International Journal of Physical Distribution & Logistics

Management
Supply chain finance: a literature review
Luca Mattia Gelsomino, Riccardo Mangiaracina, Alessandro Perego, Angela Tumino,
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IJPDLM
46,4
Supply chain finance:
a literature review
Luca Mattia Gelsomino, Riccardo Mangiaracina,
348 Alessandro Perego and Angela Tumino
Department of Management, Economics and Industrial Engineering,
Received 1 August 2014 Politecnico di Milano, Milan, Italy
Revised 6 February 2015
25 September 2015
8 January 2016 Abstract
22 January 2016
Accepted 25 January 2016 Purpose – The purpose of this paper is twofold: to classify the research to-date on supply chain
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finance (SCF) according to the main themes and methods, and to propose directions for future research.
Design/methodology/approach – The review is based on 119 papers mainly published from 2000
to 2014 in international peer-reviewed journals and in the proceedings of international conferences.
Findings – The articles that provide a definition of SCF reflect two major perspectives: the “finance
oriented” perspective – focused on short-term solutions provided by financial institutions, addressing
accounts payable and receivable – and the “supply chain oriented” perspective – which might not
involve a financial institution, and is focused on working capital optimisation in terms of accounts
payable, receivable, inventories, and sometimes even on fixed asset financing.
Research limitations/implications – While efforts were made to be all-inclusive, significant
research efforts may have been inadvertently omitted. However, the authors believe that this review is
an accurate representation of the body of research on SCF published during the specified time frame,
and feel that confidence may be placed on the resulting assessments.
Originality/value – The paper presents a comprehensive summary of previous research on this topic
and identifies the most important issues that need to be addressed in future research. On the basis of
the identified gaps in the literature, four key issues have been highlighted which should be addressed
in future research.
Keywords Literature review, Supply chain management, Supply chain collaboration,
Supply chain finance
Paper type Literature review

1. Introduction
The recent economic downturn caused a considerable reduction in the granting of new
loans, with a significant increase in the cost of corporate borrowing (Ivashina and
Scharfstein, 2010). Moreover, the collapse of the asset and mortgage-backed markets
dried up liquidity from industries (Cornett et al., 2011). In these difficult times, firms
(especially the most vulnerable ones) tried to extend trade credit from suppliers in order
to supplement other forms of financing, while organisations less affected by this credit
crunch took the role of liquidity providers, accepting an increase in payment terms
(Coulibaly et al., 2013; Garcia-Appendini and Montoriol-Garriga, 2013). These effects
contributed considerably to the need for solutions and programs that optimise working
capital. Among these, one of the most important approaches is supply chain finance
(SCF) (Polak et al., 2012). SCF aims to optimise financial flows at an inter-organisational
level (Hofmann, 2005) through solutions implemented by financial institutions
International Journal of Physical (Camerinelli, 2009) or technology providers (Lamoureux and Evans, 2011). The ultimate
Distribution & Logistics
Management
objective is to align financial flows with product and information flows within the
Vol. 46 No. 4, 2016
pp. 348-366
supply chain, improving cash-flow management from a supply chain perspective
© Emerald Group Publishing Limited (Wuttke et al., 2013b). The benefits of the SCF approach rely on cooperation
0960-0035
DOI 10.1108/IJPDLM-08-2014-0173 among players within the supply chain, which typically results in lower debt costs,
 new opportunities for obtaining loans (especially for “weak” supply chain players), Supply chain
or reduced working capital within the supply chain. Moreover, the SCF approach finance
often improves trust, commitment, and profitability throughout the chain (Randall
and Farris, 2009).
The level of interest in the topic of SCF among practitioners has increased
significantly. An example that illustrates this is the “Supply Chain Finance scheme”
developed by the UK government[1]. This scheme is an agreement between the UK 349
government and 37 of the biggest companies in the UK. The companies agree to notify
a financial institution when an invoice is approved for payment; the bank is then able to
offer a 100 per cent immediate advance to the supplier at a lower interest rate, knowing
that the invoice will ultimately be paid by the large company.
Along with the expansion of the SCF market, interest in SCF is also growing among
academics. The number of scientific articles focusing on SCF has increased in the last
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decade, giving the concept a more defined identity and leading to the development of a
more precise framework to describe the SCF solutions landscape. However, contrasting
definitions, which address the topic from different perspectives, have been found in the
literature. More specifically, the literature review highlights the existence of the finance-
oriented and the supply chain-oriented perspectives (cf. Section 3). The former is focused
on financial aspects and considers the SCF approach as a set of financial solutions, very
often provided by financial institutions (Camerinelli, 2009). The latter emphasises the role
of collaboration amongst supply chain members, with a particular focus on inventory
optimisation. This perspective extends the boundaries of SCF beyond simply financial
solutions, taking into consideration inventories, supply chain processes, and even
collaborative solutions for fixed asset financing, such as pay-on-production schemes
(Pfohl and Gomm, 2009). The differences between the two perspectives result in
conflicting frameworks and definitions, and consequently it is still very difficult to derive
a clear picture of SCF from the existing literature. As a matter of fact, a general
framework describing the SCF concept and SCF solutions, in which the two main
perspectives (finance oriented and supply chain oriented) are both considered, is still
lacking. The authors believe that the integration of these two existing perspectives is
critical if the benefits of the SCF approach are to be more fully realised.
This paper aims to provide a systematic review of the recent literature and to
identify areas for future research. The paper is organised as follows: the second section
describes the methodology used to carry out this literature review; the third section
presents and discusses the main findings; the fourth section highlights the gaps and
suggests potential directions for future research in this field; and the final section
presents the conclusions that have been drawn.

2. Methodology
2.1 Scope of the analysis
This review examines articles dealing with the general concept of SCF and/or specific
SCF solutions (e.g. factoring, Reverse Factoring, supplier finance, Vendor-Managed
Inventory (VMI)), mainly published between 2000 and 2014. As a matter of fact,
although some specific solutions were addressed long before 2000, the rise of the SCF
concept can reliably be said to have started at the beginning of the twenty-first century
(Hofmann, 2005; Pfohl and Gomm, 2009). Together with the aforementioned solutions,
the trade credit literature was also reviewed, considering the same time frame. This
literature could not be neglected in the present review, because it is recognised that
trade credit partially overlaps with the concept of SCF (Klapper and Randall, 2011).
 IJPDLM Contributions focused on trade credit are plentiful within this time frame (Chang
46,4 et al., 2008; Seifert et al., 2013; Soni et al., 2010). Specifically, they can be divided into
seven groups: monetary policy implications, credit risk models, trade credit motives,
order quantity decisions, factoring economics, credit-term decisions, and settlement
period decisions (Seifert et al., 2013). The first two groups in the list are unrelated to
the matter at hand, and were therefore excluded from this review. The other categories
350 might include contributions with clear links to the concept of SCF (e.g. Klapper et al.,
2011; Klapper and Randall, 2011), and, therefore, were included in this review.
It should be noted that several articles that address the topic of “Financial supply
chain management” have also been included in this review, based on the fact that, at
least in these particular contributions, the distinction between SCF and financial supply
chain management seems to be negligible. Specifically, contributions dealing with the
integration of physical and information flows with financial flows (Wuttke et al., 2013b)
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were included, whereas articles which address the topic solely from the point of view of
automating the trade process were excluded.

2.2 Selection process

The selection process can be divided into two macro-steps. In the first step, the search
was conducted using library databases (e.g. Science Direct, Scopus, Web of Knowledge)
and multiple keywords and strings (e.g. “supply chain finance”, “supply chain
financing”, “financial supply chain”, “financial value chain”, “working capital
optimisation” “working capital management” “VMI”, “supply chain AND factoring”,
“reverse factoring”), which were sought in both the abstract and in the main body of the
paper. By using this method, all of the major logistics and supply chain management
journals and the top finance and management journals were examined (e.g.
International Journal of Physical Distribution and Logistics Management, Supply
Chain Management: An International Journal, Journal of Business and Finance, Journal
of Finance, Management Science, International Journal of Production Economics,
Journal of Business Logistics, Journal of Supply Chain Management, Journal of
Operations Management). In addition to international journals, the search included the
proceedings of leading international conferences as well as published books. Articles
that mentioned the SCF topic only in the introductory remarks or as a collateral
research theme were discarded (e.g. articles focusing on e-invoicing, which only
mention SCF, were considered to be out of scope).
Papers were read carefully and thoroughly. In the end, 106 papers published from
2000 to 2014 were selected for in-depth examination.
In the second step, coherently with Cooper (2009), the entire body of work referenced
in the initial sample of 106 papers was gathered and examined, in order to identify
relevant papers that: eluded the keyword search carried out in step one, or were
published prior to the time limit set (i.e. 2000). This step led to the identification of a
total of 2016 articles, most of which could immediately be discarded based solely on the
title (i.e. methodological, contextual, or other articles clearly unrelated to the topic
at hand) or because they were already included in the initial sample of 106 articles.
The result was a sample of 226 articles. From these, 50 additional contributions were
discarded because they were found to be non-scientific articles (e.g. reports, white
papers), leaving 176 articles to be reviewed. In order to select which articles deserved an
in-depth analysis, two criteria were used: papers published in a top journal (i.e. the top
finance, logistics or supply chain management journals based on the SCImago Journal
Ranking Index), or if not published in a top journal (as defined above), papers that were
 cited in at least four of the original sample of 106 articles. The first criterion produced Supply chain
20 articles, while the second produced 18. Each of these articles was then carefully finance
examined to determine whether it should be included. Ultimately, nine articles from the
first group and four from the second were added to the review, bringing the total
number of articles to 119.
Summarising, 119 papers were selected. Among these, five were published before
2000, while the others were published in the 2000-2014 time frame; 102 were published 351
in journals, and 16 in international conference proceedings, while the remainder are
books, book chapters, and working papers. In general, the papers found on this topic
were published in journals of logistics and supply chain management (22), business and
management (14), economics (14), finance and treasury (11), production management
(11), operations research (10), and engineering and technologies (7).
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2.3 Review method

A number of methods used in previous reviews were examined (Meixell and Norbis,
2008; Natarajarathinam et al., 2009; Perego et al., 2011). For the purposes of our review,
and consistently with Perego et al. (2011), the articles were classified using a
two-pronged approach. The papers were classified on the basis of the research method(s)
adopted and were also examined on the basis of their contents. The general SCF
literature (not related to specific solutions) was analysed first in order to identify
the main topics currently being studied and relevant SCF solutions to be included in the
review. Then, articles related to those solutions were examined. All of the papers were
grouped according to three main themes:
(1) concept and definitions of SCF;
(2) expected benefits; and
(3) SCF initiatives in place.
The articles were summarised using the established review criteria in order to facilitate
the identification of patterns that describe research themes as well as revealing possible
gaps. Coherently with Carter and Easton (2011) and Jarvis et al. (2003), data coding was
conducted by the corresponding author and by one of the other authors, based on
the coding scheme depicted in Table I. An initial measure of reliability, based on the
proportion of total pairwise agreements between the coders, was (overall) over
80 per cent, suggesting a very high level of reliability and thus replicability of the data
coding (Carter and Easton, 2011). Disagreements between coders were examined, and
the other authors were involved as needed, until consensus was reached ( Jarvis et al.,
2003; Pilbeam et al., 2012).

3. SCF: findings from the literature

This section is organised as follows: following a brief introduction, the articles are
discussed from the point of view of the research method in the first subsection, while
the subsequent subsections address the key topics listed in the previous section.
A table summarising the content and features of each of the 119 papers analysed is
available upon request.

3.1 Research method

The analysis presented in this paper replicates the categorisation proposed by Meixell
and Norbis (2008), in which the papers were classified according to seven research
 IJPDLM Area Category Information
46,4
Descriptive Country Country of corresponding author’s affiliation
Source Journal, conference proceedings, or book title, in which it was published
Title Complete title of the paper
Methods Methodologies Primary methodology of the paper (cf. Table II for admissible values); if a
single primary methodology cannot be identified, multiple codes may apply
352 Scope It identifies if the paper addresses the general SCF approach or a
specific solution
Themes Definition and Coded as “Core” if the article provides a definition of SCF, “Ancillary”
concept if it contributes to conceptually clarify the concept without formally
attempting to define it, “None” otherwise
Quantitative Coded as “Core” if the article presents a quantification of the benefit of
benefits SCF or SCF solutions (through analytical models, simulation or
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quantitative-based analysis of empirical data), “None” otherwise

Qualitative Coded as “Core” if the article is focused on the definition of intangible or
benefits qualitatively describe tangible benefits of SCF or single SCF solutions,
“Ancillary” if the description of the benefits is used to support the core
content of the paper, “None” otherwise
Table I. SCF projects Coded as “Core” if SCF projects are the focus of the article (e.g. case
Categories used to study), “Ancillary” if they are presented and comprehensively
extract and analyse described, but are not the core content, “None” if projects are merely
the data mentioned or are not present

methods, i.e. analytical models, conceptual models or frameworks, case studies,

interviews, surveys, simulation, and others. Please note that the total number of papers
listed in Table II does not add up to 119 as multiple methodologies were used in some
papers. Overall, about half of the articles reviewed are based on analytical models or
simulations, while the other half are almost equally split between conceptual and
empirical studies (e.g. case study, surveys).
Analytical modelling has been used with a general scope by some authors, such as
Pfohl and Gomm (2009), who modelled a generic SCF solution in order to identify the
variables driving the benefits. Similarly, Srinivasa Raghavan and Mishra (2011),
developed an analytical model to demonstrate that, under the right hypotheses, the
joint financing of a buyer-supplier dyad is more profitable than two separate financing
operations for both of the two organisations and for the lender. The analytical approach
has, of course, also been used extensively to model specific SCF solutions. In this
respect, the solution most commonly addressed is VMI. Dong and Xu (2002),
approached the solution from the supply chain perspective, and compared the benefits

Methodology Number

Analytical 57
Conceptual 30
Survey 12
Case study 13
Table II. Simulation 11
Research method Interviews 0
summary Others 9
 of the VMI solution to those that can be achieved through so-called full channel Supply chain
coordination (i.e. an ideal state in which the supply chain players concur to maximise finance
the profit of the entire supply chain). Yao and Dresner (2008), on the other hand,
compared the benefit of information sharing, continuous replenishment, and VMI in
terms of stock reduction with respect to a more traditional stock management policy.
With regard to other solutions, Palia and Sopranzetti (2004) proposed a model to assess
the benefits of a solution for the securitisation of accounts receivable (such as the factoring 353
option), while Lee and Rhee (2011) demonstrated how trade credit, used according to a
supply chain perspective, could be a valuable supply chain coordination tool.
The conceptual articles reviewed usually present general frameworks or concepts
regarding SCF, focused on defining the scope of application, the objectives, the actors
involved, or the levers that can be exploited (Camerinelli, 2009; Gomm, 2010; Hofmann,
2005; Hofmann and Belin, 2011; Pfohl and Gomm, 2009). Hofmann (2005) provided an
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analysis of the players involved in the SCF process as well as some insights about how
SCF solutions affect the way financial and supply chain processes are managed.
Although conceptual papers dealing with the SCF concept are much more prevalent
than those involving specific SCF solutions, some valuable examples of the latter were
found, e.g. Soufani (2001) addressed the role of factoring for SMEs in the UK.
With regard to empirical research methodologies, the literature reviewed highlights the
use of surveys (Borade and Bansod, 2010; Dong et al., 2007; Klapper, 2006; Soufani, 2002),
as well as statistical analyses of empirical data from previous data sets (Atanasova, 2012;
Fisman and Love, 2003; Klapper, 2006). As an example, More and Basu (2013) conducted a
survey of Indian firms, whose purpose was to identify the most important challenges in
the implementation of SCF solutions. In addition, the case study methodology has recently
been used in several articles, in a descriptive (Blackman et al., 2013; Randall and Farris,
2009) or in an exploratory manner (Wuttke et al., 2013a, b). These articles usually examine
the resulting benefits and, in some cases, present interpretative SCF frameworks. Notably,
Wuttke et al. (2013a), used case studies to develop a six-proposition framework linking the
contextual variables and the internal supply chain characteristics that most affect the
application of SCF solutions.

3.2 Concept and definitions

This section discusses the definitions of SCF presented in the papers analysed, which
are summarised in Table III. These definitions help clarify the current state of the art in
SCF and the main perspctives from which different authors have approached this topic.
In order to classify the definitions of SCF, two main factors were considered:
(a) The role of financial institutions.
(b) The scope of SCF:
• only (an evolved form of) Reverse Factoring;
• inclusive of inventory optimisation and/or inventory shifting; and
• inclusive of fixed asset financing.
Variable (a) deals with the role of financial institutions within the SCF framework.
Some articles suggest that SCF can be considered as a set of short-term solutions
provided by financial institutions, focused on accounts payable and/or receivable.
In these articles, the direct involvement of a lender, who becomes the solution provider,
is an essential component of the SCF scheme.
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46,4

354

Table III.
IJPDLM

Supply chain
finance definitions
(b.i) (b.ii) Scope:
(a) Role of Scope: inclusive of (b.iii) Scope:
financial only inventory inclusive of fixed Proposed
No. Article Definition institution RF optimisation asset financing perspective

1 Hofmann SCF is an approach for two or more organisations in a supply Yes Supply
(2005) chain, including external service providers, to jointly create chain
value through means of planning, steering, and controlling the
flow of financial resources on an inter-organisational level
2 Camerinelli SCF is the set of products and services that a financial Yes Finance
(2009) institution offers to facilitate the management of the physical
and information flows of a supply chain
3 Pfohl and SCF is the inter-company optimisation of financing as well as Yes Yes Supply
Gomm the integration of financing processes with customers, chain
(2009) suppliers, and service providers in order to increase the value of
all participating companies
4 Gomm (SCF is the process of) optimising the financial structure and the Yes Yes Supply
(2010) cash-flow within the supply chain chain
5 Chen and SCF, as an innovative financial solution, bridges the bank and Yes Finance
Hu (2011) capital-constrained firms in the supply chain, reduces the
mismatch risk of supply and demand in the financial flow, and
creates value for supply chain with capital constraints
6 Lamoureux SCF solutions represent a combination of technology solutions Yes Finance
and Evans and financial services that closely connect global value chain
(2011) anchors, suppliers, financial institutions and, frequently,
technology service providers. They are designed to improve the
effectiveness of financial supply chains by preventing
detrimental cost shifting and by improving the visibility,
availability, delivery, and cost of cash for all global value chain
participants

(continued )
 Downloaded by RMIT University Library At 03:46 21 December 2017 (PT)

(b.i) (b.ii) Scope:

(a) Role of Scope: inclusive of (b.iii) Scope:
financial only inventory inclusive of fixed Proposed
No. Article Definition institution RF optimisation asset financing perspective
7 Grosse- (SCF) is an integrated approach that provides visibility and Yes Supply
Ruyken control overall cash-related processes within a supply chaina chain
et al. (2011)
8 Wuttke We define (FSCM) as optimised planning, managing, and Yes Supply
et al. (2013a) controlling of supply chain cash flows to facilitate efficient chain
supply chain material flowsb
9 Wuttke (SCF is) an automated solution that enables buying firms to use Yes Yes Buyer
et al. (2013b) Reverse Factoring with their entire supplier base, often driven
providing flexibility and transparency of the payment processc
10 More and (SCF) can be defined as managing, planning, and controlling all Yes Finance
Basu (2013) the transaction activities and processes related to the flow of
cash among SC (supply chain) stakeholders in order to improve
their working capital
Notes: aBased on Camerinelli (2009) and Pfohl and Gomm (2009); bdefinition of financial supply chain management; cdefinition of supply chain finance
finance

Table III.
Supply chain

355
 IJPDLM Variable (b) reflects the scope of SCF covered in the selected articles. Some of these
46,4 papers not only consider SCF as a set of short-term financial solutions, but also limit the
possible financial solutions to Reverse Factoring only, assuming a specific buyer-
driven orientation (typical of Reverse Factoring).
Other papers include collaborative inventory management or inventory shifting
among supply chain players within SCF. The inclusion of inventories as well as payables
356 and receivables broadens the scope of SCF to include working capital in its entirety.
Finally, some articles further expand the scope of SCF. These, in fact, not only
consider all of the working capital components as the main target of SCF practices, but
expand the scope to include the financing of fixed assets among supply chain players
(Gomm, 2010; Hofmann, 2005; Pfohl and Gomm, 2009).
Two major perspectives emerge from the analysis of the articles that provide
definitions of SCF: the “finance oriented” (from which it is possible to identify a further
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“buyer-driven” perspective) and the “supply chain oriented” perspective (cf. Table IV).
The “finance oriented” perspective interprets SCF as a set of (innovative) short-term
financial solutions, as shown by Camerinelli (2009) and Chen and Hu (2011), who
explicitly mentioned this point in their definitions. Therefore, financial institutions
(or, more generally, lenders) are essential components in the SCF scheme. A second
important characteristic of the “finance oriented” perspective is the focus on payables
and receivables (but not on inventories). Lamoureux and Evans (2011) opine that the
events that trigger SCF solutions are the most important events in the trade process
(e.g. order acceptance, shipment, payable due date). This view is also held by More and
Basu (2013), for whom SCF is conceptually divided into three categories: pre-shipment,
in-transit, and post-shipment financing solutions. It is worth noting that, within the
“finance oriented” perspective, there is also a subset of articles that address SCF from
an even stricter perspective, which could be called the “buyer-driven” perspective.
In these articles, SCF is viewed as a set of buyer-driven financial solutions, often
modelled as an evolved form of Reverse Factoring (Seifert, 2010; Wuttke et al., 2013b).
The evolution, with respect to traditional Reverse Factoring, lies mainly in the
technological improvement of the solution that makes it possible to: provide capital to a
higher number of suppliers at a lower rate, increase transparency and flexibility, and
involve new players – such as logistics service providers (Chen and Hu, 2011; Wuttke
et al., 2013b). Although this perspective is taken into account in only a limited number
of articles, it is quite well-established among practitioners (PWC, 2009).
On the other hand, the “supply chain oriented” perspective extends the framework
of working capital optimisation to include inventories. For example, Pfohl and Gomm
(2009) tested their conceptual model in a VMI scenario, while Randall and Farris (2009)

(a) Role of
financial (b.i) Scope: (b.ii) Scope: inclusive of (b.iii) Scope: inclusive of
Perspective institution only RF inventory optimisation fixed asset financing

Financial Mandatory No No No
oriented
Buyer- Mandatory Yes No No
Table IV. driven
The SCF Supply Non-mandatory No Yes Sometimes
perspectives chain
identified oriented
 analysed the benefits achieved through a generic shifting of inventory between two Supply chain
supply chain players. In the latter case, a descriptive case study highlights how all of finance
the different components of the cash-to-cash (C2c) cycle can be managed in a
collaborative way by the supply chain players involved (e.g.: shifting inventories from
a supplier to a customer). Notably, the described benefits might be achieved in the
absence of a specific financial solution provided by a lender, which, in fact, is often
ancillary. As a general trend, the articles that take this perspective tend to provide 357
holistic analyses of the SCF approach, without describing any specific solutions or
practices. A second characteristic of some of the papers that assume the “supply chain
oriented” perspective regards the object of the financing. Pfohl and Gomm (2009),
and Gomm (2010), specifically state that SCF also applies to fixed asset financing
(e.g.: through a pay per production solution). This is also confirmed by Hofmann (2005),
who illustrates, as an example of an SCF operation, a joint investment in a fixed asset
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by two organisations that are part of the same supply chain.

3.3 Expected benefits

From a strictly financial point of view, the benefits of SCF solutions derive mostly from
the exploitation of differences in the cost of capital between different players in the
supply chain (Lamoureux and Evans, 2011). This is a well-known fact, which was
identified even in early contributions on specific SCF models (such as Reverse
Factoring), published well before the 2000s, already underline it (Brennan et al., 1988).
Player “A”, whose cost of capital is kA, might exploit the cost of capital kB (kB o kA) of
player “B” in order to lower its capital rate (Pfohl and Gomm, 2009; Randall and
Farris II, 2009). However, this is not the only source of benefit and, in order to better
conceptualise the value derived from a SCF programme, two additional factors
should be taken into account: the duration and volume of the financing required.
This three-dimensional framework is known as the “Supply Chain Finance cube”, and
was proposed by Pfohl and Gomm (2009) and Gomm (2010). The different SCF
solutions affect one or more of the three axes that define the cube. For example, a VMI
programme directly affects the volume of capital needed, decreasing inventories
through improved accuracy (Dong et al., 2007; Sari, 2007); an invoice discounting
solution directly affects the duration of the financing, decreasing the C2c cycle for the
supplier and/or the buyer involved in the transaction (Farris and Hutchison, 2002;
Grosse-Ruyken et al., 2011); a Reverse Factoring solution, or in general a programme
that combines the shortening of the C2c cycle with the exploitation of the leading
player’s risk rating, affects both the duration and the rate axes (Wuttke et al., 2013a).
The benefits of SCF solutions, however, are not limited to financial performance.
Supply chain visibility is of paramount importance as well (Caridi et al., 2010).
Large companies (such as player “B” in the previous example) might be interested
in promoting SCF solutions in order to lower the cost of gathering certain information
(e.g. customer demand), which is too costly or even impossible to gather otherwise
(Pfohl and Gomm, 2009), thus increasing its total sales or reducing its costs.
Another very important source of benefit for large supply chain players is the
reduced risk of bankruptcy throughout the supply chain. This kind of benefit is typical
of factoring and Reverse Factoring solutions. Specifically, Klapper (2006) points out
that factoring (and, moreover, Reverse Factoring) may allow high-risk suppliers to
mitigate their credit risk level with that of their high-quality buyers, thus reducing their
cost of debt and increasing their level of access to liquidity. The Reverse Factoring
solution could provide additional benefits related to the reduced need for information:
 IJPDLM collecting credit information for selected high-quality buyers is – generally speaking –
46,4 easier and reduces the risk of the financial operation, with a further decrease in cost of
debt and access to liquidity for high-risk suppliers (Berger and Udell, 2006; Klapper,
2006; Tanrisever et al., 2012).
Several papers approach the analysis of SCF benefits from the point of view of the
C2c cycle, which is also typically a key performance indicator for the management of
358 the entire supply chain (Farris and Hutchison, 2002). The C2c cycle can be defined as
“the average days required to turn a dollar invested in raw materials into a dollar
collected from a customer” (Stewart, 1995) and it consists of three components: days of
sales outstanding (accounts receivable collection period) plus days of inventory held
(considering both work-in-progress and finished products) minus days of payable
outstanding (accounts payable settlement period). As an example, Luo and Zhang
(2012) studied the benefits of coordinating the supply chain through trade credit
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(i.e. operating on the accounts receivable collection period). Their results show that
managing trade credit periods might be a source of substantial benefits for the supply
chain. For example, a low-risk buyer can use trade credit to financially sustain a
start-up supplier, to mutual benefit. However, the authors also demonstrated that such
benefits depend on the information available throughout the chain: asymmetric
information among the parties involved may lead to suboptimal solutions. Along the
same line of reasoning, Hofmann and Kotzab (2010) showed how a collaborative
approach (or, as it is called, a supply chain-oriented approach) to C2c management
leads to optimal solutions, whereas aggressive behaviour (i.e. pressure to shorten
receivable collection and extend payable settlement times through the supply chain)
might negatively affect the value of the organisations involved. Such conceptual
insights also find support among practitioners, as some organisations have adopted the
role of liquidity providers, accepting an increase in their C2c cycle, providing an
alternative means of financing to supply chain partners in distress. The positive effects
of an SCF approach to C2c cycle management are also confirmed by Lamoureux and
Evans (2011), and by Randall and Farris II (2009).
Other articles highlight the benefits associated with the involvement of financial
institutions in SCF programs. In some solutions, such as factoring or those focused on
securitising assets receivable, financial institutions usually carry the burden of collecting
payments, in exchange for an increase in revenues (Palia and Sopranzetti, 2004;
Tanrisever et al., 2012). Moreover, financial institutions can improve their risk-assessment
process, especially regarding SMEs. This assessment is often characterised by high levels
of uncertainty due to asymmetric information, and constitutes a source of major concern
for financial institutions (Deakins and Hussain, 1994). The SCF approach might increase
the availability and accuracy of information, thus supporting financial institutions in
estimating a default probability tailored to the specific SMEs (Hofmann, 2005).
Finally, some articles state that supply chain links are strengthened through
enhanced collaboration, visibility, or automation that a SCF solution might entail
(Hofmann and Belin, 2011; Lamoureux and Evans, 2011).

3.4 SCF projects

Several papers describe existing SCF initiatives (Blackman et al., 2013; More
and Basu, 2013; Templar et al., 2012; Wuttke et al., 2013a, b). Overall, these articles
can be categorised into two classes, based on their purpose. Some of them are
descriptive in nature, and present one or more cases of interest, highlighting
significant aspects; others are exploratory and present a set of propositions related
 to SCF about the adoption process, the outcome of the SCF programme or the role of Supply chain
inter- or intra-company collaboration. finance
3.4.1 Descriptive. The purpose of these articles is usually to highlight successful
examples of SCF programs or practices. The paper can have a single- or multi-case
focus. The papers analysed present the descriptive case studies either as the main
contribution to the paper, or to support insights gathered conceptually.
An example of the first type, with a single-case focus, is the analysis of the Motorola 359
financial supply chain management strategy, described by Blackman et al. (2013).
The authors highlight how the introduction of a collaborative approach to managing
the financial flows within the supply chain generates cost savings for all of the
companies involved.
An example of the multi-case type is presented by John Mathis and Cavinato (2010), in
which the Zara and Toyota financial supply chain strategies are described in order to
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demonstrate that collaboration between the finance and supply chain functions is
paramount for an effective financial supply chain management strategy. A second
example is represented by Nienhuis et al. (2013), who analysed the opportunities presented
by SCF in terms of real-time financing of SMEs. They discussed two descriptive case
studies focused on innovative SCF services, which support the conclusion that e-invoicing
service providers and financial institutions are moving towards real-time financing.
A further example is represented by Silvestro and Lustrato (2014), who analysed the role
of banks in the integration of financial and physical flows, and supported their conceptual
conclusions with two in-depth case studies.
3.4.2 Exploratory. The purpose of these articles is to develop, from multiple SCF
initiatives, a series of propositions regarding contextual and/or internal variables that
might affect the adoption process and/or the benefits of different SCF solutions. As an
example, Wuttke et al. (2013b), who adopted a multi-case methodology, identified
patterns related to contextual and internal variables affecting the adoption process and
the outcomes of the different SCF solutions. They developed a five-proposition
framework with the objective of supporting managerial decisions related to the
implementation of SCF programs. Similarly, Wuttke et al. (2013a) used a number of case
studies to develop four propositions involving the adoption process. Specifically, the
authors addressed why companies take different approaches to SCF, and the role of
suppliers in the adoption of SCF solutions.
Another analysis that is based on exploratory case studies is provided by Templar et al.
(2012). The authors collected empirical evidence from different industries for the purpose of
analysing motivations, strategies, enablers, and inhibitors of different SCF applications.
The paper provides a twofold contribution: the authors highlight how SCF impacts on both
the supply chain and the financial performance of the companies involved, and they also
point out the current level of immaturity of SCF practices in business, and the existing gap
between SCF theory and practice which does, however, seem to be decreasing.

4. Gaps and directions for future research

Four main gaps have been identified in the literature reviewed. Consequently,
recommendations for future research have been provided to fill in these gaps.

4.1 No general theory of SCF

The most important gap in the current SCF literature is the lack of a general “theory
of SCF”. This seems to be the cause of the disparity between SCF theory and practice,
 IJPDLM which has previously been noted by Templar et al. (2012). This is hardly surprising.
46,4 On the one hand, SCF is a complex and relatively new concept, but on the other hand,
the division of this topic into two different perpsectives has led to the publication
of diconnected ideas, which has had a negative impact on the usefulness of the
results. The research on this topic should therefore move from a conceptual
determination of the validity and importance of SCF (which has been achieved) on to
360 addressing and generalising the building blocks of this approach (e.g. schemes and
solutions, issues, enablers), starting with a comprehensive definition of those
practical instruments or solutions that make up the SCF landscape. A better general
theory of SCF can be developed if it is based on a solid foundation of broadly
applicable SCF building blocks. The reviewed literature is not devoid of attempts
to develop generalised visions of SCF that have been found among both the
“finance oriented” perspective (More and Basu, 2013) and the “supply chain oriented”
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perspective papers (Wuttke et al., 2013a). However, they are relatively scarce and the
ideas presented have not been fully developed, since they usually address just a
few practices without providing a holistic framework. Moreover, they still fail to
bridge the two main perspectives, producing efforts and publications that are not
fully coherent among each other.
Further research works should focus on providing a comprehensive classification of
SCF solutions that takes into consideration the key features of SCF practices and takes
a more practical view of the SCF concept. These definitions will be the building blocks
for the creation of a general SCF theory following a theory generation process similar to
the one observed within the field of supply chain management (Carter et al., 2015;
Cooper et al., 1997; Croxton et al., 2001).

4.2 Weak empirical-based holistic analyses on the application of SCF

Although analyses of specific SCF solutions (e.g. factoring, trade credit, and
VMI, Claassen et al., 2008; Klapper and Randall, 2011; Klapper, 2006) based on
empirical data have been found in the literature, there is a lack of empirical
analyses addressing SCF from a more holistic point of view (e.g. state of the
art/adoption level of the different SCF solutions). Empirical analyses might prove
useful for testing existing models and hypotheses, as highlighted by Pfohl and
Gomm (2009), as well as providing data for an assessment of the diffusion of the
SCF approach and of its different applications, which is still unclear. The existing
empirical studies do not fully satisfy this need. Among the most significant
empirical studies, More and Basu (2013) based their work on a survey, which
was limited to financial solutions – a limitation shared also by Wuttke et al. (2013a) –
and, geographically, to Indian firms only. Wuttke et al. (2013b), considered a
more comprehensive set of practices (such as evolved forms of Reverse
Factoring, inventory financing, and financing based on letters of credit), but
limited the study to the application of SCF solutions focused on the upstream side
of the supply chain.
Further research should address more innovative schemes and solutions (such as
Dynamic Discounting, or evolved forms of Reverse Factoring) and also tackle the
application of SCF solutions that focus on the downstream side of the supply chain, as
these have received less attention, especially from the empirical point of view. Future
research should also focus on analysing the adoption level and the state of the art of the
different solutions. Finally, empirical studies should be employed to test hypotheses
and the models developed.
 4.3 Few assessment models consider the impact of SCF programs on supply chain Supply chain
financial performance finance
Although the link between the SCF concept and a financially sustainable supply chain has
already been addressed (Templar et al., 2012), there is a general lack of research on the
effects of SCF solutions on the financial performance of the entire supply chain (i.e. with
supply chain set-ups that are more complex than the single buyer-supplier dyad).
The literature on the “finance oriented” perspective includes a series of SCF 361
solutions that have been recognised to have a positive effect on the financial
performance of the supply chain players, although further research is still needed to
better assess some of the more innovative solutions (e.g. Dynamic Discounting and
evolved form of Reverse Factoring). One example is the Reverse Factoring solution,
which positively influences the financial performance of the supply base involved
(Klapper, 2006). However, quantitative assessments of the benefits achievable through
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Reverse Factoring solutions are still rare and are based on the single buyer-supplier set
up (e.g. Tanrisever et al., 2012). A second example is the management of trade credit,
which has been considered by a number of authors who focused on the impact on the
financial variables – such as the cost of capital – of the supply chain players involved.
Although the management of trade credit has been addressed for a range of scenarios,
which generally involve typical supply chain or logistics decisions (e.g. joint inventory
policies and trade credit decisions, trade credit for the supply chain coordination),
non-dyadic supply chain set-ups have scarcely been addressed and have been
identified as an area for future research (Seifert, 2010).
With regard to the SCF “supply chain oriented” perspective, joint inventory
management policies have been extensively analysed, even in complex networks, over a
long period of time (Clark and Scarf, 1960). Specific “supply chain oriented” SCF solutions
(e.g. VMI) involving complex, non-dyadic supply chain set-ups have also been studied
(Darwish and Odah, 2010; Mangiaracina et al., 2012). However, the impacts on the financial
performance of the supply chain have rarely been addressed. A rare example is Xu et al.
(2010), who analysed how VMI might reduce the probability of bankruptcy among supply
chain players. The contributions that do consider financial performance are rudimentary
and this topic could be further studied and developed in greater detail.
Future research should extend the focus of the assessment models either to include
more complex supply chain set-ups (especially for solutions of a more financial nature),
or to conduct a more comprehensive analysis of the impact on financial performance
(especially with respect to solutions of a more supply chain management nature).

4.4 Lack of tools for choosing SCF solutions for different supply chains and objectives
This review highlights a lack of practical guidance and tools to help managers identify the
SCF solution that best suits their needs. This area has generally been neglected in the
literature. Although some managerial implications have been identified, especially
through empirically based research such as that presented by Wuttke et al. (2013a, b),
no significant steps have been taken to develop such tools. These tools should be based
upon an understanding of the benefits and drawbacks of the different SCF solutions, and
at the same time upon the connection between the features of a supply chain and the
different SCF solutions. As pointed out by Wuttke et al. (2013b), such variables
(e.g. captivity, strategic importance, complexity of the market) have, in fact, an overriding
effect on the effective application of different SCF solutions. As an example, a supply base
consisting of SMEs responds in a different way to different SCF solutions than does a
supply base made up of large companies, even if their financial performance is similar.
 IJPDLM 5. Conclusions
46,4 In this paper, 119 research contributions on the topic of SCF, mainly published between
2000 and 2014, were examined. The papers were analysed using a two-pronged
approach – i.e. analysis of the research method(s) adopted and of the specific contents.
The contribution of this paper is twofold. First, it presents a structured review that
provides a guide to both researchers and practitioners on the subject of SCF,
362 highlighting the main perspectives that researchers have taken on this topic, the most
important achievable benefits, and the methodologies used to conduct the studies.
Second, it identifies some research issues for future investigation.
In general, the literature review has shown that the topic of SCF has been addressed
from two main perspectives. The “finance oriented” perspective is focused on
short-term financial solutions, provided by financial institutions, which involve
accounts payable and receivable. An even more restrictive perspective, the so-called
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buyer-driven perspective, focuses only on evolved forms of Reverse Factoring.

The “supply chain oriented” perspective, instead, is more broadly focused on working
capital optimisation (in terms of accounts payable, receivable, and inventories) and
potentially even on fixed asset financing. It may or may not include financial
institutions, as it also comprises solutions that optimise working capital among the
supply chain members. With regard to the benefits of SCF, the literature review has
shown that tangible benefits can be found in the reduction of volume, rate, or duration
of the financing, whereas intangible benefits can be achieved by exploiting the value of
information and the strength of the supply chain links. In terms of methodology, the
review shows that studies focusing on the general scope of SCF are mainly conceptual,
whereas those focusing on specific solutions use analytical modelling and simulation.
The analysis revealed several gaps in the extant literature that indicate directions
for future research in the area of SCF. First, it shows that there is a need for the
development of a “general theory of SCF”. Second, the empirical results on the
application of many SCF solutions are weak. Third, there is lack of analysis focused on
the link between SCF and supply chain financial performance. Finally, there are too few
practical instruments available to support managerial decisions in the field.
This study has one potential limitation. While considerable effort was made to
ensure that the review would be all-inclusive, it is possible that some relevant research
studies may have inadvertently been omitted. However, the authors believe that this
review is an accurate representation of the body of research on SCF published during
the specific time frame.

Note
1. Gov.uk. “Prime Minister announces Supply Chain Finance scheme - news stories - GOV.UK”
2012. www.gov.uk/government/news/prime-minister-announces-supply-chain-finance-
scheme (accessed 3 February 2014).

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About the authors

Luca Mattia Gelsomino is a PhD Candidate at the Politecnico di Milano, in the Department of
Management, Economics and Industrial Engineering, where he gives lectures on logistics and
supply chain management. He is a Researcher of the Supply Chain Finance Observatory of the
Politecnico di Milano School of Management. His current research interest includes the topic of
SCF, as well as the design and financial assessment of supply chains. Luca Mattia Gelsomino is
the corresponding author and can be contacted at: [email protected]
Riccardo Mangiaracina, PhD, is an Assistant Professor at the Politecnico di Milano, where he
holds the chairs of Production Plants and Mechanical Plants and where he gives lectures on
logistics and supply chain management. He gained his PhD at the Politecnico di Milano,
Department of Management, Economics and Industrial Engineering in 2007. He is a Member of
the MIP’s faculty and he is the Research Director of the B2C eCommerce Observatory of the
Politecnico di Milano School of Management. His current research interests include logistic
networks design, supply chain planning, B2C eCommerce, and SCF.
Alessandro Perego is a Full Professor of Logistics and Supply Chain Management at the
Politecnico di Milano, where he chairs the course of logistics and production systems
management and logistics management. During his career he chaired also the courses
eOperations and industrial logistics. He is the Co-Founder and Member of the Scientific Board of
the Observatories Digital Innovation of the Politecnico di Milano School of Management, as well
as the responsible of the observatories on supply chain finance, contract logistics, digital agenda,
eBusiness B2b, eCommerce B2c, electronic invoicing and dematerialization, Internet of Things,
intelligent transportation systems, mobile payment and commerce, and mobile wireless and
business. He is also the Director of the IoT Lab of the Politecnico di Milano.
Angela Tumino, PhD, is an Assistant Professor at the Department of Management,
Economics and Industrial Engineering of the Politecnico di Milano, where she holds the Chair of
Logistics and Production Systems Management. She is the Research Director of the Internet of
Things Observatory of the Politecnico di Milano School of Management. Her main research
themes include RFId, Internet of Things, logistics, supply chain management, visibility and
information sharing, value assessment, and SCF.

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