ING Guide to Financial Supply Chain Optimisation
Creating Opportunities for Competitive Advantage
Introducing the Financial Supply Chain
Gregory Cronie, Head Sales, Payments and Cash Management, ING
Welcome to this new series of features from ING on Financial Supply Chain Management and how treasurers can optimise the process to create competitive advantage and add value to the company. During this period of economic instability and depressed growth, which could extend for months or years, every company needs to make the most of its resources and adopt creative solutions to weather the crisis and position itself for short term survival and long term success. Over the next three editions of TMI, we look at financial supply chain management from end to end. What is it? What are the components which make it up? Where are opportunities to address inefficiencies and create value typically found? What solutions can be implemented to take advantage of these opportunities?
Since the discipline of Treasury, as we understand it today, originated in the 1970s, treasurers have typically managed the company’s financial assets at a macro level, focusing on overall liquidity and risk. Cash pooling, cash positioning and forecasting typically take place at a group or at least business unit level. While these activities continue to create substantial benefits for their firm, treasurers can further enhance the value they deliver by influencing the elements which contribute to working capital, and increasing the efficiency of the financial supply chain. In this way, treasurers can optimise liquidity, preserve margins and minimize the amount of working capital, which the company requires, whilst contributing to a better experience for customers and suppliers.
Treasurers can further enhance the value they deliver by influencing the elements which contribute to working capital, and increasing the efficiency of the financial supply chain.
A question, which our clients frequently ask, is how to justify investment in the financial supply chain. For too long, it has been considered that the financial supply chain facilitates the physical supply chain i.e. the process of payments and collections supports the exchange of goods and services. In fact, the opposite is true. Companies’ overriding responsibility is to deliver stable returns to its stakeholders, and the goods and services, which it provides, are the mechanisms to do this, not the other way round. Consequently, investment in the financial supply chain is key to a well-managed business with consistent returns and a competitive margin, and equally important as the investment in production processes.
To enable companies to leverage opportunities for improvement in the financial supply chain, ING has invested heavily in developing its international scope and solutions to become a leading bank in many of the disciplines which comprise effective financial supply chain management, from trade services and trade finance, through to cash and liquidity management. In this series, we look at each step in the financial supply chain, from explaining the basics to addressing the complexities of global supply chains.
This innovative ING Guide will be presented in three parts. In this first part, ING introduces the financial supply chain and outlines the order-to-cash and purchase-to-pay processes. In the second part, which will appear in the next edition of TMI, we look at supply chain financing alternatives and how these can be used to unlock working capital. In the final part, we look at financial supply chain optimisation from a strategic perspective, including some of the industry initiatives of which corporate treasurers can take advantage to maximise liquidity and reduce costs.