Supply Chain Finance Beyond the Big Banks

AI-Powered Trading Platform Unlocks Liquidity for SMES Without Hindering Large Enterprises

Over the years, larger enterprises have stretched their order-to-cash cycles from a few weeks (30-45 days) to months (120-240 days).

Waiting so long to get paid crimps small and medium suppliers (SMEs). They lack the cash flow to grow and the financing to pull off bigger deals. Difficulties for SMEs translate into slow-growing economies. In the U.S. alone, small businesses employ 46.4% of the workforce.

Today, supply chain financing technology breaks this bottleneck by helping smaller suppliers unlock liquidity. These artificial intelligence-powered platforms can finance more and quicker deals. SMEs can access surety bonding, cargo insurance, credit insurance – and grow faster. This is true supply chain leadership.

In Part IV of this series on AI hype vs. reality, we talk supply chain finance. This is another example where AI adds value, particularly in its ability to generate smart contracts.

Part I: Generative Artificial Intelligence Can Boost Your Business

Part II: Hype Vs. Reality – AI Is Essential for Modern Warehouses

Part III: 7 Ways AI and Generative AI Benefits E2E Supply Chains

AI-Powered Supply Chain Finance

What Is Supply Chain Finance?

Most definitions refer to supply chain finance as a set of technology-based solutions that streamline financing processes for buyers and sellers. The technology automates transactions, optimizes working capital, lowers costs and enhances efficiency. Many involve bank financing.

All that is true. But none of that supply chain finance software helps the SME who has to wait most of the year for the big behemoths of the world to pay their bills.

Face it, Walmart will eventually pay. So that purchase order is an asset, even if the bank deems it a liability. So, I define supply chain finance as an app that transforms core activities into assets that unlock liquidity for SMEs.

Properly understood, then, supply chain finance allows sales orders, purchase orders, logistics shipments and payment transactions to act like a credit card. Larger companies can use preferred smaller suppliers without speeding up payment.

Banks normally won’t touch these transactions. A true supply chain finance platform will, empowering SMEs.

How AI-Powered Supply Chain Finance Benefits the Big Boys

For their part, larger enterprises can use AI-powered supply chain finance to include preferred, but smaller, suppliers in the long tail of their supply chain.

Countless small businesses know how to deliver in challenging markets. But they remain undercapitalized and underutilized.

They are largely invisible and unmeasurable by enterprise standards. These SMEs have limited financial histories.

Artificial intelligence, however, can analyze cash flow data, payment histories, supply chain relationships. Natural language processing can pull extra insights from contracts, emails and other documents. Machine learning algorithms can develop predictive models that can reduce the risk profile of SMEs, bringing more of them into the global economy.

Smart Contracts – A Transaction Accelerator

Boths sides of the ledger benefit from quicker transactions enabled by smart contracts.

Predictive analytics and smart contract creation:
- Application: Artificial intelligence and machine learning analyze historical data to predict future supply chain events (e.g., order fulfillment, payment delays).
- Example: An AI model predicts when a supplier is likely to deliver goods. The model generates a smart contract based on this prediction. The contract specifies delivery terms, payment milestones and penalties for delays.
Risk assessment and smart contract terms:
- Application: AI assesses risks related to suppliers, market volatility and geopolitical factors.
- Example: ML algorithms analyze supplier credit scores, market trends and geopolitical stability. Smart contracts incorporate risk-based clauses (e.g., adjusting payment terms based on risk levels).
Fraud detection and self-executing smart contracts:
- Application: AI detects anomalies and fraudulent activities within supply chain transactions.
- Example: A self-executing smart contract triggers payment release only when predefined conditions (e.g., successful delivery confirmation) are met. AI monitors these conditions and prevents fraudulent claims.
Automatic contract execution:
- Application: AI automates contract execution, reducing manual intervention.
- Example: When goods arrive at a warehouse, AI verifies delivery against contract terms. If all conditions are met, payment is automatically initiated without human involvement.
Optimized financing decisions:
- Application: AI analyzes financing options (e.g., trade credit, factoring, loans) based on real-time data.
- Example: ML models recommend the most cost-effective financing method for a specific transaction. Smart contracts then execute the chosen financing arrangement.
Real-time insights and dynamic contracts:
- Application: AI provides real-time visibility into supply chain events.
- Example: A smart contract adjusts payment terms based on real-time inventory levels, demand fluctuations or unexpected disruptions. AI-driven insights trigger contract modifications.

AI-Powered Supply Chain Finance

True Supply Chain Finance Is a Win-Win-Win

Today’s supply chain finance options mean more than heading to the big bank.

AI-powered, app-based supply chain finance allows small companies with great products or services to sell as much as they can. Big companies with small suppliers can buy as much as they need. Partners that want to grow are never short on business.

Want to learn more? I’m happy to chat with supply chain leaders and executive teams. Reach out and let’s see how AI-powered supply chain finance can benefit your enterprise.