Supplier Finance and Return on Investment – not just an act of macro-economic altruism
April 2nd, 2021
In recent years – and especially around the pandemic – there has been much talk of supply chains, of their importance and how fragile they can be under the wrong conditions. Perceived by many as a modern consequence of industrialisation and globalisation, in fact supply chains and their finance mechanisms have been around since ancient Mesopotamia circa 3000 BC.
There are many wider advantages associated with investment in this area – emancipating working capital for both buyers and suppliers, removing trading bottlenecks and dislocations and facilitating more rapid and efficient transactions leading to a healthier macro economy. But there are also significant benefits for the most vital part of the chain, the investors providing the temporary capital make it all possible.
One only need look at the world’s richest man – Jeff Bezos – who has made it part of his life’s work so far to create the biggest and arguably best on the planet, achieving 20% y-o-y growth and estimated current revenues around $330bn. By embracing technology and automation, investing in state-of-the-art warehousing and transportation, Amazon have torn through archaic practices to trailblaze where others follow.
With the advent of AI and other technological innovations, supplier financing’s time has truly come – and able to generate not only attractive returns but also new opportunities to fund. According to the International Chamber of Commerce the returns derived from it reached between $50 billion and $75 billion in 2019. Intra- and post-Covid we can only surmise that these sums are now (and will be) substantially greater.
This sector is attracting big ticket investment from the likes of Softbank, TPG and Llamasoft, and leading Supplier and Trade Finance funds are quoting internal rate of return (IIR) of 52% – it’s just the kind of thing which is making global Change Management experts and influencers very excited.
Time has always been equated to money – and optimising supply chains is a way to not only create lower shipping times and more sustainable trade, but deliver equitable returns on investment for those involved, not only in the ‘first world’ but geographical regions where logistical advances would be all the more pronounced.
What has that to do with Zvilo? Well, we are currently in process of creating a Supplier Finance platform – while seeking to generate an equitable return for all stakeholders involved, for the suppliers who need the working capital and for capital that not only seek to make return but also strengthen the supply chains across the Balkans and across the globe.