Transcription
Supply Chain FinancingDale S. Rogers, Ph.D.W. P. Carey School of BusinessArizona State UniversityJanuary 25, 2017We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.1
Main Ideas Procurement Organizations need to bebetter educated on SCF Supplier Development with SCF How SCF programs work– Funding Amount of variability in the Fintechs Accounting Treatment (Alcoa Case)We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Supply Chain FlowsProductFlowFinancialFlowWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.InformationFlow
Supply Chain Finance is:1. Using the supply chain to fund theorganization, and2. Using the organization to fund the supplychain.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Supply Chain FinancingFund the GrowthWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Fund the Growth Firms are looking to an efficient andeffective supply chain to fund thegrowth of the company. Companies cannot only be dependent onrevenues and financial management togrow profit.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.6
Sources of Operating Capital:An ExamplePricingFunctionalSavingsSupply ChainSavingsWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.SKURationalizationMixManagement
Reasons for Increases In CashHoldingsInventorieshave fallenR&Dexpenditureshaveincreased.Cash flowrisk for firmshasincreasedCapitalexpenditureshave fallenWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Supply Chain Finance(Reverse Factoring)Pays in 90daysBank3PL sells accountsreceivable to bankand receivespayment in lessthan 30 daysManufacturerUsesManufacturer’scredit ratingTransportationProvider(Carrier)Pays in 30days3PLPaysImmediatelyWe empower supply chain professionals with profounddiscovery,powerful connection, and clear foresight.Customer
TimelineBank pays the3PL3PL pays theTransportationCarrier0 days30 daysManufacturerpays the Bank60 daysWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.90 days
Supply Chain FinanceUsesManufacturercredit ratingAgrees toSCFArrangementAggregatorSupplier canchoose to receivepayment as early as2 days after theinvoice has beenapproved.SupplierSubmitsinvoice toAggregatorManufacturerOr wait 90We empower supply chain professionals with profound discovery,powerful connection, and clear daysforesight.Bundle of Manufacturerreceivables as DTC notesBank 1Bank 2Bank 3
TimelineAggregatorsendsmoney tobank(s)DeliveryofProductproduct receivedInvoice senttoManufacturerday 0AggregatorsendsAggregatorInvoice sells notes money tosupplierapproved to bank(s)day 8day xday 10We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Manufacturer sendsmoney toAggregatorday 90
List of Largest Banks Participating in SCFWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Fintech FirmsFirmAribaBaswareSpecializationSupply ChainFinancing sUnit of SAP, that is providing acomplete procure-to-paycapabilityFirmPrimeRevenueA Finnish software companyselling enterprise software forfinancial processes, purchase topay and financial management.C2FOExchangeSimilar concept to Priceline onlybased Dynamic for early payment of receivables.Discounting/ear Target market is SME firms.ly payment.GT Nexus / Supply chainMerged with TradeCard, anotherTauliaInforcollaborationprovider of Supply Chain Financeplatform withsolutions. And it was recentlysome CFacquired by Infor, a provider offunctionality.cloud-based software forbusinesses.TexturaOrbianSupply Chain Early Fintech company thatFinancingstarted originally as a JVbetween SAP and Citibank. Theyfinance the purchases of theTraxreceivables with financialpartners underwithClearstream,We empower supply chain professionalsprofound discovery,Euroclear,andDTCnotepowerful connection, and clear foresight.issuances under no-purchaseSpecializationSupply ChainFinancing andDynamicDiscountingCommentsTechnology platform that iswidely considered to be the mostrobust. Their software can helpanalyze firm spend and provide astrategy to optimize paymentterms based on multiplebenchmarks and suppliercharacteristics. Technologyincludes payment termsoptimization. Also, in addition toSCF can help firms do dynamicdiscounting.Supply Chain A procure-to-pay platform that isFinancing and independent of ERP softwareDynamicfirms or banks. They are able toDiscountingprovide flexible options for buyersand sellers.Supply Chain Concentrates on the constructionFinancingindustry. Value proposition forgeneral contractor is higherquality process.LogisticsReceives, standardizes,transaction risk normalizes, and corrects logisticsmanagement data, and general invoice riskand datadata. They are able to providerefining.an agreed upon risk score for
SCF FundersNameAdvance GlobalCapitalApex PeakSpecialtyFunding SMEs in the emerging marketsthroughout the worldFunding for SMEs throughout Singaporeand in South AfricaGreensill Capital Principal investor group specializing instructured trade finance, working capitaloptimization, specialty financing andcontract monetizationGemCorpCountriesUKSingaporeAustralia, UK,and USInvestment Fund focused on emergingUKmarkets in Africa, Asia, and Europeacross sectors and asset classesPropelProvides Working Capital Solutions, such South Africaas Supplier Finance and Receivablesfinance to firms in African countriesTower TradeSupply Chain Finance and IT services for SwitzerlandGroupcompanies in Ireland, South Africa, Spain,Switzerland, UK, and the USWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Dynamic Discounting Offering of early payment discounts on approvedinvoices awaiting payment. Buyers have option of choosing an APR Supplier invoices discounted based on a slidingscale derived from the number of days supplier ispaid early. Types:– Early Payments– Extended Discount Term– Dynamic Payment Terms (ASAP)We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
HOW DOES IT FIT WITH OTHER EARLY PAY PROGRAMS?THEY COMPLEMENT EACH OTHER PERFECTLYSPEND LEVELSBuyer push SCF 50M Buyer extends DPOAccounts Payable Value C2FO everything in between P-Cards less than 1MSupplier pullBuyer generates profitSCFCardsC2FOSupplier SizeLargerWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Smaller
TOGETHER THEY HELP ADDRESS ALL PARTS OF THE SUPPLY CHAINAND MAJORITY OF VALUE OPPORTUNITY IS IN MIDSECTION OF SPENDTypical spend distribution of Fortune 500 companySpendValueAPRCapital CostAPRSPEND M X070% 3560% 3050% 2540% 2030% 1520% 1010% 5 00%LargestSupplier250SCF5007501,0001,250C2FOWe empower supply chain professionals with profound discovery,powerful connection, and clear c e: Bavelos Group, 2015
E-PayablesPCardEPayablesVirtualCardWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.GhostCard
E-Payables – P-CardsBuying FirmChief Purchasing OfficerSupplier FirmRetailCommercialTie CardsCo-BrandingFraudSecurityRebatesBankCard IssuerProcessorMasterCardVisaWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Bank
SCF vs. E-Payables SCF brings CPO and CFO together. Thetension used to be on CPO focusing onprice and CFO on working cap. SCF for core suppliers, large volume ofmoney, frequent transactions. P-card (or virtual card) more for lots ofSME suppliers.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
SupplierPay PledgeWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
WorkingCapitalAverage WC RequiredMonthlyPaymentsAverage WC RequiredWeeklyPaymentsWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Time
Cash Conversion CycleApple100806040200-20-40-60We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Apple
Further Explanation http://financing.supplyWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
End Of PresentationExtra slides followWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
PaymentsPurchaseRequisitionPurchaseOrderWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight. CheckACHVCAWire TransferFedWire
SCF vs. E-Payables SCF brings CPO and CFO together. Thetension used to be on CPO focusing onprice and CFO on working cap. SCF for core suppliers, large volume ofmoney, frequent transactions. P-card (or virtual card) more for lots ofSME suppliers.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Fees TransactionSize 7,255.22120 Basis Points 40FeesWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Cash Conversion CycleApple100806040200-20-40-60We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Apple
Cash Conversion CycleCCC DSO DIO – DPO Days Sales Outstanding (DSO): thenumber of days needed to collect onsales. Days Inventory Outstanding (DIO): howmany days it takes to sell the inventory. Days Payable Outstanding (DPO): thecompany's payment of its own bills.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Further Explanation http://financing.supplyWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Funder SolutionsWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Cash Conversion 60We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
EquityCashSources ofCapitalSupplyChain/Operating CapitalWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Debt
PricingFunctionalSavingsSources ofOperatingCapitalSupplyChainSavingsWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.SKURationalizationMixManagement
BuyerGoods/Services30 days afterclose of billingcycle (averageof 45 days)Supplier2 days aftercard has beenprocessedPaymentCardIssuerProcessorRetail /FraudCommercialSecurityTie CardsRebatesCo- supply chain professionals with profound discovery,We empowerpowerfulconnection, and clear foresight.BrandingMerchantAcquirer
PTransmittAcquirerer:Bank (orCITI BankMasterCaSellerotherrd, Visa,institution)etc.2020BPBP80BPRiskMgt.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
SCF ProviderAgrees proved invoiceProviderSubmitsapprovedinvoiceSupplierPays in90 daysBuyerOr wait 90daysWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.FinancereceivablesUses Buyers’credit rating toassess riskSyndicate/Consortium ofBanksBankBankFunder
IdentifySKU /SupplierProcure-to-PayCommercialCredit CardRequestGoods /Send nceApproveInvoiceDynamicDiscountingPaymentDocument Management /We empowersupply chainprofessionals with profound discovery,Analytics/ Reportingpowerful connection, and clear :Pension Funds,Insurers,Mutual Funds
Purchase VolumeCommercialCardWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Supplier Size
Purchase VolumeDynamicDiscountingWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.Supplier Size
LargestPurchase VolumeSmallestReverseFactoringWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.SmalleSupplier SizeLarg
Cash Conversion CycleCCC DSO DIO – DPO Days Sales Outstanding (DSO): thenumber of days needed to collect onsales. Days Inventory Outstanding (DIO): howmany days it takes to sell the inventory. Days Payable Outstanding (DPO): thecompany's payment of its own bills.We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Sources of Data Income Statement:– Revenue– Cost of Goods Sold (COGS) Balance Sheet:– (Average) Accounts Receivable– (Average) Accounts Payable– (Average) Inventory The number of days in the period (year 365 days, quarter 90)We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Days Sales Outstanding(Average) Accounts Receivable/ Revenueper day Choices:– Accounts Receivable– AAR (beginning AR ending AR) / 2– Time average of ARWe empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Days Inventory Outstanding(Average) Inventory / COGS per day Choices:– Inventory– Average Inv. (beginning Inv. ending Inv.) /2– Time average of Inventory– De-inflate COGS?We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
Days Payable Outstanding(Average) Accounts Payable / COGS perday Choices:– Accounts Payable– AAP (beginning AP ending AP) / 2– Time average of AP– De-inflate COGS?We empower supply chain professionals with profound discovery,powerful connection, and clear foresight.
of the company. Companies cannot only be dependent on revenues and financial management to . (Reverse Factoring) Pays Immediately 3PL sells accounts receivable to bank and receives payment in less than 30 days . Apex Peak. Funding for S
