Coca-Cola Europacific Partners, Danfoss, Pepco, Vattenfall and Telia are among the companies sharing their working capital stories at Working Capital Forum Europe in Amsterdam on 1st December. 

Other speakers announced today include Duncan Marvin, author of The Pyramid of Lies - Lex Greensill and the Billion Dollar Scandal, Bram Desmet, originator of the Supply Chain Triangle concept and Menno Middeldorp, head of research at Rabobank. A parallel track will include technology demos from cash and working capital leaders such as TIS, Taulia, Coupa, Kyriba, PrimeRevenue and many others, as well as early insights into a supply chain connectivity venture between Commerzbank and Deutsche Telekom.

Full details for the event, to be held at Amsterdam's Beurs van Berlage (above), are here. Around 250 working capital practitioners are expected to attend.

Coca-Cola Europacific Partners (CCEP) has chosen Rabobank to run a new sustainability-linked supply chain finance programme. Rabo will provide funding to the programme, with other banks expected to participate and grow the facility over time.

The programme incentivises suppliers to make sustainability improvements. It will provide competitive financing that is linked to sustainability-driven KPIs for suppliers that unlock incremental discounts against the initial funding rate. The programme will set KPIs for suppliers in improving their overall ESG ratings, using data from EcoVadis. 

Initially launched in Germany, the programme will be expanded to CCEP’s suppliers in the rest of Europe, Australia and New Zealand in future phases,  It represents a significant win for Rabobank, replacing several existing programmes at CCEP, which has annual revenues of €13.5bn. ​

CCEP will also partner with Rabo Foundation, Rabobank’s social impact fund, to support one of its farmer programmes in Indonesia  that promotes the adoption of sustainable practices and farm inputs to increase yields and achieve better long-term economic strength.​

America's largest public companies managed inventory more effectively, collected from customers faster, and took longer to pay suppliers, according to the 2022 Working Capital Survey from The Hackett Group.  Despite this improvement across all three components of working capital, the overall working capital improvement opportunity increased substantially, said the report.

The three key measures of working capital – days payables outstanding (DPO), days sales outstanding (DSO), and days inventory outstanding (DIO) – all trended positively for the year for the top 1000 US businesses. DPO improved by .5%, from 61.9 days to 62.2 days. DSO improved by 2%, from 41.7 days to 40.6 days. Finally, DIO improved by 2%, from 56.7 days to 55.7 days.

Excess working capital grew substantially in 2021. According to The Hackett Group’s analysis, the top 1,000 companies have nearly $1.7 trillion tied up in excess working capital, 28% up from $1.29 trillion in 2020. The opportunity includes $627 billion in inventory, $533 billion in receivables, and $498 billion in payables.

Top performers by industry now convert cash more than three times as fast as typical companies (15.8 days versus 46.2 days). They collect from customers 43% faster (in 27.8 days versus 48.7 days), hold 58% less inventory (28.1 days versus 67.7 days) and take 50% longer to pay suppliers (76.6 days versus 51.2 days).
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Cash on hand as a percentage of revenue fell by 23% last year, after a sharp increase to 13% in 2020, putting it now back near pre-pandemic levels. Companies also saw a 17% decrease in debt as a percentage of revenue, indicating that companies have been using the cash they have hoarded during the pandemic to enhance their operational and financial performance.
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'The improved metrics of 2021 are encouraging, but they are contrasted by a significant increase in total excess working capital,' said The Hackett Group Director Shawn Townsend. 'That opportunity -- combined with ongoing uncertainties and disruptions ranging from high inflation, growing interest rates, geopolitical issues and the ongoing pandemic -- means that companies cannot take their foot off the gas when it comes to working capital management.'

Commerzbank is working with Deutsche Telekom subsidiary T-Systems on a supply chain automation solution that will integrate financial services. 

​Working with an unnamed pilot customer from the logistics sector, the project will use 5G, artificial intelligence, the internet of things (IoT), blockchain, cloud technology and sensors  to digitise the entire supply chain. 
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Urs Krämer, Chief Commercial Officer at T-Systems, said the project will, 'Bring the worlds of technology and finance together so as to digitise all aspects of a supply chain – from procurement, invoicing, through logistics, to payments.'

'Supply chains will change rapidly with digital networking and integrated payments,' said Jörg Oliveri del Castillo-Schulz, Chief Operating Officer of Commerzbank. 'Together with T-Systems we are working on scalable solutions so that our customers can make their complex supply chains such that these are more efficient, resilient and productive.'

PVH Corp, owner of the Calvin Klein and Tommy Hilfiger brands, has launched a sustainable supply chain finance program with HSBC. The US corporation claims it is the first such programme in the fashion industry to be tied to both environmental and social objectives, and based on suppliers’ sustainability ratings.

The HSBC-funded programme gives PVH’s suppliers  access to funding based on environmental targets as well as a series of social elements, including a healthy and safe working environment, compensation and benefits, and employment issues, such as forced labour, child labor, and harassment and abuse. 

“PVH's commitment to environmental stewardship and enhancing human rights in our supply chain is core to our Forward Fashion strategy," said Sarah Clarke, Chief Supply Chain Officer at PVH. "The availability of accessible financing is pivotal to ensuring our suppliers are empowered to invest back into their businesses and people, and contribute to our collective goal of creating an innovative and responsible global supply chain.” 

Suppliers progress will be measured against PVH’s Human Rights and Environmental Supply Chain standards and performance assessment standards will be measured using what the firm describes as ' industry-aligned tool'. These include the Social Labor Convergence Program (SLCP), which measures a facility’s performance against human rights and labor standards, and the Sustainable Apparel Coalition’s (SAC) Higg Facility Environmental Module, which assesses environmental standards. 

Our first round table in London since 2019 almost ended before it began. As our diverse group of treasury, corporate finance, and procurement leaders began to describe the supply chain issues they were facing, more than one revealed that their policy for the moment was to, ‘Forget about working capital.’  Not, thankfully, because it was no longer a concern, but because of the vital importance of securing increasingly scarce supplies of everything from grain to microchips, paying what the market demanded, and carrying inventory in far greater quantities than would have been thought wise in the old days of ‘optimisation.’ 
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Conflicting priorities
One procurement chief in a multinational electronics firm found himself between two conflicting priorities: As consumer spending declines thanks to inflation and rising interest rates, so the pressure is on to control costs across the business.  However, with a global shortage of microchips, prices are rising as scarcity increases - so much so that the launch of a significant new product has been postponed for lack of components. ‘For us, it’s all about the rising cost of money,’ he said, referring not just to the cost of capital but to FX, and the need to manage these variables more carefully than ever before.

One notable exception to the procurement race was a consumer goods multinational that had effectively vertically integrated, owning their key commodity crop from ’seed to consumer’ and ensuring consistency of supply in quantity  - though even they could not control the weather. 

A global treasurer at a beverage firm also noted the difficulty of getting consistent grain supplies - not just in quantity, but also in quality. As a result, farmers began to offer poorer grades to keep up with demand, where supplies from Ukraine and Russia have been effectively cut off. 

Just in case
Our entire group, then, acknowledged the move from ‘just in time’ procurement with lean stocks and tight tolerances to ‘just in case,’ building up stocks against whatever the future might hold - which is becoming more challenging to predict by the day (see our Stockholm round table report for why black swans are becoming white swans). 

With that in mind, the importance of effective cash forecasting was on the rise. No one underestimated the difficulty of that task - as one treasurer joked, ‘I have a 99% record on cash forecasting - we were wrong 99% of the time.’ Yet there were ways to increase the quality of forecasts. Like so many elements of the modern treasury, it came down to data - its availability, quality, and our ability to analyse it. 

Perhaps best equipped for forecast accuracy was a multinational which had invested in setting up an in-house bank (based on SAP), giving near-real-time global visibility of cash with a corresponding increase in forecast reliability. The same treasurer also used other advanced tools, such as virtual accounts, bringing greater reconciliation accuracy and simplicity to banking arrangements. 

Payables and receivables finance
Despite the changeable conditions, working capital tools and techniques remained an essential part of the toolkit. Both payables and receivables financing were in use. Treasurers took a pragmatic approach, pursuing the cheapest cost for funding. One treasurer described the choice between receivables finance and a revolving credit facility simply: ‘It’s all about the BPs (basis points) However, all were aware of the forthcoming tightening of standards around the reporting of supply chain finance and keen to ensure they kept their programmes on the right side of the debt/payables divide.

One priority that had not changed due to global conditions was environmental, social, and governance (ESG), which remained a priority in procurement and treasury. Everyone present had ESG priorities with some, such as a global mining concern, seeing them as a priority above all others, as the gateway to cooperation with national governments. Supplier finance was seen as one route to encourage compliance with ESG standards across the supply chain.

As the meeting closed, participants were asked what they would suggest should be the priorities of treasury and procurement in this changeable economic climate. Five themes emerged:

1. Think long term - it's tempting to focus on immediate threats, but don’t let go of the strategic perspective. 
2. Nurture your talent - whatever the external conditions and however good the technology, having the right people on your team is the best safeguard against shocks
3. Change behaviours - what worked in the past may not be right for the future. Your thinking may need to change.
4. Remain Flexible - No plan survives contact with the enemy - so be prepared to adapt as you go.
5. Communicate - with suppliers, with banks, within your own business. In a time of crisis, it’s more important than ever,

Working Capital Forum Round tables are open to senior leaders in treasury, procurement, and payments and are held under the Chatham House Rule. If you would like to join a similar event, contact dianah@adaugeomedia.com or apply directly for our future events in Edinburgh, Dusseldorf or Amsterdam.

Henkel has become the latest multinational to add an ESG component to its supply chain finance offer. Deutsche Bank, which funds Henkel's SCF programme, will link supplier early payments to ESG data provided by EcoVadis.

Speaking to Der Treasurer, Ulrich Borgstädt, head of group treasury at Henkel, said the ESG offer was being launched in Europe at first but could soon be rolled out globally. 'That's one of the reasons why we decided to link to Ecovadis,' he added, 'This rating is recognised globally and can therefore also be used in other regions.'

Deutsche Bank has adapted its systems to integrate the EcoVadis data and allow suppliers to be moved from one category to another 'with the click of a mouse', said Michael Dietz, head of trade finance flow at Deutsche Bank.

See also: 

• Taulia and EcoVadis link up for ESG ratings data
• CRX Markets partners with EcoVadis to integrate sustainability data into its supplier finance offer

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Citi is to expand its supply chain finance offering in Africa with funding from British International Investment (BII), the UK’s development finance institution. 

The Master Guarantee risk-sharing agreement with BII will boost Citi’s supply chain finance volumes in Africa, with a focus on funding SME suppliers and underserved or excluded businesses.

Chris Cox, Global Head of Trade & Working Capital Solutions, Treasury and Trade Solutions, Citi, said the agreement would, “Enable us to expand our supply chain finance offering and increase credit to suppliers most in need, in particular the small and medium size enterprises that normally have limited access to financing.”

Taulia has become the latest supply chain finance provider to announce that it is integrating ESG data from EcoVadis into its platform. EcoVadis will provide ESG ratings for the SAP-owned fintech's Sustainable Supplier Finance solution.

The announcement formalises a relationship which had already seen J.P. Morgan and Taulia fund and manage a sustainable SCF programme for Bridgestone, which uses a pricing matrix linked to EcoVadis data.  

Last week CRX Markets announced its own partnership with EcoVadis, which is rapidly gaining ground as the ESG data provider of choice for SCF programmes, with Morningstar's Sustainalytics its closest competitor.

U.S. Bank is to work with SCF platform provider LiquidX to offer supplier finance to the bank's corporate clients. 

The collaboration will see suppliers and buyers able to connect their supply-chain systems directly to U.S. Bank and transact through LiquidX’s platform. Suppliers can then be paid nearly immediately and buyers may receive extended payment terms.

'With so many supply-chain challenges for businesses, we want to help make the financing process as smooth as possible,” said Dan Son, head of global banking division at U.S. Bank. 'This new collaboration will deliver a single intuitive interface that seamlessly connects suppliers, buyers and our bank in the supply-chain ecosystem.'

Call centre provider Continuum Global Solutions has turned to LSQ for a $65 million invoice finance facility to replace an existing line of credit.

​LSQ will also be providing the company with accounts receivable management solutions, including customer credit, risk management, and collections through the LSQ FastTrack® platform.

'This new facility with LSQ allows Continuum to continue our growth plans for the foreseeable future,' said Michael Flodin, CEO at Continuum.'The structure of the arrangement also allows us the flexibility needed to achieve these goals.'

LSQ worked with strategic partner Skyview Capital to complete the financing for its portfolio company Continuum, according to Miguel Serricchio, LSQ executive VP of channel management and strategy.
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The company is looking forward to this new relationship and appreciative for the creative structure which allows Continuum to stay on its growth trajectory," said Dean Estrada, managing director at Skyview Capital.

CRX Markets has partnered with EcoVadis to integrate its  sustainability ratings into its platform. The deal will allow funders to assess corporate sustainability in based on Ecovadis data and and offer appropriate financing rates.

CRX Markets launched what was claimed as the first Sustainable Supply Chain Finance (SSCF) transaction in the DACH region with its client,  Nestlé, in April 2020. Since then it claims to have arranged close to half a billion dollars in financing through the programme. 

Frank Lutz, CEO of CRX Markets, said the firm sees, 'A high demand from companies to map ESG criteria also in working capital finance. This is not just a trend but will become an integral part of any corporate financing.'

At EcoVadis, communications and marketing director David McClintock added, 'By combining our Sustainability Ratings with CRX Markets Platform, together we can deliver the integration and automation required to bring powerful financial incentives for companies to improve their sustainability performance, and drive positive impact at global scale.'

Citi is working with SCF platform Stenn to offer deep-tier financing to smaller firms in its clients' supply chains. Citi described the move as part of an expansion of its global trade payables finance product suite to cover onboarding, compliance, risk management, and potential financing for deep-tier suppliers.

Chris Cox, head of trade and working capital, treasury, and trade solutions at Citi, said, ‘Deep tier supplier financing provides our clients with solutions that can further strengthen relationships with suppliers and help to improve the resilience of supply chains. Developing these offerings with fintechs like Stenn helps deliver that capability.’
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Greg Karpovsky, CEO at Stenn, described the Citi partnership as, ‘A significant milestone.’​

Italian food company Barilla is the latest customer for Kyriba's Enterprise Liquidity Management platform to support its treasury, risk management and supply chain finance operations.

The solution will centralise Barilla’s multiple supply chain finance programs into a single Dynamic Discounting programme. The platform, says Barilla, will also increase cash visibility, improve cash forecasting, and digitise FX, interest rate, and commodities risk management.

'We set out to bring more value to the Barilla enterprise and required a provider that would deliver an easy-to-use solution with proven expertise in supply chain finance, and a robust multi-bank connection capable of onboarding suppliers anywhere in the world', said Giangaddo Prati, Group Chief Financial and Information Technology Officer at The Barilla Group. 'Kyriba is the only provider to bundle treasury management and supply chain finance in a unique solution.' 

The Working Capital Forum has launched a research project aimed at analysing the state of automation in account payable (AP) departments in global businesses.

The AP Initiative starts with a survey of several hundred AP and shared services directors to understand which stages in the AP process are causing the most friction and which would most benefit from further automation or digitisation.

​This survey, supported by Taulia, is now open to responses. ​