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The "Supply Chain Finance" Myth: Why Retailers Really Need Capital | Fred Njogu
Most banks and fintechs misunderstand the problem at the last mile. They build "Supply Chain Finance" to fund invoices, assuming the sale has happened. But Fred Njogu explains that the real problem is the lost sale: the customer is at the counter, the demand is real, but the shopkeeper didn't have the cash that morning to stock the product.
The Story: Fred Njogu, COO of Correlaction, is a "reformed engineer" who spent years optimizing distribution for Coca-Cola and Unilever. In this episode, he deconstructs why traditional banking models fail informal retailers and why the solution isn't lending, it's "smoothing the order-to-cash cycle."
The Deep Dive: This conversation corrects a fundamental category error. Fred explains that manufacturers (Anchors) don't have a supply chain problem, their distribution is highly organized. The issue is the "Cash Trap" at the retailer level. He details how Correlaction uses data to help merchants "buy what they can sell, not just what they can afford," effectively financing the inventory gap to prevent stockouts.
In This Episode, You Will Hear:
The "Supply Chain Finance" Misconception: Why the gap isn't about financing the supply chain, but solving the working capital constraint that causes stockouts.
The "Look in the Drawer" Moment: The decision-making process of a retailer who has 5,000 shillings but needs 7,000 worth of stock.
Order-to-Cash Smoothing: How to design a product that allows retailers to fulfill actual market demand rather than their limited cash capacity.
Unit Economics of the Last Mile: Why a $2 order cannot be delivered by a truck, and the specific math of distribution costs.
Why Credit Cards Failed: A lesson on why 16-digit cards and 30-minute till processes destroy sales in a high-velocity environment.
Monetizing "Idle Assets": Using historical purchase data as "goodwill" to underwrite risk without physical collateral.
The "Fragmentation" Trap: Why African markets fragment rather than consolidate, and the economic incentives behind it.
Active vs. Passive Distribution: The difference between a wholesaler "sitting on a high chair" and a distributor who controls the outlet.
Key Quote:
"The demand is there, and because... you don't have enough working capital, you end up losing the opportunities... It's not really a supply chain finance issue. It's more of a working capital... You can buy what you can sell tomorrow, not buy what you can afford today."
Connect with Us:
Samora Kariuki (Host): https://www.linkedin.com/in/samorakariuki/
Fred Njogu (Guest): https://www.linkedin.com/in/frednjogu/
Frontier Fintech: www.frontierfintech.substack.com
View all episodes
By Frontier FintechMost banks and fintechs misunderstand the problem at the last mile. They build "Supply Chain Finance" to fund invoices, assuming the sale has happened. But Fred Njogu explains that the real problem is the lost sale: the customer is at the counter, the demand is real, but the shopkeeper didn't have the cash that morning to stock the product.
The Story: Fred Njogu, COO of Correlaction, is a "reformed engineer" who spent years optimizing distribution for Coca-Cola and Unilever. In this episode, he deconstructs why traditional banking models fail informal retailers and why the solution isn't lending, it's "smoothing the order-to-cash cycle."
The Deep Dive: This conversation corrects a fundamental category error. Fred explains that manufacturers (Anchors) don't have a supply chain problem, their distribution is highly organized. The issue is the "Cash Trap" at the retailer level. He details how Correlaction uses data to help merchants "buy what they can sell, not just what they can afford," effectively financing the inventory gap to prevent stockouts.
In This Episode, You Will Hear:
The "Supply Chain Finance" Misconception: Why the gap isn't about financing the supply chain, but solving the working capital constraint that causes stockouts.
The "Look in the Drawer" Moment: The decision-making process of a retailer who has 5,000 shillings but needs 7,000 worth of stock.
Order-to-Cash Smoothing: How to design a product that allows retailers to fulfill actual market demand rather than their limited cash capacity.
Unit Economics of the Last Mile: Why a $2 order cannot be delivered by a truck, and the specific math of distribution costs.
Why Credit Cards Failed: A lesson on why 16-digit cards and 30-minute till processes destroy sales in a high-velocity environment.
Monetizing "Idle Assets": Using historical purchase data as "goodwill" to underwrite risk without physical collateral.
The "Fragmentation" Trap: Why African markets fragment rather than consolidate, and the economic incentives behind it.
Active vs. Passive Distribution: The difference between a wholesaler "sitting on a high chair" and a distributor who controls the outlet.
Key Quote:
"The demand is there, and because... you don't have enough working capital, you end up losing the opportunities... It's not really a supply chain finance issue. It's more of a working capital... You can buy what you can sell tomorrow, not buy what you can afford today."
Connect with Us:
Samora Kariuki (Host): https://www.linkedin.com/in/samorakariuki/
Fred Njogu (Guest): https://www.linkedin.com/in/frednjogu/
Frontier Fintech: www.frontierfintech.substack.com