Effective Ways In Which The Blockchain Technology Has Improved The Financial System-- The Improvement Of Supply Chain Financing #002

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Hello great minds,

It is a new day and I believe you are all doing perfect.

With a humble soul, I happily come before this great community today to discuss on an issue of great importance in the cryptospace.

In our last discussion, we started a very interesting topic known as supply chain financing.

In a simple term, we understood supply chain financing to be a financial agreement linking the buyer, the supplier and the producer together in a single business.

Today, we shall be learning the benefits of supply chain financing, please stay tuned

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BENEFIT OF SUPPLY CHAIN FINANCING

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There are so many advantages of supply chain financing in the financial system and we shall explain some of them below.

• IMPROVED LIQUIDITY:

Liquidity as we know is understood to be the ease at which financial orders are executed in the market.

The more liquid a financial market is the more easy it is for orders to be executed.

Liquidity implies that there are so many participants in the market, buyers and sellers.

Supply chain financing plays an important role in improving the liquidity in a market, it ensures that a much needed working capital is easily accessible to the supplier, which is very important for their operations.

Liquidity provisions allows them to meet their various obligations and have investment in growth.

• OPTIMIZED WORKING CAPITAL:

An optimized working capital is another benefit of a supply chain financing in the financial world.

In the benefits of buyers, the supply chain financing helps in the optimizing of working capital by extending payment terms so it can be easily reached by the suppliers while it simultaneously gives suppliers an early payment options to select from.

This strategy helps to improve cash flow management and also eliminate the need for an expensive short-term loans

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• STRENGTHENED SUPPLIER RELATIONSHIP:

Another advantage of supply chain financing is that it builds and strengthen the relationship between the suppliers and buyers.

It helps to build a more collaborative relationship between the suppliers and buyers, they tend to work together in unity and build trust in one another.

The buyers benefit a lot from a reliable and stable supply chain in the system while the suppliers on the other hand enjoys financial support and preferential treatment in the system.

• REDUCED SUPPLY CHAIN RISK:

Another advantage of supply chain financing is that is mitigates the financial risk associated with supply risk.

By ensuring a good financial health of the suppliers, the supply chain financing helps in the reduction of the risks linked with disruptions in the supply chain.

And this is especially important with industries with just in time inventory systems.

• ENHANCED SUSTAINABILITY:

The supply chain financing contributes greatly to the sustainance of the supply chain.

Here suppliers are allowed to invest in friendly environmental practices and technologies with an Improved flow of cash from earlier payments, and this in turn contribute to a more sustainable supply chain.

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CONCLUSION

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We have examined some key benefits of supply chain financing in the financial system.

In our next discussion, we will examine Interesting ways in which the blockchain has affected the supply chain financing and we shall also consider some challenges faced in this system.