SCF Industry News from PrimeRevenue

Sweetener for suppliers

Fri, 23 Oct 2009 9:00:00 EST

October 21, 2009, Financial Times (UK): When KPN, the Dutch telecoms group, last year decided to extend how long it took to pay suppliers it knew it would not be a popular decision. So, as it moved its payment terms from 45 to 90 days, it looked into a mechanism called supply chain finance. "Obviously [the lengthening of payment terms] is a negative thing for suppliers. So we were looking for a sweetener to smoothen the implementation and then we found this," says Toon Huiskes, a financial manager in KPN's procurement division. Supply chain finance is seen by many supply chain experts and managers as the great hope for easing problems with suppliers. Although it actually refers to several different solutions, at its most basic it allows both the buying company and the supplier to improve their working capital � a crucial attribute given the recent financial crisis. Companies such as J Sainsbury, Nestl�, Syngenta, retailer Metro and truckmaker Volvo have all used it. The way it works at KPN is typical. The Dutch group pays its suppliers later, improving its own working capital by holding on to its money for longer. But suppliers can now access their invoices to KPN on an internet platform and sell them on to a bank as soon as they are approved. That means they can get their money almost three months ahead, against the payment of a fee they need to pay the bank. The bank eventually collects the money from the buyer on the official payment date. "It supports our supply chain because it is a win-win for everybody," says Mr Huiskes.

Supply chain finance: A capital idea

Fri, 25 Sep 2009 9:00:00 EST

September 25, 2009, RetailWeek (UK): With cash flow critical, logic dictates that retailers and suppliers should be taking advantage of the benefits of supply chain finance. Yet only a handful of retailers have adopted this way of working in order to benefit from the improved cash flow and enhanced supplier relationships that it can bring about. Supply chain finance helps bridge that ever-contentious point between retailer and supplier - in other words, the supplier's desire to be paid quickly versus the retailer's desire to extend credit terms. Both sides' demands have become even more exaggerated in the recession as cash flow management has become more important. It works by the supplier selling its invoices to the bank at a rate discounted against the credit rating of the retailer. The bank then pays the supplier when the supplier wants payment, and the retailer pays the bank in line with normal payment terms. ...Used correctly, supply chain finance really could have the potential to revolutionise retailers' notoriously tricky supplier relationships.

Sourcing successfully in the New China

Tue, 22 Sep 2009 10:00:00 EST

China's role as a premier source of components and materials may not be in jeopardy. However, the evolution of global business and the tenuous state of the world economy demand that western companies reexamine their sourcing strategies and operations in China. One reason is that a fair number of Chinese suppliers have been hurt by customer bankruptcies or (somewhat less lethally) customers' inability to pay on time. As a result, some Chinese suppliers are demanding more stringent payment terms, particularly from new customers. Other suppliers, however, are seeking to attract customers by taking a more flexible approach to payment terms. No matter which way a supplier is inclined, it strongly behooves buyers to understand the financial health and evolving policies of suppliers.

"Zombie suppliers" haunt manufacturing sector

Tue, 1 Sep 2009 14:00:00 EST

August 25, 2009, Reuters: Think this downturn was rough on manufacturers? Some analysts believe the sector's woes may worsen when demand for industrial products rebounds -- and manufacturers discover key suppliers cannot rebound with them because they are effectively -- but not yet officially -- out of business. Call them zombie suppliers. Analysts say the speed with which major manufacturers cut output in this recession put unprecedented strain on thousands of small manufacturers that supply the industry with critical parts. That has left the supply chain with an unknown number of suppliers who are dead but do not know it -- companies so undercapitalized and overleveraged they will never raise the money they need to get their idle plants running again. "Their lenders are going to say, 'Sorry, we're not going to increase our exposure with you because we don't know if you're going to make it or not," says Bill Diehl, the chief executive of BBK, an advisory firm that does supply chain risk analysis. And that, of course, would be a horror show for the publicly traded manufacturers that rely on these suppliers. It could leave them scrambling to secure components once the recovery starts -- and missing some of the rebound's benefits.

Toro implements innovative financial platform to improve cash flow

Thu, 13 Aug 2009 14:00:00 EST

August 13, 2009, Finance and Commerce, Minneapolis, MN: And you thought the Toro Co. was all about lawnmowers. Make no mistake - the Bloomington-based company is a leader in the lawn-care business, as legions of golf course managers and groundskeepers, in town for the PGA at Hazeltine, are discovering this week. The company, which manufactures and distributes high-tech lawn care tools for home and professional use, is showing off its products at numerous events in conjunction with the tournament, which concludes Sunday. But there was another big development this week, unrelated to the tournament, as Toro's money managers rolled out an innovation that should provide a little more strength for the company's margins during a rocky sales season. The deal, announced Tuesday, pairs Toro with Atlanta-based PrimeRevenue and Wells Fargo HSBC Trade Bank in an online supply chain finance program for its many vendors. The platform that PrimeRevenue developed for Toro creates opportunities for both the manufacturer and its suppliers to get better control of their cash flow and working capital.

UK Chancellor Darling welcomes BOE consultation on SCF

Tue, 11 Aug 2009 9:00:00 EST

August 7, 2009, The Independent (UK): The Independent reports that UK Chancellor of the Exchequer Alistair Darling welcomed the Bank of England's consultation into supply chain finance.

Are Companies Missing Out on Extra Cash?

Wed, 17 Jun 2009 9:00:00 EST

June 16, 2009, CNBC: Suppliers are taking strain as firms are unable to pay for goods and service on time. CNBC interviews the newly formed Procurement Intelligence Unit which says that a new supply chain financing model could help both suppliers and buyers to improve their working capital levels. Mark Perera, CEO of PIU, discusses.

Payment plan could save British companies billions

Wed, 17 Jun 2009 7:00:00 EST

June 15, 2009, The Telegraph: British companies are missing out on billions of pounds' worth of savings by not adopting a revolutionary supply chain payment scheme, according to a new think tank. Procurement Intelligence Unit (PIU) said the supply chain finance (SCF) model could cut companies' working capital requirements by up to 7.5pc, save suppliers from bankruptcy and help ease the financial crisis. J Sainsbury, Nike and Volvo have already adopted the payment model, which is popular in the US and Nordic countries. The buyer-led scheme allows companies to pay later, while their suppliers get paid earlier. It works by the buyer facilitating the early payment of money it owes the supplier via a bank. It allows the supplier to get the money from the bank at a far lower cost than would normally be charged on advances against invoices. The buyer benefits by extending the payment period, enabling it to hold on to crucial funds for longer. "Lack of working capital is one of the biggest problems facing businesses," Mark Perera, chief executive of PIU, said. "Some companies have been trying to pass the pain on to suppliers, by delaying the payment. But that puts suppliers in jeopardy. SCF should be a win-win for everyone."

Bank of England Invites Comments on Supply Chain Finance Facility

Mon, 6 Jun 2009 8:00:00 EST

June 6, 2009, Bloomberg: The Bank of England asked for comments on a possible "supply chain finance facility" that would provide working capital funding to suppliers of U.K. investment-grade companies. The facility probably would involve the Bank investing in a tradable security, the central bank said.

Banks Get Tougher on Credit Line Provisions

Mon, 4 May 2009 8:00:00 EST

May 4, 2009, WSJ: Banks are shortening the terms on lines of credit that have long been used by companies to avoid cash crunches - a sign that while lending is reviving, businesses are facing new hurdles to obtaining credit.

Invoices Paid Late, Study Says, T&R

Wed, 22 Apr 2009 8:00:00 EST

Just as suspected, companies are having a tougher time getting paid, according to new data showing that more invoices are paid late and disputes are increasing. Two years ago, invoices were paid on average 7.2 days after the due date. That figure has almost doubled, according to credit and collections vendor Cortera's database of 18 million U.S. companies. Industries with the slowest-paying customers are retail (19.6 days late on average), public administration (17.18) and manufacturing (16.02). The proportion of invoices sent to collection agencies grew 8.45% in February. A surprising finding is that some companies are making life tougher for themselves by wielding the cost-savings axe on in-house credit teams. "It seems odd that the lowest-hanging fruit-collecting on invoices due - is not being fully leveraged by companies at a time when they most desperately need it," says Jim Swift, Cortera's Boca Raton, Fla.-based CEO.

Bank Lending Keeps Dropping

Mon, 20 Apr 2009 8:00:00 EST

April 20, 2009, WSJ: Lending at the biggest U.S. banks has fallen more sharply than realized, despite government efforts to pump billions of dollars into the financial sector. According to a Wall Street Journal analysis of Treasury Department data, the biggest recipients of taxpayer aid made or refinanced 23% less in new loans in February, the latest available data, than in October, the month the Treasury kicked off the Troubled Asset Relief Program.

PriceWaterhouseCoopers Touts Value And Urgency of SCF

Thu, 16 Apr 2009 11:45:00 EST

April 16, 2009, PwC: PriceWaterhouseCoopers says "The maturization of Supply Chain Finance delivers a tool that can help to support business executives seeking to effectively and holistically manage their companies' supply chains. It continues to be a viable model, particularly in the light of the current credit crisis."

Les grandes entreprises s�duites par les atouts du � reverse factoring �

Thu, 26 Mar 2009 11:45:00 EST

March 26, 2009, L'AGEFI: Cette technique de financement des fournisseurs sur ordre de l'aacheteur peut aider � r�soudre certaines probl�matiques de tr�sorerie apparues derni�rement.

Keeping the US supply chains up and running

Wed, 25 Mar 2009 11:45:00 EST

March 2009, GTR (Subscription Required): GTR has brought together some of the leading players in the supply chain finance market in the Americas to gauge their views on the impact of recession on areas such as open account transactions, letters of credit and on managing the financial supply chain. It is generally recognised that what starts in the US ripples out to the rest of the world six to 12 months later. PrimeRevenue's Robert Kramer, VP Working Capital Solutions, featured.

The Cash You Need May Already Be On Your Balance Sheet

Tue, 24 Mar 2009 11:45:00 EST

March 24, 2009, Booz and Co: In these illiquid times, cash is in short supply, yet there is up to $950 billion of excess working capital on corporate balance sheets that could be converted to cash. This discontinuity is particularly striking, because risk premiums are at extraordinary and historic levels, where the market is even willing to provide liquidity. Even for the strongest companies, analysts and bankers are sending a clear message: "Plan to meet cash requirements from operations, and don't count on the credit windows being open - even for you."

Customers "Banking" on Your Working Capital

Mon, 9 Mar 2009 11:45:00 EST

March 9, 2009, CFO Magazine: Nearly all business-to-business suppliers are feeling their working capital squeezed by customers delaying payments, according to the Credit Research Foundation.

The Big Freeze: CFOs hope government intervention will soon thaw frozen credit markets. That's not likely.

Sun, 1 Mar 2009 11:45:00 EST

March 1, 2009, CFO Magazine: "A couple of years ago, banking was all about leveraging capital and growing [earnings per share]," says Michael Reinhard, CFO of National Penn Bancshares, a community bank with $9 billion in assets. "Now it's about generating capital and preserving it.".

Ernst & Young Report Survey Says Cash Management Critical in Downturn

Fri, 20 Feb 2009 11:00:00 EST

Ernst & Young says "A large part of a company's expenses may flow through its supply chain so it is no surprise that a close examination can yield saving opportunities. But supply chain also presents an opportunity to increase revenue by selling into markets that may not be as affected by the downturn," the report claims.

GM Seeks $16.6 Billion More in U.S. Aid

Wed, 18 Feb 2009 11:40:00 EST

February 18, 2009, Wall Street Journal: General Motors Corp. and Chrysler LLC told the federal government they may need up to $21.6 billion more combined in bailout loans to put them on the road to recovery, and outlined extensive bankruptcy contingency plans even while continuing to lobby against the option.

Cost of Borrowing Zooms Up for Corporations

Sun, 18 Jan 2009 11:00:00 EST

January 18, 2009, New York Times: Like consumers and homeowners, America's corporations binged on easy credit when times were flush, racking up huge debts. Now the bills are due, and paying them back will not be easy, or cheap.

Caution! Economic downturn presents new set of challenges to EMS, OEM electronics buyers

Fri, 12 Dec 2008 11:00:00 EST

December 12, 2008, Purchasing Magazine: The financial crisis and economic slowdown in the electronics industry will pose both challenges and opportunities for electronics industry buyers in 2009. Perhaps the biggest challenge: managing supplier risk and guaranteeing continuity of supply for the production line.