The Role of Technology in Streamlining Supply Chain Finance

Before you could realize it, technology has entered our lives through several holes and changed the way we live, interact with people, and even do business. Speaking of businesses, technology has vastly improved working efficiencies and allowed managers to get away from mundane tasks and focus on more critical areas. One such area, where technology has helped a great deal, is Supply Chain Finance.
Using technology in supply chain finance adds significant value to your business in areas like cost optimization, revenue growth, faster speeds, and better control, to name a few.

How does it work?

One thing common across all supply chains is the huge amount of data. Managing the huge amount of data and deriving meaningful insights from it is an area of concern for business owners. Technology helps businesses collect, consolidate, and analyze data for the benefit of the business. Technology automates the entire SCF process from start to finish, including invoicing, approval, credit assessment, and even final settlement.

Role of Technology in Streamlining SCF

The 5 major benefits of using technology in supply chain finance are listed below.

1. Faster and better access to information: The supply chain, by its very nature, generates a lot of data, much of it isolated and in different formats. Using technology helps connect this data and consolidate it into the software. Once that is done, businesses can get consistent, reliable, and repetitive information very easily and in no time. Technology helps businesses break down ‘information silos’ and share information internally or with external agencies. This helps avoid inaccurate forecasts, flawed executions, and longer reaction times.

2. Improved Insight: For decision making to be effective, insights play a key role. The use of technology in the supply chain makes it easy to evaluate data, gain insights on various supply chain related parameters, and take proactive steps. These timely course corrections have direct and indirect effects on overall supply chain performance.

3. Improved agility: Having meaningful information and timely insights helps businesses take corrective action in no time. This improves the overall agility of businesses. If the company’s supply chain system or the company itself has obstacles (or silos), a business can’t work with agility.

4. Better Collaboration: In a large corporation, where there are multiple people and departments, the key to success is collaboration. This is the common thread that helps the organisation accomplish its shared goal. In such a situation, supply chains embedded with the right technology enable, monitor, and evaluate collaboration between individuals, departments, and organisations and maintain a consistent flow of information, analysis, and choices.

5. Improved customer loyalty: In today’s competitive age, businesses look for innovative ways to win customer loyalty. Now, organisations are coming to realise that managing the supply chain effectively can help them keep customers happy and win their loyalty. This becomes more critical for organisations with multiple stakeholders. For example, customers want to know the availability of goods in stock even before they enter the shop. Customers and retailers want to know the expected delivery date and status in real time. Providing accurate and timely information enhances the customer experience and, hence, customer loyalty. Supply chain technology’s visibility, accuracy, and agility are essential to making this all possible.

The Challenges of Traditional Supply Chain Finance

While SCF has been in the business for years, it has so far been mostly manual, which has presented several challenges and operational snags. Some of the major challenges of traditional supply chain finance processes are listed below:

● Laborious and inefficient manual processes: The traditional SCF process involves too much paperwork, which results in higher costs and lower efficiencies. Manual input and checking make the process costly and error prone, which results in delays in invoice reconciliation as well as in the receipts of payments. According to an estimate, the cost of processing this paperwork is between 5-10% of the transaction value.
● Lack of transparency: For any supply chain to be successful, there needs to be complete trust, collaboration, and coordination across various stakeholders. This trust arises from having end-to-end visibility of the entire process. This results in the stabilisation of material flows, a reduction in demand distortion, and increased efficiency. However, since the traditional SCF is manual and paper-based, it is easy to manipulate and hence not as trustworthy. For example, a person may delay submitting an invoice, but to show it was done at the right time, he/she may put a back date on it. On paper, everything may look fine, but in reality, there is a challenge. This will delay the entire payment process.
● High Costs: The huge amount of documentation required and the paperwork involved requires several people to handle the entire process. Sending documents physically from one place to another involves cost and time. Hence, if one looks at the actual costs and the time costs involved, traditional SCF is very expensive.

The Role of Technology in Addressing Supply Chain Finance Challenges

Moving beyond the manual process, technology can revolutionise the entire SCF process. It can automate the entire process from start to finish, from invoicing, approval, and credit assessment to even final settlement.

The different types of technology solutions available for supply chain finance are listed below:

● Internet-of-Things (IoT)
● Automation and Robotics
● Enterprise Resource Planning (ERP) systems
● Warehouse Management Systems (WMS)
● Transportation Management Systems (TMS)
● Supply chain planning software
● Data Analytics

The Future of Technology in Supply Chain Finance:

Looking into the future, technology is going to help businesses; especially MSMEs, lower their financing costs and improve business efficiencies. The following are the emerging trends in the SCF in the near future:

● Digitization of Supply Chain Financing: The future will see businesses flooded with a plethora of technology-based solutions. In addition to giving them short-term credit, the use of technology in SCF will help businesses with greater flexibility in payments in an otherwise fragmented supply chain market.
● Building a large financing pool: The years to come will witness businesses having multiple options to choose from as far as financing their needs are concerned. From banks to NBFCs, and other private players, they would be eyeing this growing MSME market. This would mean the players would have a large invoice financing pool to choose from.
● Business risk-proofing and driving efficiency: Going forward, the businesses will undergo compliance resolution to eliminate errors and inefficiencies in the existing SCF process, which will create a holistic ecosystem with better risk management and risk mitigation solutions.

Conclusion

A technology-enabled supply chain can significantly reduce costs and make the supply chain cost efficient. An optimized supply chain can significantly increase sales by ensuring the timely and accurate delivery of the right products in the right quantities, from production to the store. This leads to a reduction in out-of-stock and overstock situations, resulting in improved inventory management and customer satisfaction. The supply chain financing platform from Mynd Fintech empowers MSMEs by providing them with easy and quick funding via multiple lending partners and making financing seamless.