SCFINANCE
exchange for a lower price or discount on the goods purchased. The “dynamic” component refers to the option to provide discounts based on the date of payments. UNEVEN SUPPLY/DEMAND A BENEFIT Dynamic discounting can work particularly well for uneven supply/ demand patterns, which favor contractual payment terms that are more flexible and may help distributors increase their net income by optimizing their working capital.
Logistics companies are devising new methods of dealing with a dearth of storage by choosing inland locations away from coastal ports—and by building multi-story warehouse facilities. Inventory is now “in.”
surrounding product availability, demand, inventory turn, and the pace at which inventories can be replenished, distributors must contend with variability in cash flow. ENTER DYNAMIC DISCOUNTING Fortunately, supply chain finance programs have been evolving to include options such as dynamic discounting, which gives a buyer the flexibility to choose when to pay its supplier in
Scoop Get the The program provider would then collect payment from the buyer at the later date in accordance with the payment terms established between the buyer and the distributor. Yet given the high uncertainty enroll in a traditional supply chain finance program—assuming one is available to them—that would allow them to sell their receivables to a program provider (such as a bank) in exchange for immediate cash.
Of course, there are also distributors who are resilient enough to withstand product shortages and the supply chain issues they’re causing. But those who are feeling the pinch will need to find solutions for husbanding their capital wisely in anticipation of continued shortages in the foreseeable future.
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5/5/22 1:06 PM May 2022 • Inbound Logistics 41
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