- LCs, TReDS improve liquidity, buyer-supplier trust
- Invoice discounting helps MSMEs unlock cash flow
- Smart, green logistics cut costs, boost efficiency
At the India Steel Supply Chain Summit 2025 (ISSCS 2025), held on April 17-18 and organised by BigMint in partnership with Quesrow, a session titled “The Role of Finance and Logistics in Optimising Supply Chain Efficiency” explored how vendor financing solutions such as the Trade Receivables Discounting System (TReDS) are enhancing liquidity, easing working capital constraints, and strengthening supplier relationships. The session also emphasised the strategic integration of finance and logistics to improve cash flow efficiency, enable timely deliveries, optimise costs, and promote multimodal and sustainable supply chain practices in the steel sector.
Key takeaways
1. Supply chain finance: The fuel
Finance is crucial for a supply chain to function effectively, acting as the necessary fuel. Traditional financial instruments such as letters of credit (LCs) ensure payment security between buyers and suppliers, especially in international trade.
Newer mechanisms, such as invoice discounting through platforms such as TReDS, have revolutionised supply chain finance. TReDS allows MSMEs to get their invoices discounted, improving their cash flow and enabling them to expand their operations. This has been a revolutionary change, helping industries grow significantly. Invoice discounting is not a loan or credit limit, but rather a way for suppliers to sell their receivables to financiers.
2. Enhancing cash flow, liquidity
Various financing methods exist to improve cash flow throughout the supply chain. Suppliers can receive immediate payment from financiers, while buyers pay the financier at a later date. This enhances liquidity for MSMEs, allowing them to fund their next projects.
Purchase order financing assures suppliers of confirmed payment from buyers, accelerating the cash flow cycle. LCs, prominent in import/export transactions, involve banks on both sides to guarantee payment when goods and documents are in order.
3. Logistics: The wheel
Efficient logistics is equally important, acting as the wheel that enables the supply chain to move. Optimising both the cost and speed of logistics is crucial in modern supply chain systems.
Various transportation systems, including rail and multimodal options, are evolving to achieve this optimisation. Specialised transportation is required for certain goods, such as engineering products, and the modern supply chain also encompasses reverse logistics, green supply chain practices, and supply chain consulting for further optimisation.
Conclusion
Supply chain finance acts as the fuel powering trade, with tools like LCs and platforms such as TReDS enhancing payment security and MSME liquidity. Invoice discounting boosts cash flow without adding debt. Logistics, the wheel of the supply chain, must balance cost and speed. Evolving transport modes, reverse logistics, and green practices are key to a modern, efficient supply chain.
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