What are your thoughts on supply chain finance (SCF) programs? In these programs, companies extend access to low-cost capital to their suppliers. The goal is stronger suppliers, with higher production volumes and better production capabilities. The end result is a stronger supplier relationship.
This post is based on the Supply Chain Brain article, Three Cost-Effective Reasons to Invest More in Your Suppliers, by Nathan Feather, February 11, 2019. Image source: Shutterstock / Ieva Geneviciene.
1. Do a quick web search of a retailer such as Wayfair or IKEA. How would a supply chain finance program improve supplier relations? Be specific in naming suppliers. (This activity may require a web search of several of the suppliers to the retailer firm chosen).
Guidance: Students choose a retailer and then research at least one supplier to the retailer. Have students describe how a supply chain finance program would increase production and/or improve production capabilities for the supplier that would benefit the retailer.
2. Why would a supplier be hesitant to accept a supply chain finance program arrangement from a major retailer?
Guidance: Students should consider the risks of being so tightly aligned with any retailer. Discussion might include: coverage of supplier and buyer power, risk of developing a large supply chain customized for one buyer, potentially diminished profit margins per item sold due to increased volume produced by the supplier, and expectation that new products will be offered to the retailer at a discount or first in exchange for the financing arrangements. The discussion can also be used to identify risk mitigation strategies for each risk.