Supply chain finance: outlook for 2021 and trends for 2022

The pandemic has radically reshaped consumption patterns in industries around the world. From sourcing raw materials to sourcing the end consumer, the value chain has been consistently disrupted in recent years. However, companies have continued to transform their operations and adapt to the technological revolution in this environment of pivot or decline. Industries around the world are now fueling the digital boom and supply chain finance is no exception.

The sector has experienced a massive acceleration with the emergence of advanced technologies and innovations.

Supply chain finance volumes have grown significantly in recent years, reaching a total value of $ 1.31 trillion in 2020, according to the World Supply Chain Finance Report, published by BCR. The supply chain finance market is expected to grow at a CAGR of 17.1%, with additional spending of approximately USD 82.75 billion, by 2024. Further, as the global revenue pool for Supply chain financing grew by around 7% from a half year of 2021, with total industry revenue, according to BCG, expected to reach $ 11 billion by 2030.

In addition, on the supply side, North America, South America, Europe, Middle East, Africa and APAC are expected to have the maximum influence due to the diversity of the supplier base. While the industry is expected to accelerate at a sustained rate in the years to come, it has certainly been put to the test in these uncertain times.

Even though the industry has seen many ups and downs with the closures and global lockdowns that followed, it has managed to equip itself with resilience and stay one step ahead. Supply chain finance is taking on new dimensions with digitization enabling its growth and adoption. The year 2021 saw that technological solutions enabled cost optimization, improved working capital and greater transparency in business transactions and helped MSMEs stay afloat during the pandemic. The accessibility of financial data coupled with big data analytics and technologies such as blockchain, IoT, machine learning and AI have shifted the market in favor of supply chain finance.

As we move into this new year, we can expect some trends that will shape supply chain finance in 2022.

Healthy collaboration of advanced technologies and human capacities

As technology automates the entire process of payment exchange and history, documentation, data analysis, etc., a workforce intervention with capabilities such as critical thinking, logical implementation and customer relationship is a prerequisite for business success. The greatest performance improvements only occur when machines and humans work in harmony, improving each other’s strengths.

Improved risk management solutions

The pandemic has highlighted the risks of global supply chains as organizations grappled in the initial stages with supply chain disruptions. Over the coming year, companies will be implementing this and working to create a holistic ecosystem with better risk management and mitigation solutions. An “Always-On, Always-Ready” solution will become the necessary asset, to provide timely information in the event of disruptions and changes that are growing around the world. This will allow organizations to have a broad view to continuously monitor and reach new levels of suppliers and gain better visibility of the supply base. In addition, the design of technologies such as machine learning and AI would help assess credit risk and predict fraud and threats in real time.

Build a larger pool of suppliers

Accelerated digitization and collaboration will create a vast heterogeneous network with other providers, stakeholders and enablers. The year 2022 will see a massive shift towards a ‘multiple choice quotient’ with an expanded scope and multiple players proving higher values, improved funding and better working capital.

Understand changing customer needs

The last two years have led to the creation of new habits, needs and demands of customers in all sectors. With such tight net supplier and buyer networks, it is imperative for businesses to take the time and underestimate the changing needs of buyers. Covid lockdowns and the resulting economic blackouts, disruptions and irregularities have been a key driver of behavior change in supply chains and it is up to supply chain finance to ensure that these new capabilities can be developed.

Regulation and optimization of compliance issues

While the last few years have seen a trend for organizations to implement automation strategies before assessing compliance needs, the new era calls for a reversed operational cycle. With constantly evolving government mandates and regulations in all geographies, global invoicing and tax compliance are becoming increasingly complex and fragmented. The age of 2022 will see a transformation in business strategies where organizations operating globally will place compliance resolutions at the top of their automation approach.

Over the years, supply chain finance has become a gateway for buyers and suppliers, offering a range of finance and risk mitigation solutions to optimize the supply chain. important.

The views expressed in this article are the personal opinion of Kunal Ahirwar, CEO and Co-Founder, Earnvestt Technologies.

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