Demica: liquidity potential in logistics in Central Europe
Report by Demica, a provider of specialised working capital solutions, providing consulting, advisory and technology services
Significant liquidity could be released for supplier companies based in Central Europe through Supply Chain Finance (SCF), according to the latest research from Demica, a technological specialist for working capital solutions.
Its new study reveals that SCF programmes could help unlock combined working capital of over €16 billion for suppliers located in Poland, the Czech Republic and Hungary in the manufacturing, wholesale, and logistics sectors. The exploitation of this hidden liquidity potential is particularly important for many domestic companies in Central Europe, in particular the small- and medium-sized enterprises (SMEs), as standard relationship credit is getting more difficult and more expensive to access against the backdrop of economic slowdown and western bank deleveraging.
The report highlights that the ease of obtaining affordable finance for firms situated in Central Europe has implications on a broader level. As bilateral trade linkages between Central European economies and Germany have expanded rapidly over the last two decades, many of the companies in Central Europe are firmly anchored in the supply chains of German companies. The financial robustness of these supplier companies is therefore vital to German corporates who depend on their supply of intermediate goods and services. In this context, SCF is proving to be a particularly cost-efficient financing tool in providing Central European suppliers with much-needed liquidity in a tight credit environment. In developed economy like Germany, local German supplier firms could even benefit from liquidity release to the tune of €44 billion with SCF arrangements, according to the study.
SCF not only enables earlier payments for suppliers at a rate of interest that is often far superior to their own, it also provides purchasing companies with working capital advantage through extending days payables outstanding. Demica’s calculations show that large corporate buyers in the fields of manufacturing, wholesale and logistics from Germany, Poland, the Czech Republic and Hungary could seize an aggregated €103 billion of potential liquidity released through SCF programmes.
Philip Kerle, Chief Executive Officer of Demica, commented, “Whether we are looking at emerging markets or developed economies, SCF is a vital credit facility that should be leveraged to unleash working capital trapped in the supply chains. Especially for supplier companies from emerging economies where borrowing costs are high and alternative sources of financing are limited, SCF can often prove to be their financial lifeblood. Buyer companies who offer SCF programmes can equally benefit from the arrangement by extending payment terms and hence increase their own working capital. Over the years businesses have paid much attention to improving operational efficiencies in supply chains. However, to boost the bottom line businesses must do more to enhance financial efficiency. In a post-crisis world where working capital optimisation has become a high priority, SCF provides both suppliers and buyers a win-win solution to achieve this goal.”
Tradeshift: Pioneering eProcurement and Digital Trade
Tradeshift helps transportation and logistics organisations digitally transform their processes. The company offers a suite of services, including spend management, accounts payable and invoice automation, eprocurement, and supplier collaboration through a dedicated B2B supply chain marketplace of more than one million businesses.
As disruption and digitisation continue to accelerate, demand for Tradeshift’s solutions has grown dramatically. The company recently announced the signing of 20 new global enterprise customers since the beginning of its financial year on 1 February, while the number of active businesses transacting on the Tradeshift platform rise by 52 per cent year on year.
Tradeshift Chief Revenue Officer Christope Bodin expects that growth trajectory to continue, as the economy begins to fully reopen and the world works towards recovering from the pandemic. “We are well positioned to support the wholesale digitalisation of business processes,” Bodin said. “For organisations looking to grow in a post-COVID economy, this is fast becoming an organisational standard.”
Tradeshift in Brief
- HQ: San Francisco, USA
- Employees: 800 located in offices in 13 countries
- Customers: 500+ in 190+ countries
- Total on-platform transaction value: $1tn
- Platform: 1.5m companies connected
Key Tradeshift customers: Volvo, Kuehne+Nagel, DHL, Air France-KLM Group
Tradeshift: From $1 to $1 trillion
The company was established with a mission to “connect every company in the world, digitally,” according to Lanng, and followed the trio's earlier product EasyTrade, a pioneering open-source trade platform.
In July 2021, just over a decade since launch, Tradeshift announced passing a new milestone: the cumulative value of transactions processed across its platform passed the $1 trillion threshold. To put that in perspective, Tradeshift said it took two years to reach the $1bn milestone.
Commenting on Tradeshift’s current and future standing, chief executive Christian Lanng said: “We’ve helped a lot of businesses to stay operational and get paid during an extremely volatile period. Every time a business joins our platform it unlocks a whole ecosystem of relationships that we can help to digitise. This sets us apart from the majority of enterprise software providers who remain preoccupied with building connections one at a time.”