 This is a transcript of the webinar held on 30th October 2018. To access the webinar, with slides, click here MIKE HEWITT Hello, everyone, and welcome to this Working Capital Forum webinar, Meet the Gamechangers. Many of you will know the Working Capital Forum. We usually meet over fine wines and great food. Today, no fine wines, no great food, just whatever you have at your desk or on your couch. But what we do have is really great company. I’m delighted to say that for the next 45 minutes to an hour we’re going to be joined by some experts in working capital – the people who really are the gamechangers. This webinar is made possible by Taulia, who are our sponsor for today’s webinar. If you look carefully in the webinar console and scroll down the page, you will be able to download a copy of The Gamechangers’ Guide to Working Capital, a really comprehensive look at how to put together a working capital optimisation programme. What we’re going to do for the next 45 minutes is to go through some of the key topics in that guide and take a real in-depth look at how to structure a working capital optimisation programme in your organisation; what are some of the barriers we might need to overcome; and what are some of the pitfalls and bear traps to look out for. Along the way, were going to be asking you to participate by giving us your views about some key questions around working capital optimisation. INTRODUCTIONS Before we get to any of that, we have a really great team with us today, as I mentioned. I am Mike Hewitt. I’m the managing director of the Working Capital Forum. But let’s move on and ask our panellists to introduce themselves. Andrew Wilson, you’re on the line. Tell us a little bit about yourself. ANDREW WILSON Hello, everybody. My name is Andrew Wilson. I’m a finance change consultant, for many years now, working largely in business services and the transformation space. I have delivered working capital and SCF programmes in a number of businesses over the years, in industries as diverse as FMCG and pharma. I will be talking you through some of the steps today that Mike has already talked about. I’ll come back online shortly. Thank you. NICK BOARO I’m Nick Boaro and I’m a partner in our working capital management practice here at EY; a dedicated team of 150 folks globally that do nothing but talk about this topic and how it impacts cashflow ultimately. I’ve been doing it for about 18 years now with EY. I’m looking forward to the discussion today. MATTHEW STAMMERS My name is Matthew Stammers. I lead marketing for Taulia. I’ve been with the company over four and a half years, and probably coming up to ten years in the payments and working capital space now. For those who don’t know, Taulia works with about 150 of the world’s largest organisations to help them optimise their cashflows – so, working capital, supply chain finance and dynamic discounting across all of their suppliers. We do that using a technology-led approach and we’re really delighted to be sponsoring today’s webinar and helping inform the discussion about how to make these programmes work inside your organisation. SETTING YOUR WORKING CAPITAL GOALS MIKE HEWITT We now know who is with us and what a great panel of experts they are. Let’s move on to our first topic for today’s webinar. When you are setting up a working capital optimisation programme, the first step is to work out what it is you want to achieve – which might sound obvious, but isn’t always so. I’m going to come to all our panellists on each of these topics, but can I start, please, with Nick. Nick, would you like to kick us off on how to set your working capital goals? NICK BOARO What we typically see is a trade-off – or folks believe there is a trade-off – between cashflow and balance sheet improvement, and what you’re going to have to pay for that on the P&L. What we end up seeing, time and again, is that there are levers or improvements that can be driven without a trade-off. So, when you’re setting goals, it’s understanding what goals can be achieved without any trade-off, and then what goals might require trade-offs to make success. Understanding the balance of what can be achieved and what is possible is extremely important. Obviously, goals can be pushed even further if you consider certain trade-offs. So, there are a very large range of opportunities when you’re looking at working capital management and cashflow improvement. What we then talk about is how do you set that goal. As Taulia does and as we do and as many others do, it’s really an analytically-driven approach where you cannot look, necessarily, at the high-level benchmarks of DIO, DSO, DPO; but more focused on what is available to you within your own spend profile, within your own customer profile, to achieve success. Analytically-driven tools that will calculate what good looks like and what success could possibly be in that enrolment is, in my view, critical to success, because you actually have a path to get there, not simply a high-level metric that you’re trying to improve. You’re making change based on metrics that you can influence. That is how we go about setting working capital goals: it’s from the bottom up. But I’d be interested to know how others feel. MIKE HEWITT Something we’ve heard at a lot of Working Capital Forum meetings is that the first problem is often simply finding the basic data to get your starting point. Many organisations find it hard even to understand what their existing payment terms are, particularly for multinational organisations with subsidiaries across the world. Matt, can I turn to you? In Taulia’s experience, are you seeing that clients tend to start with the full set of data they need to get the most out of this? Or is it more a case of building up an initial picture so that you know what your goals could or should be? MATTHEW STAMMERS That’s a really good question. What we see is, historically, companies have really struggled to get a good view of their current situation. They’ve got different tools in place, like treasury management systems, accessing their ERP, and it’s not really giving them a great view of not only what is own working capital position within their company, but what does their suppliers’ working capital position look like as well. Nick talked really nicely about goals and trade-offs. One of the trade-offs I think we’ve seen historically is that companies want to improve their own working capital position and they set out on a journey to do that – but they often do that at the expense of their suppliers. Using the types of tools that Nick has talked about ? and also Taulia has got a set of analytic tools that we use as well ? to actually give visibility into a company’s working capital position, but then also give visibility into the suppliers’ working capital position and then use that to make educated decisions about how to best pursue the path to improve working capital across the supply chain, is definitely a better way to do it. That’s the way that we’ve just started to see come through now. PUTTING TOGETHER THE RIGHT TEAM MIKE HEWITT Let’s assume that we have set the goals of our programme, we’ve got a pretty good idea of what we’re aiming to achieve. We’re going to need to get that boardroom buy-in. We have a high-level sponsor at the beginning of our programme, but to make this work we’re going to have to put together the right team. It’s crucial to find out who should be involved and how do we get those people engaged and on the programme. Let’s turn once again to Nick. You’ve had quite a bit of experience of this. What sort of team do we need? And who should really be involved in this process? NICK BOARO That’s a great question – and we deal with that quite frequently, as you can imagine. One of the things that I think is important for folks to understand is when you’re going to make improvements across working capital and cashflow, there are some things you can do internally to fix your internal processes and your systems and tools; there are some things that require financial solutions on the other end, such as supply chain financing, and then there are also commercial arrangements, the actual terms of trade with your customers and suppliers, as an example. When you’re going across the spectrum of opportunities that would create incremental cashflow from working capital, it becomes evident pretty quickly that that is not a finance-driven-only exercise. Operations, procurement and sales, even, when you’re looking at the AR side of things, are all absolutely relevant when it comes to driving that change in the organisation. Finance is critical: they typically sponsor programmes like this, treasury, CFOs, VPs of finance. But you cannot achieve success unless you have the rest of the business that impacts that particular process engaged and involved. When it comes to building a team, if you see the spectrum on the screen, all the way on the left is a soft touch, where finance is simply saying, “Hey, I’m just going to track results, I’m going to see how the teams are doing as they try to improve their individual business unit DPOs,” as an example. It’s usually not very successful, because they don’t have the tools or the information they need to find success. On the other end of the spectrum, the most aggressive teams I’ve seen set up within finance and deploy maybe some performance improvement folks, but don’t actually engage the business – they’re trying to do it all themselves. The department or the function tends not to be able to dive as deep without having that involvement and dedication from the folks that need to do it and sustain it thereafter. So, either end of that spectrum is usually not ideal. The best teams are those cross-functional teams in between, where you have finance executive support so that you have funding and you get the resources required to achieve success; but you have the buy-in and the functional leadership of, say, procurement or operations to be involved in the project to make sure that the changes that you’re making make sense within the business, as well as sustaining those benefits after the benefits have been achieved. Once the programme goes away, I think you still need folks to live and breathe cashflow and working capital – and that only comes about through the training of having them involved in the process in the first place. MIKE HEWITT Matthew, you have some experience of this, with the new title of head of working capital or head of supplier finance, for example. Is this something we’re starting to see? That these cross-functional teams are being put together and led by people with new responsibilities and new titles? MATTHEW STAMMERS We looked at the profiles of people who were joining this webinar, to understand who we were talking to. Not surprisingly, a lot of you on this call are coming from the treasury function; there are also a lot of folk coming from the procurement background. But interesting, probably about 10% of the people who are attending this webinar are starting to have the title of head of working capital or head of supply chain finance, as you say. This really reflects what Nick was talking about. In our experience, where organisations to make these types of initiatives work, they don’t just run it solely out of treasury or solely out of procurement or solely out of finance and it’s a siloed approach. The organisations that are really successful are those that have CFO or even CEO backing at a sponsorship level. And they actually nominate somebody to take on the project, working cross-functionally – so, across sales for the DSO piece, across the supply chain and procurement folk for the inventory piece, and very much across finance with the payables piece. The very best organisations bring together a project team, have that executive sponsorship, have a clear nominated lead who, quite bluntly, is comped on the performance side of it. That really drives the performance and success of working capital programmes through the organisation. Again, as Nick as just talked about, it makes them not just a one-off, quick-hit initiative, but actually an ongoing, sustained success for the organisation. MIKE HEWITT That’s a very good point. Nick, let’s come back to you on that idea of incentive compensation, building rewards into KPIs. Is that really the way to focus people’s attention on this? Is that what works best? NICK BOARO It definitely is a component. To some extent, everyone is coin-operated and we are all going to do what we need to get done to meet our goals. There is an indirect way of getting there. It doesn’t necessarily need to be solely on cashflow improvement or working capital improvement on the balance sheet. If you’re measured on an improvement in EBITDA or an improvement in an adjusted return on invested capital, working capital is a component of that. Sometimes, it’s advocating in the business on what value improving working capital will have on the metrics that they already have. So, you don’t always necessarily need new metrics. But there are metrics that can be used, as long as the right education is provided as to what the teams are doing to improve that metric. In inventory reduction, you’re going to require less carrying costs and less overhead, because you’ve got less inventory. What is the impact on that in the P&L? It’s getting to that level of conversation. Similarly, with supply chain financing or dynamic discounting, there are ways of getting at what we’re saving beyond just the cash. It’ about educating folks on how that impacts their numbers. MIKE HEWITT In summary, I think we’re hearing that there’s a lot of work to be done before we even begin to think about actually putting the programme in place. We’ve set out our goals, we’ve built our team and we’ve got that really important cross-functional buy-in, often enforced or encouraged by the use of good performance metrics, KPIs and reward systems that allow us to make sure that it’s front and centre for everyone across the programme. SELECTING A PARTNER Let’s move forward. Let’s assume that we’ve got working capital goals in place, that we have the right team put together, and that that team has bought in and is incentivised. All of that is the groundwork ? but the great day is going to come when you actually have to select a partner for your working capital programme. Of course, there are plenty of routes we might take about how to select the right partner. But there are some key decisions you’re going to have to make fairly early on in the process. Let’s take a look first of all at some of the steps we might want to take in selecting a partner. Andrew, if you would like to talk us through this process, that would be enormously helpful. ANDREW WILSON As we’ve heard from the team and Nick in particular, we’ve created our internal goals and we’ve built our internal team. The next step, really, is to choose the right partner to support us in rolling out the programme. There are a number of key areas that will dictate your success here. The first one – and maybe the most important one – is that we need to find a partner who has the same objectives as we do. That sounds like a fairly obvious thing to say, but you’ll find as you talk to various players in this space that the objectives they’re looking to get out of this might not be the same that you have. The first step to ensure you get to is that you’re all looking at the same objectives and, importantly, that we can actually all win in this programme; that there’s not a winner and a loser; that we’re all going to share in the benefits, however they might be addressed. That’s the first issue. The second thing is to take a strong look at the offering that the partner will give. What level of what functionality are they going to provide? And is it the right functionality for you? How rich is that functionality? There will always be some trade-offs here, but look at the functionality they offer and also what their approach is to your own internal systems, particularly around your ERP platforms. Is it a “plug and play” or is there far more effort required from yourselves? So, take a strong look at the functionality. Next, recognise that your partner becomes part of your internal team and that they’re going to add to and build on your internal team. You will want a partner who can provide the skills and experience that you don’t currently have. And that won’t just be technology – that could also be around such topics as communication, supplier analytics, etc. Choose a partner that blends nicely and adds to your internal team. The important point I’ve found when rolling out a programme in the pharmaceutical industry is to make sure you have a good culture fit. All organisations are different: you may have a very direct approach, you may have a very collaborative approach, or somewhere in between. But ensure that you have the right people sitting in your organisation, because they’re going to be very key to the success of the programme, but they’re also going to be very visible within your organisation. Make sure these are the right people that have the right cultural fit with you. Lastly, but not least, look at the cost-value balance. What is the cost to you of this programme? How is that cost going to be paid? Are there upfront charges? Are there transactional charges? Is there some sort of [?? 0:25:20] model? Give that whole area some consideration, and look at that in terms of what value these guys are going to generate for you versus the cost of implementing. If you consider those five broad areas, you’re going to be able to select the right partner. MIKE HEWITT Nick, in your experience, do companies tend to get these steps right? Or do you occasionally find situations where people have jumped in with a partner too quickly, perhaps, without going through all this due diligence and making sure they’re choosing the right one? NICK BOARO That’s a great point. I’d say maybe a quarter of the engagements we get going on have failed previously – they are previously failed attempts where they then engage us because we can do one of three things, or maybe all three things. We can help generate more value. We can help get at the value quicker. And, ultimately, it’s not about shining a light on the latest issue; it’s making it all stick. Those are the three areas that, if you’re going to engage a partner, cover all these topics but make sure that you’re getting more value that you’d be able to get internally, you’re getting it quicker, and it’s sustainable actions and not one-time metric measurement. MIKE HEWITT Matthew, clearly you have a vested interest here, but can you talk us through some of the situations that you’ve seen at Taulia? I’m sure you’ve had the same experience as Nick, of coming in after a programme has perhaps not worked as well as it might and there’s a need to think more carefully about who the right partner and the right fit is. How important are some of these points that Andrew made? I’m thinking particularly about cultural fit and that experience and expertise piece. MATTHEW STAMMERS For me, there are two points that are worthwhile considering if you’re going to embark on a working capital programme. The first one is get if you get this right, as Nick said, it can be hugely beneficial not just for the organisation but for your supply chain as well. There is an enormous amount of money that is currently locked up in very inefficient payment terms, in areas like inventory. Done in the right way, you can make that far more efficient; you can release an awful lot of working capital – into the hundreds of millions and sometimes even billions. You can reduce the cost for all the parties cross the supply chain, so the cost of financing can go down. It can make your supply chain more competitive and you can improve supply chain resilience. So, get it right and it can go really, really well. The cautionary note, or the careful first point I want to make, is that this isn’t an area that is particularly simple and straightforward. My big recommendation is don’t choose the partner that does this as a side-line or does this as another piece of what they do. Make sure that you choose a partner where this is their core competence. You want somebody who does this every single day, it’s at the heart of their business and it’s what they do all the time, so that they can guide you through. Without using the Taulia example too much, you want to get somebody who has done an awful lot of programmes, so that they can guide you through and say, “We’ve seen it before – this is how you should do it and this is best practice.” That’s my first point: pick a partner where this is the core of their business. I think that’s really important. The second point goes back to what Nick said earlier and what Andrew is alluding to a little bit. You want somebody who is with you for the journey; who doesn’t just come in and do this as a one-hit-wonder, but is going to work with you over time. Because you can unlock value from your supply chain not just once but on an ongoing basis, and you want somebody who is there to help you do that. Then, you want somebody who is there that, as the technology evolves, are at the forefront of that and are leading that and guiding you through the next steps as well. BUILDING YOUR WORKING CAPITAL DASHBOARD MIKE HEWITT Soon we’re going to be talking about how to roll out your programme, but before we get to that we should look at the real “meat” of this working capital project: how to build out your working capital dashboard. Let’s ask Andrew to come back in. I think you’re starting with this lovely quote: “What you measure improves.” Take us on from there. ANDREW WILSON I think that old adage is a good one in this space. The KPIs and the metrics that you measure, you do tend to improve – I think that’s fairly clear. I guess what’s important here is to make sure you get the right measures. What normally happens, in my experience of these programmes, is they tend to start with one or both of two objectives. One is improved DPO by X number of days; and generate X million dollars of cash. Those tend to be what we see. So, we have two broad metrics: DPO and cash in dollars, pounds or whatever it happens to be. The first thing I would ask when we look at this is just to recognise those as being the C-suite type objectives: this is what your global CFO is looking for and it’s what they’re going to measure as a year-end output. For me, these are key objectives. But one of our challenges is to make sure that the KPIs we’re measuring on our dashboard are relevant to those people who are “change agents” in our organisation and that they can action them, they can do something with these objectives. I’ve found, in many cases, that asking the change agents in an organisation to improve DPO is quite a difficult ask, because actually there aren’t too many folks in our organisation that really understand what DPO really means. Our challenge, then, is to think of other objectives that are more actionable and more meaningful to the organisation; to actually translate those objectives into KPIs that the business can recognise and that they can see measures they can do to improve. For example, things like average payment terms. Average payment terms, of course, is a strong preclude to DPO, but it means something quite different. It’s much more manageable and understandable to the organisation. But also look at things like exceptions. If your clients roll out standard payment terms, for example, look at the exceptions in your organisation – maybe that’s numbers of suppliers or numbers of customers or dollar spend, whatever it might be. Start to move these into metrics that are more useful to the business. What you’ll see with those is that they tend to be leading indicators. If average payment terms for our suppliers, for example, are moving in the right direction, moving forward – we’ve got a payables example here – then it’s likely, not always, but it’s likely that DPO will move too. And the same with exceptions. If you’re getting a greater level of adherence to standard policy on the assumption that the policy is probably better than average, then you’ll find that your C-suite objective will move in the right direction. There are also some hygiene factors here that we shouldn’t ignore; some really important KPIs that will either facilitate these other KPIs or will actually improve the reported performance. That’s certainly key when you’re looking at C-suite objectives. The purple boxes are the sorts of hygiene factors that you should be measuring. Number of payment terms: having one payment term doesn’t necessarily drive working capital if that payment term is immediate, but certainly it’s usually the case that the more payment terms you have, the more you have leakage in your working capital programme. Look at things like the churn on your suppliers. Process cycle times: it’s key to get invoices processed and get that working capital benefit, but it’s also an important indicator to ensure that the health of the process and the spirit of the arrangements with your suppliers or customers is more effective. Also things like supplier consolidation: you can drive working capital benefit by moving from suppliers on the lower payment terms than others. So, it’s not always a case of changing terms; you can do these programmes by looking at the mix of suppliers that you’re working with and consolidating. So, there are some important KPIs in that space as well. You start to build a dashboard of a number of different objectives that all influence and impact on DPO and cash ? which are generally the measures people look at – but are actually more manageable within the organisation and they’re better understood. That would be my advice on how to build a dashboard for any working capital programme. ROLLING OUT YOUR PROGRAMME MIKE HEWITT So, we have a working capital dashboard. Let’s move on now to how we roll out your programme. Andrew, let’s come back to you. We’ve talked through quite a lot of the preparatory steps. But when it comes to actually rolling it out, how do we deploy the programme? What should we think about at this stage? ANDREW WILSON One of the areas to look at immediately is your approach. There are different ways to approach this deployment, particularly if you’re using a technology-led approach – and we can talk about that later. If you’re using a technology-led approach, it opens up a series of options for you around the appetite for speed of change. If the appetite is there in the organisation to make this programme work quickly, it is very possible with the solutions available today to go for a “Big Bang” type approach. Clearly, it depends on the resource levels you’ve got and that you’ve got on the project team, which will include your partner as discussed earlier. So, consider the appetite for change. If the appetite is not for a strong “Big Bang” approach, you can obviously look at things like a geographic type approach or a category. But what is the appetite for change and the speed of change in the organisation? Consider that. Secondly, stakeholders. I think we’ve talked a little bit about this. Really understand who the key stakeholders in your organisation are. For me, this is particularly key, to make sure you get to the stakeholders that can influence the change. In some organisations, as we’ve already discussed, that might be finance and treasury; in others it might be procurement. I’ve seen it done both ways and both can work equally as effectively. But ensure you have the stakeholders that can influence the change on the ground at the supplier level. Thirdly, the technical side. This is an area that will create a time lag as you build the technical integration. Give some consideration to your ERP environment, where you’re going to integrate any supply chain finance type programme. But also, I would advise just to dig into a little bit of detail here around document types. I’ve seen these programmes falter because the level of understanding of document types and the various processes that go on within ERP systems have not been fully understood, and therefore the integration has not been as complete as you would like. Fourthly – I think Nick talked about this earlier – do some analytics around your supplier base. Look at the segmentation of your suppliers. Which are the areas that are most ripe for deployment, if you’re not going for “Big Bang”. But also, look at things like master data. Master data is the bane of some of these programmes. Make sure you’ve got solid master data. You often find within master data that there are inconsistencies which will cause you a problem, so ensure that your master data has been well reviewed. You may find that you have to do some small programmes to improve that also. he feedback. It goes without saying that there should be a feedback loop here, some planned review type approach. But again, it’s often the case that there isn’t a strong feedback loop into the organisation in terms of performance and progress and stumbling blocks, etc. So, really consider what your feedback loop is. Who sits on your steerco? But also, who in the organisation should you be reporting to on a periodic basis in terms of performance and issues? So, for me, those are the five key areas that you need to focus on when you’re building your deployment plan. MIKE HEWITT ‘BEAR TRAPS’ TO AVOID MIKE HEWITT We’re coming to the point where we’re almost ready to take a couple of questions. Let’s take a look at our last topic, which is some the ‘bear traps’ – some of the things that might go wrong. We’ll just spend a minute or so on each of these. There are four here, but there are plenty of others that we don’t have time to cover, and you’ll find more detail about these in your copy of The Gamechangers Guide to Working Capital Optimisation. The first one, we’ve had a lot of issues around the accounting treatment and the way that investors in particular look at working capital and early payment programmes. There are some times when it can be, for example, reclassified as debt. Nick, in your experience, can this be a problem to look out for? NICK BOARO Absolutely. You’re going to have more pushback internally than you will from your supplier base, without fail. That pushback will come from procurement folks, who have given away less favourable terms for you, better for the supplier. And you’ll have pushback internally in accounting about, “We can’t do this because it’s going to trip some wires.” The answers and the response from the project team that’s delivering the value have to be proactively addressing those issues. How are we getting at ensuring that you’re still going to be successful? But the how, your approach, is almost going to be more important than just getting there, because if you just get there you might trip some wires along the way that make things difficult for yourself. Accounting is one of them, among a number of others. MIKE HEWITT Something to be aware of: many countries, many jurisdictions are bringing in prompt payment codes, which sometimes require companies to report on how quickly they’re paying suppliers. It’s important to be aware of your own working capital programme to make sure that it doesn’t trip up against any of those requirements. So, you put in place an early payment programme and then discover that the optics of your project are bad because it makes you look like a slow payer if you’re having to report in a certain way. Just make sure that you’re not falling foul of any payment codes. Matthew, I’d like to bring you in, because this next bear trap is an important one. We hear this from corporate treasurers particularly: “It’s all very well selecting one of these fancy new whizz-bang FinTechs, but I’ve got a massive line of credit with my lead bank and they want to share a wallet, and I really don’t want to disappoint my great friends at Bank X because I’d really quite like to hang on to that enormous credit line.” Is this something that comes up? And are there ways around this? MATTHEW STAMMERS Yes, it absolutely does come up and you’ve quite rightly identified it as a bear trap. Companies, and treasurers in particular, have very long and very deep relationships with their banks – and that’s absolutely right and proper. The way in which we describe it is that cash is your company’s most important liquid asset, so it’s really important that you have a good and strong relationship with your bank. The way in which we find it works in a positive way is when banks understand that they’re absolutely still playing in this space; they’re just playing in a slightly different way. Before, where they were proving supply chain finance programmes, they were providing both the technology platform and the financing. What’s now happening is we’re separating the financing and the technology aspects. Actually, what we should come back to is that it’s right and important for companies, because since the 2008 financial crisis what companies are looking to do – and what we hear a lot about in the marketplace – is that they want to reduce the risk from credit concentration. So, they want to bring other providers in. The discussion to be had with banks is to say, “Look, you still absolutely can play – and not only can you play in this programme, but you can play in other programmes as well. You can still participate and still be involved.” When you start to go down that route, you start to end up in a much more constructive place. MIKE HEWITT Thanks for that, Matthew. Our final bear trap – and we’ll just touch on this briefly – is, of course, bad press. Managing the external relations, particularly with media, is crucially important. It’s really easy to have your programme seen as something bad, particularly if you’re in a sensitive sector – maybe it’s retail, maybe you have a lot of small business suppliers who are likely to make a fuss. Just look out for that heavy-handed approach and try and make sure that you’re managing the optics of your programme as far as media coverage is concerned, and that everyone who’s involved in the programme is happy with it and you don’t have any overspill in terms of people going public with their dissatisfactions. If at all possible, avoid dissatisfaction in the first place; if it does happen, there is of course a need to manage it. QUESTIONS Now I’d like to have a look at some of the results of our polls. For the first poll, about half of our audience today reckon that finance or the CFO-led function is really going to drive that improvement in working capital, supplier finance projects. There’s a fairly even split between others. I can tell you, again, that for most of our audience – and no surprise – it is a C-level priority and there are multiple KPIs around it. So, we have a fairly committed group of people joining this webinar. Let’s move on and look at a few questions. Our first one comes from London, where we are. It asks: How do you deal with people inside the business who just don’t want the hassle of an SCF programme and maybe even try to block it? Andrew, I’ll turn to you for this one. Can there really be people who just take against these programmes and try and hinder them? ANDREW WILSON For sure. I guess it really depends what type of supply chain finance programme you’re trying to deploy. There are ways of deploying these programmes that can be very time-intensive on people in your organisation. Signing up suppliers can be a very long-winded role with certain supply chain finance programmes. My answer to that question of how you get around that is, first of all, select the right partner. Make sure you have the partner that will make this process as easy for your organisation as possible. That’s the first thing to do. What I’ve found, apart from that, is that reluctance is usually around terms enhancement rather than supply chain finance. I think if you can address the problem of the admin burden of bringing new suppliers onto your programme, then you’ll get buy-in quite quickly. I would also add a good communication plan. Really selling this around your organisation before you kick it off would be helpful. If you do these two things – if you communicate well and you select the right partner and the right solution – you really ought not to have too many people pushing back. What I found in the latest one I did was that I got a lot of people reaching out to get their suppliers on the programme and trying to push their suppliers earlier in the programme than had been scheduled. Get those two things right and you shouldn’t have a problem. MIKE HEWITT Excellent answer. Anything add, Matt or Nick? MATTHEW STAMMERS I’ll just jump in. On top of Andrew’s points – because he’s got all of the good points – one of the things I used to see, I was speaking to one of our customers the other day and they were relating a story which was about success breeds success. So, get some early good results and you’ll be surprised about how fast those results go around the business. This was in the telco space, and what the customer was relating back to me was that they’d had some really good results in some of the geographies they were operating in, and the other geographies were then screaming out to say, “We need to get on this programme as well, because we want to be part of it and be part of the benefit that it’s offering to our business.” MIKE HEWITT Thanks for that. We have another question here from Catherine, who I think is in London: From brainwave to implementation, how many months or years, on average, does it take to get one of these programmes going? Nick, we’ll go to you first on this. From the moment you think, “That would be a really good idea,” to it actually being a working programme, what is the lead time? NICK BOARO I would say understanding the size of the prize or the value is a pretty quick exercise – I would say probably measured in weeks, not months. Maybe four weeks, where you really have a sense of what value there is to be achieved and creating the business case around going to get it. Once you’ve got that, execution on terms extension programmes can be, say, three to six months. But then the role of technology and getting further down the chain to get more value could take a little bit longer. Matt, I don’t know if you want to jump in on the IT side of execution, but on the terms extension side I would typically see three to six months being success. MATTHEW STAMMERS I’m going to talk about old world versus new world. We have a customer who are a global aerospace company, and they were talking about the journey in the old world that they went on, where they wanted to improve working capital. They tried to understand what are their payment terms today, how is their working capital deployed. They took that back inside the business, then they worked out a strategy. That whole approach took them two year – and by the time they got to a strategy they wanted to execute, that strategy was out of date. To Nick’s point, the new world has completely change. We’re in a place where decisions can be driven by analytics, and those analytics can be deployed really quickly. So, you can get not just a generic insight to say, for example, “This is the DPO that you’re on and this is what your peers are on;” but you can actually get insights today that tell you exactly how is your working capital deployed, where can you push terms reasonably, what are your suppliers already accepting today, what can you do in terms of early payment offers, what are suppliers already accepting there. You can get a very accurate picture within a relatively short space of time, so that’s really compressed. The other side that has massively compressed – and this isn’t against banks, but just where we were – is if you look at bank-led traditional SCF programmes, you’re talking about one to two years to deploy a programme and getting 20 to 40 suppliers on a programme. Using technology, you can now get programmes live within eight weeks. We’ve just done that for a client over here in the US, and within an eight-week period of going live, at the same time they were doing terms extension and they’d released $15million of working capital back onto their balance sheet. The core point here is both the understanding and the analytics side of what is the opportunity, and the ability to implement and deploy faster and get benefits fast, have completely transformed from where we were four or five years ago to where we are today. MIKE HEWITT WCF EVENTS I’m sure there are more questions – unfortunately, we’re coming to the end of our allotted time. There’s just about time to wrap up. In a moment I’m going to thank our panellists. But just a reminder: If you’d like to attend a live Working Capital Forum event, there is a whole programme in 2019 and they will be coming to a city near you. We now run them all over the world. They’re entirely private, so nothing you say leaks out. And indeed, you can see Andrew and Matt enjoying themselves at a Working Capital Forum right there. We have treasurers and procurement directors from across the world, so do join us at a location near you. You can do that by visiting workingcapitalforum.com and clicking on “Request an invitation”. For now, it’s time for me to thank Taulia for being our sponsor, and of course to thank our panellists ? Andrew Wilson of BAE Systems, Nick Boaro from EY and Matthew Stammers from Taulia – and to thank you all for being here with us to Meet the Gamechangers. We hope to see you again soon. In the meantime, please go ahead and implement your own programmes. Thank you all and goodbye. Comments are closed.
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