The Euro Banking Association, in 2013, defined Supply Chain Finance as: "the use of financial instruments, practices and technologies to optimize the management of the working capital and liquidity tied up in supply chain processes for collaborating business partners. SCF is largely "event-driven". Each intervention (finance, risk mitigation or payment) in the financial supply chain is driven by an event in the physical supply chain. The development of advanced technologies to track and control events in the physical supply chain creates opportunities to automate the initiation of SCF interventions."
Allowing accessible financing along the entire physical supply chain ensures exponential benefits to all entities involved in a trade transaction.
Buyers and Suppliers:
Closer matching of the physical, financial and information supply chains will continue to energise innovative financing solutions in the future. Integration of data and information is, and will be, the basis of future trade solutions.
Technology has affected the lives of people all around the world particularly in the last few decades. These benefits are now surfacing in the trade finance arena as digital information becomes more readily attainable, convenient and available.
Physical supply chains can be made up of more than one supply chain and encompass areas such as maritime, shipping, freight and logistics. Whilst it may seem from the outside that these are all very similar, there are actually a number of key differences.
A recent article posted on ‘Shipping and Freight Resource' is very useful in this respect.
This article provides the following basic definitions: