Value creation for Suppliers by Adopting Supply Chain Finance: Analysis in Automotive Product Company

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Ashish Tiwari, Kiran Karande

Abstract

SMRC Automotive Products Pvt. Ltd. has come a long way since its creation in 1914 by Joseph Reydel. Over the years through several mergers and acquisitions, the organization has developed core competency in the field of automotive parts manufacturing such as instrument panels, door panels, bumper etc. for leading OEMs such as Tata Motors, BMW, Nisan etc. Lately the organization has experienced a slump in its annual sales majorly due to the impact of COVID 19 and the subsequent lockdown imposed by the Govt. of various nations. Due to the ongoing crisis and the uncertainty involved in situation coming back to normal, SMRC is actively looking forward to explore cost reduction opportunities in its purchasing operations. One such area is Supply Chain Finance which has largely been unexplored till now by SMRC. The adoption of reverse factoring can create significant reduction in financing cost for a major portion of the MSME suppliers which are strategic partners for the company’s supply chain. Through this case an attempt has been made to determine the potential benefits SMRC can avail through better management of financial practises in its purchasing operations through Supply Chain Finance. A comparative analysis of the SCF products offered by various banks has been done to determine the most beneficial SCF programme/product for the company and its suppliers. This would result into a win-win situation for both the parties as the benefits would be experienced by both in the form of cost reduction in their finance operations

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