We asked Roy Wijnands, a client relationship manager, about the link between financial services and supply chain management.

Roy Wijnands

Financial services companies or services companies in general do not really get much cover when it comes to supply chain management literature. It’s mainly the domain of manufacturing companies. Nevertheless, in my opinion services companies can apply methods proven to be successful in the manufacturing sector. Why? Service companies can be compared to manufacturing companies in terms of factory-like characteristics as they also follow a set of processes and procedures in order to arrive at the value adding end result. The only difference is the end result being a service not a product or a combination of both. In terms of my company, a global invoice finance business, the raw material is a capital supplied by banks and investors that is used to offer financial solutions to SMEs around the globe in order to improve their cash flow. However, in order to be able to fund clients’ invoices there is a long process that sometimes can take several months of AML checks, due diligence, internal audits, thousands of meetings, calls and emails, tough negotiations, expensive legal councils, inflexible waterfall projects and a lot of manual work in the back- and front-office. With new tech-savvy competitors entering the market, clients becoming more demanding and better informed, more complex and fast changing business environment as well as sharpening regulation, there is an increasing pressure to innovate, boost speed and efficiency of product and service offering and lower costs. The main principles of supply chains management focus on cost reduction, waste elimination and efficiency improvement in order to create value and gain customer loyalty. In recent years lean management has been expanding outside the manufacturing industry to help service companies improve quality and efficiency of their digital supply chains.

A few days ago, I came across an article about Zara that is planning to expand its online sales to 106 new countries in emerging markets[1]. I have learned from this course that Zara has become an apparel giant thanks to its lean and ‘fast’ supply chain based on a reverse strategy in which they listen to customers feedback regarding their needs and evolving trends being able to launch a new collection 4 weeks later. It kept me wondering how my company which operates in 14 countries around the globe can learn from Zara. The key to Zara’s success is communication and knowledge exchange as scouts on the streets and store employees collect feedback from clients and report it instantly to the headquarters[2]. Data is a powerful thing nowadays! And having data from across the globe really puts Zara ahead of its game.

According to the 2017 global supply chain report Eyefortransport that surveyed such companies as Amazon, Adidas, and Toyota, visibility is the main problem in the digital supply chain affecting cost, speed and quality[3]. In addition, Deloitte identified traceability, compliance, flexibility and stakeholder management as “key supply chain pain points that clients are experiencing across the globe.”[4]In my opinion this is exactly the challenges traditional financial services providers are facing followed by poor transparency, limited access and exchange of data due to unintegrated systems or absence of data, manual and repetitive operational processes, tons of paperwork and low level of interaction among subsidiaries.

In order to optimize the digital supply chain process and increase the collaboration between the involved parties a greater transparency and visibility into one another’s business operations and processes is needed. Today’s technology is able to support greater connectivity and data exchange as well as elimination of waste such as manual processes involving touch, inventory, motion, waiting, defects over-processing and over-production[5]. Blockchain is a new technology that is said to revolutionize various industries and business areas, including financial services, as “it is making the supply chain transparent, streamlined, and operational.”[6]In a nutshell, Blockchain is a cryptographically secure database or a distributed digital ledger that records transactions and events and that can be shared across a public or private peer-to-peer community[7]. Data stored in the Blockchain is transparent, traceable and auditable as well as hack-proof as nothing can be changed without the permission of all users. What is more, due to the participants’ access rights, validity based on consensus protocol, and permission to share data there is no need for a middleman[8]which saves time and cost. The main benefits to all stakeholders using the platform are: (1) automation of processes, (2) on-boarding simplification including AML and KYC check, (3) shared information repository “enabled by the real-time reporting capability, smart contracts functionality, and distributed features.”[9]For my company it means that it will be able to access funds from banks much faster as banks will be able to access my company’s KYC and AML documentation and history of audit and compliance activities, my company will then be able to offer innovative cross-border funding solutions in an efficient and quick manner with a simplified on-boarding process due to availability of client’s and client’s customers’ data.

Blockchain, automation as well as artificial intelligence are the next lean management tools joining the club of Henry Ford’s moving assembly line and Toyota’s Just-in-time production system. By letting robots and machines perform repetitive tasks such as invoice upload, debtor payment allocation, credit limits application, month-end reporting, debtor dunning correspondence, my company could reassess employees’ knowledge, skills and abilities to allocate their resources to projects that require creativity and flexibility and to give their employees more authority and empowerment to contribute to the process improvement and ultimately to value creation. Blockchain is not yet a mainstream technology however it will revolutionize business environment and supply chain networks in the coming years. Therefore, my company should already start preparing for the digital future.

[1]https://af.reuters.com/article/idAFKCN1NC1N0-OZABSretrieved on 08/11/2018

[2]https://af.reuters.com/article/idAFKCN1NC1N0-OZABSretrieved on 08/11/2018

[3]https://www.eft.com/content/2017-global-supply-chain-report  retrieved on 09/11/2018

[4]https://www2.deloitte.com/content/dam/Deloitte/pt/Documents/blockchainsupplychain/IE_C_TL_Supplychain_meets_blockchain_.pdfretrieved 09/11/18

[5]Raghunathan R., Phuah I., Yong M. (2016). Raising Finance Productivity and Capability: The Lean Approach. PWC and CPA Australia

[6]https://medium.com/applicature/blockchain-as-the-backbone-of-digital-supply-chains-3ad1d0a4569cretrieved on 10/11/18

[7]https://www2.deloitte.com/content/dam/Deloitte/pt/Documents/blockchainsupplychain/IE_C_TL_Supplychain_meets_blockchain_.pdfretrieved on 10/11/18

https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/blockchain-explained-what-it-is-and-isnt-and-why-it-mattersretrieved on 10/11/18

[8]https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/blockchain-explained-what-it-is-and-isnt-and-why-it-mattersretrieved on 10/11/18

[9]https://www2.deloitte.com/content/dam/Deloitte/pt/Documents/blockchainsupplychain/IE_C_TL_Supplychain_meets_blockchain_.pdf

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