Some interesting research would have hit the desks of procurement professionals earlier this week. A study, published by consultancy firm Demica, suggests that Procurement heads are going to have develop closer relationships with CFOs, if, as looks likely, supply chain finance becomes ever more popular over the next 12 months.

Demica’s research ‘Steady Supply: The growing role of Supply Chain Finance in Europe’, found that nearly three-quarters of large corporates are looking to extend payment terms with their suppliers in 2007 and that, increasingly, buyers are looking to Supply Chain Finance solutions to extend payment terms without affecting supplier cash flow.

Their findings come after a recent study by the Aberdeen Group claimed that many companies are ill-prepared to deal with supply chain problems. Their survey of 150 companies, carried out in Spring 2006, found that while 82% of respondents said they were concerned about the resiliency of their supply chain, only 11% are actively managing this risk.

So is the booming mark et in supply chain finance, particularly in Scandinavia , the answer to these issues?

Phillip Kerle, the CEO of Demica, certainly thinks so. “Although corporate buyers are still seeking extended payment terms, there is the growing realisation that they cannot simply squeeze suppliers to achieve this,” he says.

“It seems that ‘supply chain finance’ is now recognised by corporates and their relationship banks as the most important tool for freeing up working capital currently trapped in the process. Whilst the US is undoubtedly ahead of Europe in its awareness and use of SCF techniques, demand is growing strongly in Europe , with the Nordic countries appearing to be the most enthusiastic early adopters.”

The Demica study does, however, suggest that Heads of Procurement do not feel completely comfortable investigating Supply Chain Finance, and says that greater co-ordination is needed between Procurement heads and CFOs.

The study concludes: “…close collaboration between these two business areas – supply chain management and financial management – will be necessary to enable successful implementation of a Supply Chain Finance programme and its continued effective operation.”

With that in mind, and with Supply Chain Finance demand likely to grow strongly in 2007, challenging times lie ahead.