Innovation in the supply chain: a tool for disruptors
Article updated, January 2020
Disruption in the supply chain seems like a good idea for many reasons, and yet so much of the press around supply chain finance recently has focused on the rights and wrongs of powerful buyers such as Tesco and Carillion using Supply Chain Finance to soften the blow of a forced extension to their payment terms. This got us wondering where this notion of a supplier’s right to receive prompt payment (as opposed to on-time payments) came from. Supply chain disruption comes from many places – with building ever-stronger supplier relationships to drive value and innovation, a key opportunity.
Payment terms have always been a crucial part of both the marketing mix and business strategy, and a classic way to disrupt the business model of your competitors and (blatant misuse of market power notwithstanding) I haven’t yet heard a compelling argument why short payment terms should be mandated by the government.
Innovation and the supply chain
My favourite example of supply chain disruption is that of a (very) well known online cycle retailer who used rapid payments to negotiate great prices that they could pass on to customers and establish themselves as one of the most successful players in this a fast-growing market. With the established market competitors such as Evans pushing for constantly longer payment terms, it seems the suppliers were happy to agree….after all even Shimano have targets to meet!
Focus on Payment Terms
Of course, not making payment to the agreed terms is another matter altogether. Once payment terms have been agreed (be it 30, 60 or 90 days) then unjustified delays can cause significant grief and in some cases even insolvency for the suppliers involved.
The Power of Disruption
Converting an opportunity into reality is not easy.
The process begins with understanding the nature of trapped value. High-growth companies use innovation to achieve deep organisational change and unlock value trapped in their enterprise. This innovation encompasses not just technological innovation, but finance innovation, supply chain innovation. This is a world where disruptors gain significant competitive advantage – whilst those that stick to teh norm, will be left behind.
It has been great to work with a number of innovative UK companies who are finding innovative ways to use supply chain finance to disrupt their markets and differentiate themselves from competitors…supply chain v. supply chain.
Now that is a serious win-win for supply chain finance.
More About Disruption, Innovation and the Supply Chain
Read our recent article on industry 4.0, and changes in the manufacturing sector, to find out how innovation is reshaping the business landscape. Or to find out about Woodsford TradeBridge’s own disruptive journey, and the role of fintech in shaping our eSupply Chain Finance offering for online marketplace solutions, read the interview with our new head of eSupply chain, and managing director of Woodsford TradeBridge France, Stephanie Frackowiak.