The definition problem

Supply Chain Finance (SCF) is widely discussed across finance, procurement, and banking - yet there is no single, universally accepted definition.

For some, SCF is synonymous with reverse factoring.
For others, it includes a broader set of financing solutions such as receivables financing, dynamic discounting, or inventory financing.

This lack of clarity is not just academic - it has real consequences.

When organizations operate with different interpretations of SCF, they design programs with misaligned expectations, fragmented ownership, and unclear success metrics.

Beyond financing: what SCF actually represents

At its core, Supply Chain Finance is not a product - it is a set of solutions designed to optimize working capital across the supply chain.

It connects three key elements:

  • Buyers (seeking to extend payment terms)
  • Suppliers (seeking faster access to liquidity)
  • Financial institutions or capital providers (bridging the gap)

The objective is simple: Improve liquidity for both sides without disrupting the underlying commercial relationship.

But the execution is anything but simple.

The shift from letters of credit to open account

Historically, global trade relied heavily on instruments like letters of credit - structured, secure, and bank-driven.

Over time, this shifted toward open account trade, where goods are delivered before payment is made.

This shift created efficiency - but also risk.

Suppliers began carrying more financial burden.
Buyers gained more flexibility - but also more responsibility in managing working capital.

SCF emerged as a response to this shift - a way to rebalance liquidity across increasingly complex global supply chains.

Why most SCF programs underdeliver

Despite its potential, many SCF programs fail to deliver meaningful impact.

Not because the concept is flawed - but because execution is limited.

Common challenges include:

  • Narrow focus on financing instead of overall working capital strategy
  • Limited supplier adoption
  • Lack of internal alignment between procurement, treasury, and finance
  • Insufficient visibility into supplier economics

In many cases, SCF becomes a tactical initiative - rather than a strategic lever.

The missing dimension: data

What Chapter 2 implicitly highlights - and what has become increasingly clear - is that SCF has historically operated without sufficient data.

Programs are often designed based on:

  • Internal assumptions
  • Bank recommendations
  • Static segmentation

But without understanding:

  • What suppliers are offering to other customers
  • What competitors are achieving
  • What “good” actually looks like in the market

…it becomes impossible to optimize effectively.

The evolution ahead

Supply Chain Finance is entering a new phase.

From:

  • Product-based → to strategy-based
  • Bank-driven → to data-driven
  • Transactional → to analytical and predictive

The companies that will benefit the most are not those implementing more financing - but those who understand where, when, and with whom to apply it.

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This article is based on insights from Uncovering Supply Chain Finance by Oliver Belin. You can explore the full book here:

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