Exploring supply chain finance as an instrument for enabling logistics service providers to upgrade their service offerings

Due to high levels of competition (CMP) and diminishing returns in the traditional transportation and warehousing services, logistics service providers (LSPs) are differentiating themselves by providing value-added services (for competitive advantage) to supply chain members. By exploiting their visibility and control of physical and information flows (IFLs) in the supply chains, LSPs have tapped into the supply chain finance (SCF) market. SCF as a value-added service extends the scope of LSPs’ service offerings by integration and control of physical, information and financial flows (FFLs) across the supply chain. This facilitates the reduction of financial risk in supply chains by improving the collaborative cash-to-cash (C2C) cycle and working capital of the supply chain members. The two major research streams associated with SCF are financial supply chain management (FSCM) and trade credit. FSCM mainly focuses on the supplier-buyer relationships and the FFL while trade credit emphasises the short-term financing enabling the cash flow management that is fundamental to SCF. The existing studies in the literature provide insights into the SCF services, their mechanisms and ‘enablers and inhibitors’ for SCF adoption but a comprehensive understanding of the capabilities required by a particular supply chain member, such as an LSP, to offer SCF service offerings as a part of their service portfolio is still missing. In order to properly design and develop SCF service offerings, LSPs should be supported by a comprehensive theoretical knowledge pertaining to their capabilities. The provision of offering SCF services is associated with the new service offerings discussed in the strategic management literature, which emphasises the need for renewed skills, processes and routines developed within the frame of operations (operational capabilities) to offer new services. As the operational capabilities draw on the resources, the development of an adequate resources base by obtaining, reconfiguring, integrating and releasing of the resources (dynamic capabilities process) plays a crucial role in offering new services such as SCF. In this context, the strategic management literature provides an opportunity to carry xxviii out empirical research that identifies all the relevant characteristics, contextual factors and capabilities that might lead LSPs to offer SCF services. Keeping this in view and to explore this prospect, the purpose of this thesis is to identify LSPs’ capabilities and associated mechanisms necessary to offer SCF services. The research design that was developed to address this opportunity is a case-based approach with four embedded units of analysis. This provides the opportunity to look for literal replication of the guiding principles that underpin the capabilities an LSP can leverage to extend its service provision to SCF services. The research concludes that the interrelationships between the dynamic capabilities process and its antecedents, generic operational capabilities of LSPs and SCF adoption capabilities, provide a mechanism to understand the LSPs’ capabilities required to offer SCF services. Subsequently, the thesis contributes to theory and practice by developing a conceptual framework that can be used by researchers to extend the horizons of new service development such as SCF services and by practitioners to evaluate their firms’ (LSPs) capabilities to extend their service portfolio to offer SCF services

Towards a framework on the factors conditioning the role of logistics service providers in the provision of inventory financing

This paper explores the conditions in which Logistics Service Providers (LSPs) can compete or collaborate with banks in offering Inventory Financing as a Supply Chain Finance (SCF) service. A multiple case study research methodology was adopted. The case study involved six LSPs across Europe. Data was collected through semi-structured interviews. The results highlighted that an attractive credit demand for LSPs consists in suppliers with high amounts of inventory or borrowing needs that go beyond their borrowing capacity from the perspective of a bank. LSPs can respond to this demand when they have three specific capabilities: risk assessment, risk monitoring, and organizational capabilities. The offer of Inventory financing can be controlled by the LSP or by the bank. When the LSPs control the offer, they offer different conditions compared to the banks in terms of credit rationing, transaction costs, payment flexibility, tax rate advantage, and financial risk management. When the bank controls the offer, the LSPs influence the nature of SCF services only in terms of credit rationing and transaction costs. LSPs seem to easily develop risk assessment and risk mitigation capabilities, while the organisational capabilities appear to be the most challenging to build, and when absent they create a barrier to the provision of inventory financing. The value of the paper is twofold. Firstly, the paper provides a comprehensive taxonomy of the factors conditioning the role of LSPs in the provision of inventory financing as a SCF service. Secondly, the paper clarifies the link between the factors and the different roles played by LSPs

Exploring the relationship between mechanisms, actors and instruments in Supply Chain Finance:A systematic literature review

Supply Chain Finance (SCF) deals with the management of financial flows along the supply chain. Its core objective is to facilitate the reduction of financial risk in a supply chain by improving the collaborative cash-to-cash cycle and working capital. In order to fulfil its objective, SCF involves the coordination of supply chain actors, SCF instruments, and supply chain processes. Existing studies focus either on SCF actors, such as buyers, suppliers, banks, and logistics service providers (LSPs), or on specific SCF instruments, such as reverse factoring, inventory financing and discounting. However, an analysis of the relationship between actors and instruments, as well as of the factors influencing this relationship, requires further development. In light of this gap, this paper systematically reviews the literature on SCF with the objective of clarifying the relationship between SCF actors, instruments, and contextual factors. The review identified three main archetypes for this relationship: fixed-asset financing (fixed asset-centric), inventory financing (inventory-centric), accounts receivable/accounts payable financing (buyer-centric and supplier-centric). Based on the results of the review, the authors discuss the implications for practitioners and further research for academics

Exploring the role of logistics service provider in supporting the supply chain strategy using supply chain finance instruments

In order to serve different global markets, firms are revisiting the available logistics service providers’ (LSPs) expertise and their supply chain (SC) activities. The firms are increasingly focusing on outsourcing their logistics activities as they grow, thereby, driving LSPs to offer a variety of increasingly complex services such as supply chain finance. The aim of this paper is to interrelate SC activities, SC financing and LSPs’ roles in SC to support a global SC strategy. The findings illustrate three outsourcing scenarios that a firm can undertake to develop a sustainable relationship with the LSPs to facilitate their global role

Enablers and inhibitors for the adoption of supply chain finance by logistics service providers

Financial service providers lead in offering Supply Chain Finance (SCF) but their inability to monitor all the material and information flows is a major challenge. Logistics Service Providers (LSPs) overcome this challenge by exploiting their control over the material flows. Despite several studies on the competency of LSPs to offer SCF, the research on the influencing factors is still underinvestigated. Therefore, the aim of this paper is to identify the factors (enablers and inhibitors) that lead LSPs to adopt SCF. The findings show that these factors are related to finances, risks, standards, organisation, operations, information, cross-border transactions, and regulations

A systematic literature review on supply chain finance actors, instruments and processes

Supply Chain Finance (SCF) aims at managing the financial flows along the supply chain with an objective of maximising the creation and delivery of financial services. The literature on SCF is complex and focuses on SCF actors, SCF instruments and supply chain processes. However, the connection between these elements is weak, and the configurations of actors, instruments and processes that maximises financial value creation is unclear. In the light of this gap, this article aims at reviewing the literature on SCF, with a specific focus on actors, instruments, coordination, performance of processes and their interrelation. A systematic approach has been taken to the literature review, which ensures it is auditable and repeatable. The selection criteria are clearly aligned with the review questions and relevant information is extracted from the selected papers and synthesised into a set of constructs. Furthermore, the constructs are used to develop a conceptual framework to align SCF actors and instruments along with the contextual factors

Supply Chain Productivity in construction: Transforming Construction Network Plus digest series

All too often, construction firms focus on improving their own productivity at the expense of the other firms they work with. This reflects their tendency to not engage with a collaborative approach in which all firms involved in a construction project are working together. This reduces overall productivity, so projects overrun on cost and time. This is further exacerbated by a low rate of technological innovation, poor communication and coordination, and the inefficient use of resources. This digest shows how productivity improvements based on supply chain management used in manufacturing could be applied to improve the performance of construction. It presents three considerations for improving productivity in construction: Building end-to-end supply chain integration Achieving ‘economies of repetition’ Adopting digital technologies to improve supply chain planning We know that one size doesn’t fit all, so this digest aims to help firms understand when to focus on supply chain flexibility and when to seek economies of repetition. In this way they will stand a better chance of radically improving productivity across projects and programmes.</p

Logistics service providers’ foray into supply chain finance: Developing necessary capabilities

Logistics service providers (LSPs) struggle to offer supply chain finance (SCF) but little is known about how such firms can effectively extend their provision to such services. To address this shortcoming, we first develop a conceptual framework using dynamic capabilities and SCF literature and then elaborate this framework through a case study with four embedded units of analysis. We explicate generic and SCF instrument-specific operational capabilities and identify nuanced enablers of these capabilities in the process. Overall, our work provides a new terminology and structure explaining the provision of SCF by LSPs.</p

Increasing competitive advantage and financial certainty throughout the supply chain

Supply Chain Finance (SCF) is emerging as a core initiative to unlock the trapped financial resources within supply chains and mitigate the concentration of financial risks. Effectively implemented, it provides competitive advantage and financial certainty to the involved supply chain members. The innovative financial instruments offered under the SCF umbrella manage and steer the financial flows while keeping them aligned with the material and information flows in the supply chain. These instruments result in a win-win situation for the involved members by improving their Net Working Capital (NWC) and liquidity, strengthening their relationships with the supply chain members and reducing the probability of their bankruptcy. The guide primarily explores the prospects for businesses to tap into the field of SCF. Due to the numerous variations in SCF instruments and related programmes, this guide intends to create a consistent taxonomy of the SCF archetypes that practitioners can use to adopt a particular type of SCF instrument. In order to facilitate the adoption of SCF by businesses, each categorised instrument in the archetype is analysed to provide a detailed view of the underlying mechanisms and characteristics. Practitioners can use the knowledge attained from this guide to adopt SCF either by getting on-board on an SCF programme offered by members of the supply chain, or by offering SCF instruments to other supply chain members. The practitioners will be able to draw a parallel between SCF offerings and their individual financial benefits and requirements, leading to informed decisions related to the offering and acceptance of SCF. Lastly, based on the provided analysis, practitioners can further  explore and analyse SCF instruments based on their individual strengths, requirements and skill set. This guide starts with the context and background of SCF, followed by defining the SCF archetypes. The SCF archetypes section is followed by a detailed analysis of SCF instruments in a particular archetype. Finally, SCF instruments are analysed by presenting their deployment mechanism and characteristics.</p