Why in spite of the numerous opportunities of Supply Chain Finance (SCF) some existing and potential suppliers are reluctant to adopt it ?
One common retail supply chain; avoid over committing (manufacturing) to one specific retail partner. This is key common in the US retail ecosystem.
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I think that one of the key reasons for this is the holding cost of inventory (or stock carrying costs): buyers do not want to pay for it (hence just-in-time operations).
Bye
For fear that the Profit Margin obtained will be published and become a discussion of a significant level, so there is little explanation and in my opinion it's something that is natural for supplier companies ... hopefully it is useful ...
Perhaps the costs of financing the supplies are high and can raise the price of the offer sold on the market.
In my opinion, suppliers can have several reasons to be reluctant or unwilling to adopt SCF proposal due to following reasons;
1. SCF proposals are not always in the benefit of suppliers and it really depends on the particular offering whether it makes sense to adopt or not.
2.Lack of understanding: Some suppliers do not really understand the set-up and assumes that any offer from the buyer only benefit the buyer alone, making them suspicious about the offer.
3. Another option is that suppliers are reluctant to take away business from their exisiting bank, because they are afraid that the buyers bank might not provide better deal as compare to their existing banks. The suppliers prefer to remain with their own bank for all the other transactions. In addition, If they take away part of the business from their banks, this might have a negative repercussions on the good relationship they have with their banks.
4. Another reason is that the buyers proposing SCF might constitute a small fraction of their entire customers based, therefore, It would not be economically prudent to change banks for only a small portion of their sales.
**Most answers to the above questions can be found in Judith Martin (2017) article with a title: Suppliers’ participation in supply chain finance practices: predictors and outcomes**
Perhaps a more holistische view based in ten multiple capital model of Gleeson-White might give a different view on the supply chain as a whole, and not from the point of onlangs one company intern of sub-optimal solutions and results in terms of profit.
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