspirations (especially in the USA) are focused on turning the emphasis away from global supply lines and instead focus on domestic productivity. Competitive advantages that the East has in particular cannot be overcome easily in the West, which ultimately will be untenable to the middle- class voter. While we may see the country of origin change from time to time, the region of origin is most likely to remain in most part unchanged.
The requirement to trade with other countries is not going away anytime soon: our view remains that we will see continued growth of global supply chains. But how do we pay for it and will the disrupters soon be disrupted themselves?
As traditional trading banks have withdrawn, the accompanying void has been supported by the creation of fin-techs and invoice factoring groups. These “neo-banks” often lay their foundations via the enhancement of speeding up payment to those suppliers and others whom often have the most need for liquidity.
To ensure more than one-way out in the event of a default, neo-bank structures often utilise the support afforded by external investors whom rely on insurance backing.
These inter-dependencies can become complex, courting disaster when the funding supply gets disrupted. We are now witnessing these downstream impacts. Watch the removal of third-party investors whom supply the capital, the re-pricing of risks from the insurance providers or the disruption to the chain from either the suppliers, the shippers, or all of the above!
At Generis Trade, we have studied these inter-dependencies. Our solution needs to be less complex and is under-pinned by the integrity of the products funded. Our QC process is designed to ensure the manufacturer produces goods that meet customers’ requirements. In turn, the goods match the bill of lading, and our stewardship of the goods and the complete transparency of those goods through the supply chain via our strategic partner Gravity Supply Chain Solutions ensures that we know exactly where they are at any point in time, and we do not release them until we are paid. Generis does not rely on insurance, factoring or any other form of fintech / neo-bank creativity: our solution rests between the supplier and customer, cemented by high levels of visibility and a vetted freight forwarder.