Revenue Loss and Loan Defaults Due To SCM Dependencies
In early April 2023, the German business newspaper Handelsblatt published an article (link) discussing how banks are increasingly interested in a company's supply chain dependencies when making loan decisions.
According to a study by EY (link), which interviewed 120 loan managers, 40% of them are concerned that past and present macroeconomic and geopolitical developments and the resulting disruptions in supply chains could lead to revenue losses and loan defaults. Additionally, 38% expect the need for loans to rise due to these developments. As a result, 80% of loan managers will consider supply chain dependencies when deciding whether to grant a loan.
Loan managers are particularly concerned about dependencies on China, as many companies source a significant portion of their raw materials from there. Consequently, companies will begin to redesign their supply chains to find new sources in other countries, invest in other regions, or bring production closer to home.
Redesign Of Supply Chains to Reduce Dependencies
As a result of these developments, supply chain managers should not be surprised if they receive a call from the CFO seeking a better understanding of the dependencies in the supply chains, and options for sourcing elsewhere to achieve greater agility while reducing risk. In addition to their daily work, supply chain managers must plan and execute such a strategic shift in order for the company to secure further financing.
Changing Suppliers Puts a Strain On Supply Chain Execution
Reducing dependencies and evaluating alternatives can strain supply chain execution. Companies often build up safety stock to ensure delivery, but this strategy is capital intensive and could slow down growth. Top management will likely ask the supply chain manager to make changes as soon as possible.
How Supply Chain Managers Can Can Manage This Transition with limbiq
The key elements for a successful redesign of the supply chain for execution are the company's ability to quickly and easily integrate and onboard partners, monitor their performance, and manage shipments across all modes of transport (MOT).
limbiq enables companies to achieve all three objectives through a single platform. The flexible and easy integration of third-party data makes onboarding simple and fast. The interconnected data objects provide end-to-end visibility into all shipments and modes of transport. Capturing this data on a digital platform enables further analysis of performance.
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