Client Name

National Foods Limited

Faculty Advisor

Dr. Mujeeb U Rehman Bhayo

SBS Thought Leadership Areas

Investment Decision Making

SBS Thought Leadership Area Justification

Our project examines the readiness of the Pakistani market for the adoption of Supply Chain Finance (SCF), a financing solution that improves working capital management for suppliers and buyers. The study aligns with the Investment Decision Making thought leadership area because it explores the factors influencing financial institutions and businesses in deciding whether to adopt and invest in SCF solutions. To support our analysis, we conducted interviews with suppliers associated with National Foods and representatives from a bank to understand market awareness, challenges, opportunities, and willingness to participate in SCF programs. The findings provide insights into how businesses and financial institutions evaluate financing alternatives and make strategic financial decisions that can improve supply chain efficiency and access to funding.

Aligned SDGs

GOAL 8: Decent Work and Economic Growth

Aligned SDGs Justification

This project aligns with SDG 8 (Decent Work and Economic Growth) because it explores how Supply Chain Finance can improve access to working capital for suppliers and businesses. By providing suppliers with quicker and potentially lower-cost financing, SCF can strengthen cash flow management, support business growth, and enhance the overall efficiency of supply chains. Through interviews with suppliers and banking professionals, the project examines the potential of SCF to contribute to a more sustainable and financially inclusive business environment in Pakistan.

NDA

No

Abstract

This report aims to assess the possibility of introducing a Supply Chain Finance (SCF) program for National Foods Limited, emphasizing the awareness among suppliers, their readiness to participate, the dynamics of payments, financial constraints, and the appropriateness of reverse factoring. The study was undertaken as a mixed research practice with both secondary research of SCF models and emerging market adoption as well as primary research through key suppliers from National Foods' supplier ecosystem being interviewed.

The secondary research reveals that SCF is most applicable in supply chains involving large financially sound customers and suppliers with delayed or uncertain payment periods and/or running a financial constraint. This is particularly the case for FMCG supply chains, which are characterized by their high working capital requirements and short transaction frequency, and frequent supplier relationships. Taking into account the options in the SCF instruments, reverse factoring is the most suitable model for National Foods, as it allows the supplier to receive the payment before the invoice is approved, and the buyer can manage the payment terms efficiently.

The main research validates the relevance of SCF overall and also reveals that readiness by suppliers is not equal. Kompass seems to be the strongest contender as an early pilot as it has explicit interest in reverse factoring (if cost savings can be proven), strong financing exposure and greater familiarity with bank-led instruments. Others, such as Printech, Packages and Cherat, are at different levels of awareness and interest. They are willing to get involved depending on the cost of financing, trust in the programme, ease of joining and the reputation of the financing organization.

The key takeaway is not to embark on a wholesale rollout right away but rather take National Foods' time to carefully consider each rollout location. It would be dangerous to undertake the broad rollout because the awareness of suppliers, documentation, financing requirements, and digital readiness differ between suppliers. Rather, National Foods should start with a pilot project with a limited number of high-readiness suppliers and a trusted commercial bank. Before any wider rollout is suggested, the pilot should assess supplier participation, time to onboard, savings in financing costs, speed in payment cycles and supplier satisfaction.

The report finds that the overall conclusion of the strategic promise and conditional feasibility of SCF for National Foods is positive. When done in a graduated manner, with the bank as the middleman and the supplier as the segment, reverse factoring can enhance relationships with suppliers, enhance working capital efficiency and create a more resilient supply chain. But successful implementation of the program will rely on careful implementation, openness in pricing, trustworthy invoicing process and training the suppliers.

Document Type

Restricted Access

Document Name for Citation

Experiential Learning Project

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