Financial Supply Chain Management

[caption id="attachment_9451" align="aligncenter" width="413"]Something familiar out of context can have a dramatic impact Something familiar out of context can have a dramatic impact[/caption] Joe Hyland, CMO at Taulia, recently wrote an excellent piece about industry disruption in which he highlighted three of the characteristics of a truly disruptive strategy. Essentially, Joe advises: 1. Don’t simply reinvent the wheel. 2. Don’t plagiarize an existing model and 3. Don’t make incremental changes – be bold. I’d agree with all of that but there’s something that Joe didn’t say – perhaps because he didn’t want to blow the Taulia trumpet too overtly – so I’m going to say it for him.

It’s not quite a revolution. No-one is fighting in the streets but the world is changing. For decades – indeed centuries, banks have wielded a power over business and the wider economy that was virtually unquestioned. The effect wasn’t always negative of course. It is hard to see how the economic growth of the 20th century could have happened without these institutions. But neither was it all good. There are anomalies in the way the economies of the western world operate  - there are unintended consequences, winners and losers. The fluctuations that occur in our economies are exploited by the banks who have a privileged central position and their actions can amplify the ups and downs in exchange rates, interest rates and stock prices. These accentuated aberrations can be very damaging to economies, businesses and individuals. But there is one aspect of the way our economies have run that hasn't fluctuated and has always been pretty consistent – you never see a poor banker. But now there’s a change in thinking. Some of the anomalies that we see – in particular the unfair playing field that exists between wealthy businesses and their smaller suppliers – are now being seen as unacceptable. Extending payment terms in order to optimize cash flow is a good thing only if you take a very isolationist view – if you see self-interest as the only thing that matters. If you take a wider view, you see that delayed payment hurts vulnerable suppliers, it pushes prices up and can damage an economy – at the very least it does nothing to help an economy that is on it’s knees and struggling to get back on its feet. This is why there's been a change of thinking and ironically, it is the banks we can thank for the change.

The soundtrack to my formative years was the Sex Pistols, The Jam, The Clash, Deaf School, Gregory Isaacs and Aswad. It was fun that the generation I was a part of had music that was revolutionarily different from previous generations yet there were still those older people who wished we would all just calm down and listen to Bing Crosby and Doris Day as though Elvis, the Beatles, The Doors and Pink Floyd had never happened in the preceding two decades. Punk rock had woken an older generation and reminded them of how much they enjoyed their heyday. And this is exactly the impression I got today when I read that the International Chamber of Commerce is to rationalize the language used to describe supply chain finance.