Supply Chain Finance : A Risk Perspective

Due to the increasing worldwide competition and the desire to enter new markets, a growing number of manufacturers have to cope with globally dispersed customer and supplier networks. Not only does the globalization cause an increased number and complexity of buyer-supplier relationships, extended lead times, and supplementary inventory buffers, but also higher capital commitments and increased financial risks. However, the allocation of these additional costs and risks along the supply chain is often found to be suboptimal from a supply chain perspective. A collaborative strategy on how to distribute the financial burden and risks along the supply chain optimally would both enhance supply chain stability and reduce the overall supply chain costs. Although various concepts are discussed in literature, an overview on potential benefits and risks to be addressed is so far missing. Hence, the purpose of this paper is to inform upon the key factors to be considered when collaboratively financing inventories, and on how these factors correlate. Identifying the different conditions that enable or restrict the application of supply chain finance in practice, the paper provides valuable insights for both, researchers and practitioners.