The supply chain financing ecosystem: Early responses during the COVID-19 crisis

The most well-known practices include reverse factoring (Wuttke et al., 2013; Iacono et al., 2015; Liebl et al., 2016) and dynamic discounting (Caniato et al., 2016). The goal of WCM A Contribution to the SCF Literature is to minimize tied-up capital in a company’s operations. WC is essential for a company to finance itself (Baños-Caballero et al., 2014). The increasing number of SCF special issues in operations management journals (i.e., Hofmann and Johnson, 2016; Caniato et al., 2019; Chen et al., 2020; Rogers and Leuschner, 2015) underscores the interest. After the introduction, the context of the study is presented in Section 2 in a literature review. This attribute, called “to fund,” was induced by the presence of the COVID-19 crisis.

Interestingly, it seems that smaller buyers with fewer resources tend to pay their suppliers more on time. This trend of delaying payables to suppliers can already be seen in published financial figures. To do that, they have generally extended payment terms with their suppliers as a way of increasing liquidity. Large buying companies such as Walmart, BHP, Unilever, and ASML took proactive measures to help suppliers, especially SMEs, be sustainable. In turn, many buyers began playing “hide and seek” with their suppliers.

Naturally, banks caught on to this trend and began introducing fintech services to their clients as well. Another fintech, C2FO, estimated the liquidity needed to be $16T, with 75% of suppliers lacking cash globally. The struggles of buyers and suppliers sparked an opportunity for financial SCA. During the crisis, some buyers relaxed the requirements for suppliers. One of the reasons warehousing businesses picked up was that buyers and suppliers needed extra storage for goods they could not sell.

The SCF ecosystem’s response has contributed to the economic processes to remain working during a crisis. Value creation in the SCF ecosystem has required orchestration among actors as a loosely coupled system (Dhanaraj and Parkhe, 2006). This is where the complementary nature of the actors in ecosystems comes into play (Basole et al., 2015). The dark side of SCF practices was also discussed during the crisis. As therapeutic measures addressing symptoms, the observed patterns correspond to SCF actors’ responses to the crisis. Business service ecosystems consist of several autonomously operating organizations that interact with each other in a complementary sense (Gyrd-Jones and Kornum, 2013).

• For investors to participate in SCF programs, the receivables and inventories addressed must be made “tradable” and placed on the capital market.
• One of the reasons warehousing businesses picked up was that buyers and suppliers needed extra storage for goods they could not sell.
• Table 2offers an overview of the methodological steps taken in this study.
• After the introduction, the context of the study is presented in Section 2 in a literature review.

On the one hand, banks proactively approached buyers and suppliers hit by the crisis and involved other investors in the process. Interestingly, we also identified intances where financial services were offered to tier-2 and tier-3 suppliers. Some fintechs began offering financial services specifically for tier-2 and tier-3 suppliers. To relieve the tension between the buyers and suppliers, in which the buyers want to delay payment and suppliers wish it sooner, the fintechs and banks were trying to offer innovative solutions. One thing that stands out in our data is that banks have tried to mimic fintechs’ business models during the crisis. For instance, banks would underwrite the loans to suppliers operating on purchase orders from the buyers (i.e., pre-shipment financing).

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Given the unique challenges during the crisis, our decision was to use the rich information in the practitioner literature, also known as the grey literature (Adams et al., 2017). How did their behaviors interact within the SCF ecosystem to sustain themselves? Having the global dislocations regarding liquidity in mind, we developed three research questions. Whereas this ecosystem was previously active in the background before the pandemic, it was as if the situation unveiled the curtain.

• Rating agencies discouraged fintechs and banks from supporting SCF practices that could mask financial stress in companies.
• We also saw the participation of FSPs in new business models of physical SCA.
• We use data obtained from a systematic, in-depth analysis of the practice-driven literature reporting on SCF activities as they unfolded in the early stages of the crisis.
• What would be the future implications for the SCF ecosystem after the COVID-19 crisis?
• SCF builds on traditional trade finance solutions to help organizations manage their WC at a low interest rate (Templar et al., 2020).

In addition, it increases the speed of payment and the reliability and transparency of data transfer. The main advantage of using blockchain is that it creates a decentralized database that is secure. This technology simplified the transaction process by providing all participants in the sustainable B2B buying process with the same data about the trade. Taking this perspective can be a concrete and crucial way to sustain the development of SMEs and their supply chains in an actual competitive context.Research l… Despite the crisis-enhanced research interest and the growing importance of FSCM, academic contributions and discourse on the subject remain fragmented and vague. Design/methodology/approach-A review and analysis of selected, up to date theoretical and empirical literature is provided in order to prove the significance of this discipline in modern management theory and provide useful conclusions.

This section collects any data citations, data availability statements, or supplementary materials included in this article. This puts Agrocorp into the position where they can reduce risk and uncertainty while improving efficiency of the whole ecosystem. The latter was mainly observable in cases where some liquidity reserves were available. The former was evident where there were cash constraints (e.g., in industries at a complete standstill due to lockdowns). Despite initial successes with vaccinations, supply chains in some parts of the world were still experiencing lockdowns. Interest and principal payments on the securities are essentially made from the cash flows generated by the loans.

APPENDIX D. Complete set of secondary data used in this study

For example, a limit was set on the payment terms against suppliers. We uncovered that governments have established guidelines to protect SME suppliers. For instance, EXIM bank linked financial support with humanitarian aid. The Bank of England rolled out a stimulus package to help SME suppliers that were affected by COVID-19 to be able to borrow at low interest rates. The regulatory and governmental agency actors recognized the importance of keeping the core of SC activities healthy. They also influenced their central banks, which lowered interest rates to avoid a credit crunch or actively support SCF programs.

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The procedure chosen by the study relied on the grey literature to formulate the observed patterns and interactions in analyzing the data. One crucial fact to remember is that all actors are part of the ecosystem. Policymakers should continue to use development banks to ensure sufficient liquidity in SCs, especially in regions and sectors where markets do not appear to be developing. The prevailing complementarity serves to exploit synergies and drive innovation (e.g., new SCF practices like PO financing or sustainable supplier financing). This is where FSPs such as banks and fintech companies stepped in and provided much-needed relief. This can have a potentially negative impact on the suppliers, who now have to find a way to make up that liquidity shortfall.

During the crisis, there was increased partnering between banks, FSPs, and retailers. We saw FSPs offering in-depth integration with buyers and suppliers. In our data, we also observed that support did not stop at tier-1 suppliers.

3. Interactions across sets of actors

The results of the analysis show that SCF is an interdisciplinary research area that intersects sustainability, management, mathematical models, economics, etc. In total, 4027 scientific documents were retrieved from the Scopus database. More articles in International Journal of Production Research from Taylor & Francis JournalsBibliographic data for series maintained by Chris Longhurst ().

Cross-case analysis: from data structures to a model

Independent banks are brought together via technology platforms offered by fintechs. In SCF ecosystems, these technological elements are put together via a series of nested subcontracting. Based on the modularity of service components, they can decide how the modules are combined (Jacobides et al., 2018). Ecosystems, in turn, enable these independent modules to be combined in new ways to form various service bundles (Baldwin, 2012). Several independent FSPs work together to enable SCF solutions (Templar et al., 2020). Therefore, the literature on multiple service relationships must also be considered (e.g., Choi and Wu, 2009; Wynstra et al., 2015).

A bibliometric review of supply chain finance and digitalisation: mapping, current streams, and future research agenda

In the second case, which relates to the FSC players, we were able to condense eight 1st-order categories down to a total of two 2nd-order themes from the data (see Table 5). For instance, a few clients of a fintech called Greensill collapsed due to the COVID-19 crisis. However, lowering the water level by the COVID-19 crisis began exposing rocks hidden under the surface.

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For example, the uncertainties caused by the COVID-19 crisis have also led FSPs to postpone specific initiatives, such as standardization activities. However, FSPs saw the pandemic’s volatility as a threat to their SCF business. On the one hand, opportunities exist for FSPs, such as increased demand for liquidity from SCA. Some banks may fear being substituted by fintechs in the long-term (Erel and Liebersohn, 2020).

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They are traditionally focused on transportation, warehousing, and inventory management between a supplier and its buyer. Such buyers are typically large in revenue and drive a trade relationship. As original equipment manufacturers (OEM), they tend to be endowed with good cash reserve and credit rating. In particular, the dominant buying companies facing the consumer markets are called “focal companies” (i.e., Apple, Siemens, GM, etc.). Buyers and suppliers have a direct exchange relationship under a contractual agreement.

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In this regard, the post-hoc study provided an insight into possible future directions which appear under future development. Measures for subsequent waves, a possible new epidemic, or other significant crisis would be necessary to ensure sustainable viability. The selected investigation period refers broadly to the first wave of the COVID-19 crisis. Assuming that the SCF ecosystem’s behavior is recursively dynamic, it would not be possible to map the ecosystem’s development over time into post-COVID-19 situations.