Treasury Today Country Profiles in association with Citi

Best Practice Handbook

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Managing the Financial Supply Chain

Contents

Section 1: Supply chain spotlight
Section 2: Trends
Section 3: Financing techniques
Section 4: Trade winds
Section :. Supply chain technology
Section 6: Back to basics
Section 7: Your questions answered

Preface

Working capital management has been a natural focus for corporate treasurers over the last eighteen months. That focus, coupled with difficult funding conditions, has driven companies to look more heavily towards optimising their financial supply chains. As a result, the demand for supply chain finance (SCF) solutions has grown tremendously in 2010.

We have therefore updated this Best Practice Handbook to reflect the increasingly important role of the financial supply chain in today’s treasury environment. We begin with an overview of the treasurer’s role in financial supply chain management post-crisis. In Section 1, we also examine the financial effects of physical supply chain disruptions.

Section 2 of this Handbook provides analytical insight into the trends affecting supply chains today – and how these have evolved over the last 12 months. Themes explored range from supplier sustainability to increased competition among SCF providers. We take an objective view of the pros and cons of traditional supply chain financing techniques in Section 3 and also provide an SCF checklist.

In 2009, worldwide trade volumes fell by 12%. This has had a profound knock-on effect to trade finance, as we discuss in Section 4 of this Handbook. We also provide an overview of trade instruments post-crisis, looking at those which provide risk mitigation and those which can free up working capital in the early stages of trade.

Technology has a critical role to play in today’s financial supply chain processes – not only as a means of monitoring business metrics and improving operational efficiency, but also of enhancing risk management and visibility. In Section 5 we discuss established and evolving supply chain technologies and examine the role of SWIFT in facilitating trade transactions.

We go back to basics in Section 6, revisiting the physical and financial supply chain processes. We look at the most common barriers to efficient financial supply chain management, and how these can be overcome. We also discuss the fundamentals of working capital management, and provide a useful list of tips for working capital optimisation.

Choosing between SCF providers is never an easy task. We outline the key points to consider in Section 7, where we answer frequently asked supply chain questions. Additional topics include measuring supply chain performance and improving payments reconciliation.

We hope you will find this handbook useful. As always, we are committed to improving the quality of our research and we welcome any comments or suggestions to editorial@treasurytoday.com