Big business mining big data to squeeze suppliers put on notice
The ASBFEO has warned big businesses using supply chain finance products that mine big data to manipulate small business suppliers that this practice is being examined closely as part of its review into the matter.
On 30 October 2019, the Australian Small Business and Family Enterprise Ombudsman announced a review into the impact of supply chain financing on the small business and family enterprise sector.
Aside from exploring ways in which small and family businesses use supply chain finance as a means to better manage their cash flow, the ASBFEO is also looking at supply chain finance offerings being used by larger businesses to offset extended payment times.
“Recent reports of big businesses using supply chain finance platforms that use artificial intelligence to calculate the discount a supplier may be willing to accept are disturbing,” Kate Carnell said.
“These types of reverse factoring products that vary based on how desperate the supplier is, are being closely looked at as part of our ongoing Supply Chain Financing Review.
“Small businesses have raised their concerns with my office about the use of artificial intelligence and big data to determine and target discounts.”
She opined that “it’s clearly not OK for big businesses to use their dominant position and access to technology to further squeeze small business margins”.
While noting that supply chain finance can be a legitimate and effective tool to free up cash flow for small and family businesses, Ms Carnell said that it should never be a replacement for reasonable payment terms being offered.
“It is imperative small businesses are paid on time. We know that late payments equate to a $7 billion drag on the economy.”
Since the review was launched, the ASBFEO has held a wide-ranging consultation process with large businesses, small businesses and supply chain finance providers.
Small businesses and family enterprises who have had experience with supply chain financing can still contribute to the Ombudsman’s review via [email protected].
An interim report is expected to be released by the Ombudsman in March, followed by a full report by the end of April.