Prompt payment legislation could be having a dampening effect on supply chain efficiency, according to research from The London Business School. 

In their article, Fix the Financing of Supply Chains, Nitish Jain and S Alex Yang examine France's ​LME law, which restricts trade credit to 60 days for most French firms.  

'We found that the LME had a significant impact on retailers’ inventory investment,' wrote Jain and Yang.  'Taking hardware retailers as an example, the LME caused a 16 percent decline in trade credit, which subsequently led to an 11 percent reduction in inventory. A drop in inventory is not only going to lead to emptier shelves and more unsatisfied customers, but also hurt retailers’ financial performance. Indeed, we observed a 15 percent drop in revenue and a 3 percent decline in gross profit for retailers due to trade credit restrictions.'

Jain and Yang argue instead for a market-based approach that incorporates supply chain finance platforms. 'The future of the financial supply chain should be empowered by technology, not confined by stricter regulation,' they conclude.

Taulia has signed a memorandum of understanding with Standard Chartered to collaborate in delivering working capital finance solutions, starting with supply chain finance and dynamic discounting. It's the first time Taulia has signed with a bank since its acquisition by SAP.

'We are proud to announce the signing of the MoU with Standard Chartered and this marks another milestone in Taulia’s journey to grow our bank network and work closely with our partners to deliver working capital solutions for all of our clients,' said Thomas Mehlkopf, Head of Working Capital Management CoE at SAP and member of the Taulia Leadership Team. 

Revenues from supply chain finance at the world's 10 largest transaction banks increased by more than 20% in the first half of 2022, according to new data from Coalition Greenwich. 

​The increase contributed to a 22% rise in combined revenue from cash management and trade finance to reach $15.6 billion. 

​Coalition Greenwich tracks transaction banking revenues at Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC, JPMorgan, Société Générale, Standard Chartered and Wells Fargo.

Join Europe's top companies at  Working Capital Forum Europe, Amsterdam, 1st December 2022

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. 

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.”