Part III Innovation and Trade-Finance Challengers, 14 Something Old, Something New: Open Account, Prepayment, and Supply Chain Finance

2021 ◽  
Author(s):  
Hare Christopher
Keyword(s):  
International Trade ◽  
Supply Chain ◽  
Trade Finance ◽  
Letter Of Credit ◽  
Payment Mechanism ◽  
Supply Chain Finance ◽  
Supply Chain Financing ◽  
Technology Competition ◽  
Legal Difficulties ◽  
Over Time

Letters of credit have increasingly come under strain as a payment mechanism in international trade as a result of increased technology, competition, and regulation. At the same time, the letter of credit’s efficiency has reduced over time as a result of its processing costs and speed. The space created by the decline of the letter of credit has been filled by trade parties turning to open account and prepayment terms, whilst using Supply Chain Financing (‘SCF’) techniques to provide the requisite liquidity. The advantages of such payment terms are principally their speed, convenience and cost, all of which the letter of credit increasingly lacks. Accordingly, it is unlikely that this trend towards SCF techniques will abate any time soon. Nevertheless, there are still legal difficulties associated with such payment and liquidity-enhancing techniques, as well as uncertainty associated with the regulatory and accounting treatment of these devices. If open-account trading and SCF techniques are going to eclipse the letter of credit as a payment mechanism, these challenges will have to be addressed.

Supply Chain Financing Model: Based on China's Agricultural Products Supply Chain

2013 ◽  
Vol 380-384 ◽  
pp. 4417-4421
Author(s):  
Ting Rui Wang ◽  
Qiang Gao Lan ◽  
Yong Ze Chu
Keyword(s):  
Supply Chain ◽  
Agricultural Products ◽  
Accounts Receivable ◽  
Agricultural Enterprises ◽  
Supply Chain Finance ◽  
Accounts Payable ◽  
Supply Chain Financing ◽  
Long Time ◽  
Financing Model ◽  
Inventory Financing

Difficulty in financing is a general problem faced by farmers and small and medium-sized agricultural enterprises for a long time because of the lack of guarantees in china. Supply Chain Finance (SCF) is generating much attention as a means of substituting for lower credit availability. For the purpose of promoting chinas rural financing products and service innovation by using SCF, this article studies agri-supply chain financing model and financing products. The result showed that agri-supply chain can extend credit to the upstream and downstream enterprise through order financing, accounts receivable financing, financing warehouse, accounts payable financing, prepaid accounts financing and inventory financing etc.

Part III Innovation and Trade-Finance Challengers, 16 Countertrade as Finance

2021 ◽  
Author(s):  
Hare Christopher
Keyword(s):  
Financial Stability ◽  
Institutional Framework ◽  
Financial Instability ◽  
Trade Finance ◽  
Letter Of Credit ◽  
Financial Products ◽  
Legal Difficulties

Whilst the letter of credit has been the dominant force in the trade-finance area, its utility has increasingly been challenged by technology, regulation, and competition from other financial products. Additionally, there are some circumstances where economic, political, or financial instability makes the letter of credit inapt. This is because the letter of credit requires a certain level of financial stability and an appropriate institutional framework to function properly. In such circumstances, the parties may resort to trade finance mechanisms that can withstand such instability. The prime example is countertrade, whereby goods or services are used to ‘pay’ for goods or services. Whilst this form of transacting is not without its legal difficulties, countertrade may provide a useful trade-finance device in times of crisis, such as the global coronavirus pandemic.

scholarly journals Supply chain finance

Bankarstvo ◽  
2020 ◽  
Vol 49 (4) ◽  
pp. 100-111
Author(s):  
Radmila Gaćeša
Keyword(s):  
Supply Chain ◽  
Financial Institutions ◽  
Technical Equipment ◽  
Financial Instruments ◽  
International Financial Institutions ◽  
Working Capital ◽  
Supply Chain Finance ◽  
Supply Channel ◽  
Supply Chain Financing ◽  
Trained Staff

Supply channel financing or reverse factoring can be defined as the use of financial instruments and technologies to optimize the management of working capital and liquidity, which are linked to the supply chain. This type of transaction includes the following participants: the supplier, the buyer and the factor as an intermediary. Given the available expertise, professionally trained staff, structured experience, technical equipment and some other functionalities, banks are, as factors, ideal participants in supply chain financing. The support provided by international financial institutions, some of which will be mentioned more specifically in the following text, can be a valuable opportunity to improve existing models, and to initiate new projects and install appropriate platforms, which would certainly benefit both clients and the banks themselves.

scholarly journals Improving Supply Chain Profit through Reverse Factoring: A New Multi-Suppliers Single-Vendor Joint Economic Lot Size Model

2020 ◽  
Vol 8 (2) ◽  
pp. 23
Author(s):  
Beatrice Marchi ◽  
Simone Zanoni ◽  
Mohamad Y. Jaber
Keyword(s):  
Supply Chain ◽  
Financial Institution ◽  
Theory And Practice ◽  
Lot Size ◽  
Accounts Receivable ◽  
Financial Decisions ◽  
Supply Chain Finance ◽  
Joint Economic Lot Size ◽  
Supply Chain Financing ◽  
Size Model

Supply chain finance has been gaining attention in theory and practice. A company’s financial position affects its performance and survivability in dynamic and volatile markets. Those that have weak financial performance are vulnerable when operating in environments that are uncertain and financially unstable. Companies adopt various solutions and techniques to manage, effectively and efficiently, the flow of money to and from its suppliers and buyers. Reverse factoring is an innovative technique in supply chain financing. This paper develops a joint economic lot size model where a vendor coordinates operational and financial decisions with its multiple suppliers through the establishment of a reverse factoring arrangement. The creditworthy vendor systematically informs a financial institution (e.g., bank) of payment obligations to selected suppliers, enabling the latter to borrow against the value of the relevant accounts receivable at low interest (borrowing) rates. The paper also presents a numerical example and a sensitivity analysis to illustrate the behavior of the model and to compare the economic and operational performance of a supply chain with and without a reverse factoring agreement. The results show that the establishment of a reverse factoring agreement within the supply chain improves the economic performance and impacts on the operational decisions.

scholarly journals The origin, supply chain, and deforestation risk of Brazil’s beef exports

2020 ◽  
Vol 117 (50) ◽  
pp. 31770-31779 ◽  
Author(s):  
Erasmus K. H. J. zu Ermgassen ◽  
Javier Godar ◽  
Michael J. Lathuillière ◽  
Pernilla Löfgren ◽  
Toby Gardner ◽  
...  
Keyword(s):  
International Trade ◽  
Supply Chain ◽  
Spatially Explicit ◽  
Environmental Footprint ◽  
Production And Consumption ◽  
Poor Understanding ◽  
Spatially Explicit Data ◽  
The Tropics ◽  
Insight Into ◽  
Over Time

Though the international trade in agricultural commodities is worth more than $1.6 trillion/year, we still have a poor understanding of the supply chains connecting places of production and consumption and the socioeconomic and environmental impacts of this trade. In this study, we provide a wall-to-wall subnational map of the origin and supply chain of Brazilian meat, offal, and live cattle exports from 2015 to 2017, a trade worth more than $5.4 billion/year. Brazil is the world’s largest beef exporter, exporting approximately one-fifth of its production, and the sector has a notable environmental footprint, linked to one-fifth of all commodity-driven deforestation across the tropics. By combining official per-shipment trade records, slaughterhouse export licenses, subnational agricultural statistics, and data on the origin of cattle per slaughterhouse, we mapped the flow of cattle from more than 2,800 municipalities where cattle were raised to 152 exporting slaughterhouses where they were slaughtered, via the 204 exporting and 3,383 importing companies handling that trade, and finally to 152 importing countries. We find stark differences in the subnational origin of the sourcing of different actors and link this supply chain mapping to spatially explicit data on cattle-associated deforestation, to estimate the “deforestation risk” (in hectares/year) of each supply chain actor over time. Our results provide an unprecedented insight into the global trade of a deforestation-risk commodity and demonstrate the potential for improved supply chain transparency based on currently available data.

scholarly journals Evolving Patterns of Payment Methods in Turkish Foreign Trade

2017 ◽  
Vol 2 (1) ◽  
pp. 3
Author(s):  
Kemal Turkcan
Keyword(s):  
International Trade ◽  
Foreign Trade ◽  
Bilateral Trade ◽  
Global Financial Crisis ◽  
Global Marketplace ◽  
Trade Finance ◽  
Letter Of Credit ◽  
Payment Methods ◽  
Advance Method ◽  
Cash In Advance

Serving the global marketplace brings many risks to the firms that they may not have on the domestic side. Apart from financing, trade finance mechanisms assist exporters and importers to mitigate or reduce their risks associated with doing business internationally. The present paper sheds lights on the structure and evaluation of payment methods in international trade as well as their changing composition due to 2008-2009 global financial crisis using a unique bilateral trade finance data from Turkey with 206 countries over the period 2002-2012 at the 2-digit level of ISIC Revision 3. Three key results emerge. First, Turkey’s exports are mainly financed via open account method while the majority of its imports were executed via cash-in advance method. Second, the shares of inter-firm trade finance (open account and cash-in advance) in Turkey’s foreign trade dramatically increased over the period 2002-2012, while the shares of the intermediate trade finance (cash against documents and letter of credit) decreased substantially. Finally, the evidence show that both exporters and importers started to use cash-in advance method, the safest method of payment, more intensively than other methods shortly after the global recession in 2008. Overall, the patterns presented in this paper highlight the fact that Turkish traders are not able to set payment terms that are highly favorable to themselves and bear all risks associated with international trade transactions.

scholarly journals The impact of supply chain financing on SMEs performance in Global supply chain

2022 ◽  
Vol 10 (1) ◽  
pp. 255-270 ◽  
Author(s):  
Trong Lam Vu ◽  
Duy Nhien Nguyen ◽  
Tuan Anh Luong ◽  
Thi Thanh Xuan Nguyen ◽  
Thi Thai Thuy Nguyen ◽  
...  
Keyword(s):  
Supply Chain ◽  
Business Performance ◽  
Small And Medium Enterprises ◽  
Factors Affecting ◽  
Supply Chain Finance ◽  
Supply Chain Financing ◽  
Financing Performance ◽  
Medium Enterprises ◽  
The Impact ◽  
The Relationship

The purpose of the article is to evaluate the factors affecting supply chain finance and the influence of supply chain finance on supply chain financing performance and SMEs performance in Vietnam. The study was conducted on 856 small and medium enterprises in Vietnam for 3 consecutive months. The data is processed by Smart PLS 3.3.6 software, the results show that credit quality, supply chain integration, information sharing, and information technology all have a statistically significant impact on supply chain finance. Besides, supply chain finance has a statistically significant impact on supply chain financing performance and SMEs performance. Finally, the innovation capability and the market response capability act as full mediators in the relationship between supply chain finance and supply chain financing performance. Based on the research results, we propose solutions and recommendations to help small and medium enterprises better access capital and improve business performance.

24. Documentary payments

2019 ◽  
pp. 645-690
Author(s):  
Eric Baskind ◽  
Greg Osborne ◽  
Lee Roach
Keyword(s):  
International Trade ◽  
Legal Issues ◽  
Letter Of Credit ◽  
Payment Mechanism ◽  
Letters Of Credit ◽  
Bill Of Exchange ◽  
International Sales

This chapter is divided into two main parts. First, it aims to provide an introduction to the concept of an important piece of property called an instrument, principally by focusing on one specific example: the bill of exchange. Second, the chapter considers a bank payment mechanism called the letter of credit, especially in conjunction with bills of exchange. Bills of exchange, of which cheques are a particular type, although declining in importance in domestic sales, remain important in international sales. While bills of exchange are not the only instruments, and letters of credit are not the only mechanism supporting the financing of international trade, focusing on these two important commercial documents makes it possible to obtain a good understanding of the types of legal issues involved in documentary payments.

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