Impact of Covid-19 accelerates SCF digitisation

Rebecca Spong

date: November 19, 2020

Technology- and COVID-19-related highlights of the SCF Forum 2020.

The impact of the Covid-19 pandemic this year will accelerate the trend towards increased digitisation within the supply chain after businesses grappled with disruptions in production and demand, according to panellists at this year’s SCF Forum Global.

“When Covid hit, it was huge to have everything on one platform,” said Christian Kochan, assistant treasurer at U.S clothing company PVH, explaining how much easier it was to see information on their supply chain in one place and make necessary adjustments to the terms they had with suppliers.

“Digitisation worked well for us and paid huge dividends,” he said. PVH had previously worked closely with the U.S provider of cloud-based technology Infor to shift their supply chain and supply chain financing activities on to one platform and to streamline documentation.

Infor Nexus (an arm of Infor) provides a platform that connects businesses to their entire supply chain including suppliers, manufacturers, banks, and brokers bring the physical and financial supply chain together in one place.

Via PVH’s digitalised platform the company can offer post-shipment financing to all suppliers and are currently working on a pre-shipment offering. The company managed to bring their banking partners onto the Infor platform allowing PVH’s suppliers to have an option of different financing offers and allowing them to pick the best rate.

The Covid-19 crisis really highlighted the lack of digitisation in certain industries, observed Gary Schneider, vice-president, financial services at Infor. With the ensuing panic and disruption caused by the outbreak, he said he saw an increased number of mistakes in some of the paper-based manual tasks – which then only cause further delays, he said.

Fellow panellist Michael Sugirin, global head of open account trade at Standard Chartered said: “We have seen an acceleration in SCF clients adopting digital solutions and looking for ways to optimise working capital.”

Standard Chartered partnered with Infor earlier this year, to introduce Infor Nexus to its clients in an effort to digitise time-consuming manual tasks such as matching purchase orders or invoices.

Sugirin added that digitisation is also driving a trend towards providing supply chain finance to suppliers deeper into the ecosystem – such as third-tier or so-called deep-tier suppliers.

This can be achieved with banks working with technology providers to use ‘tokenisation’ methods to pass supply chain financing benefits to the suppliers of the suppliers. The bank has been investing in tech companies offering digitisation services and exploring deep-tier financing.

There are also opportunities to use digital technology to provide SCF further downstream in the supply chain to distributors, deals and the end-consumers, Sugirin suggested.

Panellist George Shapiro, executive chairman at Interface Financial Group, said that the next step was to use digital technology to develop multi-tier SCF with the tokenisation of assignment of debts rather than using digital payment obligations.

He sees a shift away from bank-backed obligations and guarantees to the use of large pools of data to drive decision-making on whether the supplier or even a supplier of a supplier is a viable risk to take. Data gathered from historical analysis of the buyer-supplier relationship combined with other data sources would drive financial decision making in the future, he argued.

Rebecca Spong

Rebecca Spong is an experienced freelance journalist with a demonstrated history of working in the writing and editing industry. Skilled in journalism for online and print publications. Rebecca is interested in finance, business and Middle East-focused stories. She has a Post-Graduate Diploma in Broadcast Journalism from City University.