Supplier financing - new initiatives required?
DEVELOPMENT costs at suppliers still appear to be accelerating. R&D costs, typically amounting to 5-7% of sales, reflect growing demands on suppliers from OEMs for more product development input. As a result, a growing debate has flourished centred on the question of how to finance mushrooming project-related development costs. The OEM stance appears to rest on the tenet that development financing should be indivisible from responsibility for the project itself. The result is closer involvement in the financing process which, taken towards an extreme, involves amortisation of investment costs over actual output volumes and no up-front payments. This process inevitably ups the risk profile of any given development project for a supplier. The smaller the supplier, the higher the risk. SupplierBusiness.com reports.
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