Supply Chain Finance: Outlook 2021 and Trends 2022

Kunal Ahirwar

The pandemic has drastically re-modelled the consumption patterns across industries worldwide. From sourcing raw materials to end consumer supply, the value chain has been disrupted coherently in the past few years. However, businesses have been relentlessly transforming their operations and adapting to the technological revolution in this pivot or perish environment. Industries across the globe are now nurturing the digital boom and supply chain finance, stands as no exception.

The sector has been undergoing massive acceleration with the onset of advanced technology and innovation.

Supply chain finance volumes have grown significantly in recent years, reaching a total value of $1.31 trillion in 2020, as per the World Supply Chain Finance Report, published BCR. The Supply Chain Financing market is expected to grow at a CAGR of 17.1%, with an incremental spend of about USD 82.75 Billion, by 2024. Furthermore, while the global revenue pool for supply chain finance grew approximately 7% year over year in the first half of 2021, the total industry revenue, according to BCG, is expected to reach $11 billion in 2030.

Moreover, on the supply side, North America, South America, Europe, the Middle East, and Africa, and APAC is expected to have the maximum influence owing to the diverse supplier base. While the industry is expected to accelerate at a great pace in the coming years, it was definitely put to test during these times of uncertainty.

Even though the industry saw many ups and downs with subsequent shutdowns and global lockdowns, it managed to gear up with resilience and stay ahead of the curve. Supply chain financing is scaling in new dimensions with digitisation empowering its growth and adoption. The year 2021 witnessed that technology-led solutions enabled cost optimization, enhancement of working capital, and higher transparency in business transactions and helped the MSMEs to stay afloat during the pandemic. The accessibility of financial data coupled with big data analysis and technologies like blockchain, IoT, Machine Learning, and AI transitioned the market in the favour of supply chain financing.

As we enter this New Year, there are certain trends that we can expect to shape up the supply chain finance in 2022.

Healthy Collaboration of Advance Technologies and Human Capabilities

While technology is automating the entire process of payment exchange and history, documentation, data analysis, etc., a workforce intervention with capabilities like critical thinking, logical implementation, and client relation are a prerequisitefor the success of the business. The biggest performance improvements happen only when machines and humans work in harmony, improving each other’s strengths.

Enhanced Risk Management Solutions

The pandemic highlighted the risks of global supply chains as organisations struggled in the initial phases with supply-chain disruptions. In the coming year, businesses will take this into action and work towards creating a holistic ecosystem with better risk-management and risk-mitigation solutions. An “Always-On, Always-Ready” solution will become the needed asset, to provide timely intimations when there are disruptions and changes that gaining momentum across the globe. It will enable organisations to get an extended view to continuously monitor and reach new supplier tiers and gain higher visibility of the supply base. Furthermore, devising technologies like machine learning and AI would help in assessing credit risk and predicting frauds and threats in real-time.

Building Larger Pool of Suppliers

The accelerated digitization and collaboration will create a wide heterogeneous network with alternate suppliers, stakeholders, and facilitators. The year 2022 will witness a massive shift towards a ‘multiple-choice quotient’ with expanded reach and multiple players proving higher values, improved financing, and better working capital.

Understand Changing Client Needs

The last two years have led towards the creation of new habits, needs, and demands of clients across sectors. With such close net networks of suppliers and buyers, it is imperative for businesses to take time and understating the evolving needs of the buyers. Covid lockdowns and subsequent economic breakdowns, disruptions, and irregularities have been a driving factor in the changing behaviour across supply chains and it is upon supply chain financing to ensure that these new capacities can be developed.

Regulating and Optimizing Compliance Concerns

While the last few years saw a trend of organizations implementing automation strategies before evaluating the compliance needs, the new era calls for a reverse operational cycle. With government mandates and regulations changing constantly across geographies, global invoicing and tax compliance are becoming increasingly complex and fragmented. The age of 2022, will witness a transformation in business strategies where organizations operating globally will place compliance resolutions at the top in their automation approach.

Over the years, supply chain finance has emerged as a bridge for buyers and suppliers, proving a range of finance and risk mitigation solutions to optimize the supply chain and as the global economy is currently undergoing turbulent times, supply chain financing will become all the more important.

Views expressed in this article are the personal opinion of Kunal Ahirwar, CEO and Co-founder, Earnvestt Technologies.

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