Supply Chain Financing: Key considerations for success in LATAM

Oliver Belin
April 26, 2017

For multinational organizations operating in Latin America, local supplier stability is crucial because production depends on the availability of resources. When there is a long window to receive payment for materials provided, the resulting impact on suppliers’ liquidity may impact their ability to provide resources in the future. Despite the compliance challenges that abound in Latin America, the region’s complex regulatory requirements, particularly e-invoicing, have paved the way for adoption of supply chain financing (SCF) programs, which can help to address these supplier stability challenges.

SCF programs benefit suppliers and buyers alike. A recent PwC survey revealed that supply chain financing adopters report implementing such a program for improved cash flow, greater supplier liquidity, as well as strengthening the supplier-buyer relationship. Mandated e-invoicing, prevalent throughout Latin America, eliminates traditional barriers to entry faced by companies looking to leverage supply chain financing. For example, the standardized invoice format eliminates supplier onboarding challenges and speeds up accounts payable approval processes, which is key to successful SCF implementation. The moment an invoice is approved, the supplier can get paid, ultimately strengthening their stability.

Multinationals obligated to fulfill e-invoicing requirements have the option to reactively adopt the required complexities, or leverage the opportunity to add value back into their supply chains and strengthen their supplier base. Choosing the right technology is an essential starting point to proactively implementing a successful SCF program, but even with the most sophisticated technology, organizational structures and partner banks can create significant roadblocks.

For manufacturers doing businesses in Latin America, there are three considerations to set the stage for successful SCF implementation: 

  1. Organizational Commitment
    Successful supply chain financing goes beyond technology capabilities, requiring new processes from many departments. From accounts payable to legal all the way to IT, it is important to have buy-in at all levels and include those directly impacted in the decision process. Obtaining 100% commitment from teams can be a challenge when many have worked with the same legacy systems for years. To avoid such roadblocks, consider a SCF solution that works within existing ERP systems, which allows those internal teams impacted to streamline the onboarding process.
  2. Multiple Funding Sources
    Since supply chain financing requires real-time access to capital, multiple banking partners and funding sources are needed to run a successful program. Larger banks tend to be risk averse and slow to adopt new technologies, and multinationals using only one source increase their risk of not having access to funding. Furthermore, multinationals working with suppliers from multiple countries need to ensure that the supplier and financing source can work together. With all of these factors considered, an ideal SCF solution will support working relationships with multiple funding sources to ensure capital is available at all times. 
  3. Regulatory Knowledge and Support
    It is important to take the various regulations in individual LATAM countries into consideration when rolling out a regional SCF program. Multinationals should ensure their partners possess the expertise needed to support local financing and country-specific regulations. As with Latin American compliance in general, a centralized SCF approach is essential to improve efficiencies and leverage the best financing opportunities available.

To learn more about Supply Chain Finance opportunities across LATAM and how to get started, watch our recent webinar on-demand.

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Oliver Belin

Oliver is a recognized thought leader with 10 years of experience in Supply Chain Finance. He has worked for leading organizations such as PrimeRevenue, Sumitomo Bank in London and Global Supply Chain Finance in Switzerland. In 2007, he founded “Swiss Commercial Capital” that was sold to the Australian bank, Macquarie Bank in 2011. Oliver is also an author. His book “Supply Chain Finance Solutions” was published in 2011.
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