REGIONAL CHANNELS
The challenge
partners have is
to manage and
broker multiple
vendor financing
offerings when
selling a solution
incorporating many
different vendors.
Kristian Kerr
Kristian Kerr, Head of Channel, Alliances and
Commercial for EMEA for Juniper Networks.
Vimal Kocher, Managing Director, Arrow
Enterprise Computing Solutions Business, ME.
Moving to next level of
channel financing
While value added distributors have been playing an active
role in financing, channel partners now expect vendors
to take a more involved role in generating credit through
financial institutions. By Arun Shankar.
A
ccording to a recent survey by
authors Chiplunkar Yogini and
Savitribai Phule, and the Indian
Institute of Cost and Management Studies
and Research, for the last decade or so,
companies have been focusing significant
resources on streamlining their supply
chains. For the most part, this has meant
the physical supply chain, as in the
movement of goods around the world.
Less attention has been paid, however,
to the financial side of supply chain
management: the flow of money in support
of the physical movements. Generally, it is
observed that goods and information move
faster through a supply chain than finance.
In their study on channel financing
as a mode of working capital finance,
22
the authors point out that supply chain
companies are facing many challenges like
unreliable and unpredictable cash flows,
slow processing of documents, delays
in reconciliations and high daily sales
outstanding, as far as the financial flows
of supply chain are concerned. If these
challenges are addressed, money saved can
be shifted to more valuable uses.
Working capital management is critical
for all business firms. Longer payment
terms to suppliers are likely to adversely
affect the commercial relationship as well
as the working capital position of supply
chain firms, resulting in an unstable and
financially unsound supplier base. At the
same time, a small, less powerful buyer
may face liquidity constrains if they
are forced to pay early. This shifting of
financial burden from one party to another
adds significant risk to the supply chain.
Authors of the study, Yogini and Phule,
point out that to stay in business, supply
chain players are eventually forced to bury
the cost of extended payment terms in the
cost of goods sold. Thus, over the long term,
cost-shifting to supply chain players will
result in an overall higher cost of goods
sold. In recognition of the contribution and
the vast potential of the small suppliers as
well as their inherent infirmities, provision
of adequate credit to this sector has become
a crucial element of the supply chain.
Regional dynamics
Across the region, there are a few distinct
trends that drive the dynamics of channel
credit and channel financing. The first is
the tendency by vendors to overstock their
distributors with products. The second
is the relatively passive role played by
vendors in the overall dynamics of channel
financing in the regional resell markets.
Says Dharmendra L Sawlani, Managing
Director, Smile Computers, a leading
reseller of compute brands and services,
“Vendors as such do not get involved with
the channel for credit in any which way.”
Resellers point out that the role
of vendors is more in oversupplying
distributors with their products while
extending lines of credit to their
distributors. In order to clear excess
stocks at their end, distributors arrange
extended lines of credit for their resellers
to sell-out excess inventory accumulated
Issue 12
INTELLIGENT TECH CHANNELS