Financial Supply Chain Management

This paper reviews the development of supply chain management in the automotive industry over the past several years, analyse the challenges faced by the automotive industry with particular reference to the financial supply chain, and suggest ways in which the financial services industry can be a more effective partner to the automotive industry.

The automotive industry is massively globalised and highly complex. Raw materials sourced from multiple producers are manufactured into thousands of different components for different vehicle models. Next, the finished components have to be assembled into their constituent parts and only then can the actual vehicle be built and moved into distribution. Each of these stages requires financing, and may be taking place in multiple countries, subject to multiple banking and finance regulations.

For every item of raw material, every component, every part, every vehicle, every dealer order, every purchaser customisation, there is a need for:

  • Pre-shipment finance when an order is confirmed
  • Post-shipment finance in the form of invoices
  • Payment approval and the application of available or appropriate incentives or penalties
  • Distributor financing
  • Receivables financing, and much more

This is the tipping point for the banks, which must evolve to meet the needs of Industry 4.0 to remain relevant or risk additional competition from manufacturers launching their own standalone financial services.

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