 Supply chain finance can be used as a tool to help optimise bids for windfarm concessions, says Michiel Deurwaarder, senior strategic buyer at European energy company Vattenfall speaking at the Working Capital Forum Europe on 1st December.
Ahead of putting together a bid, the Sweden-based company qualifies its suppliers and offers them opportunity to participate in a SCF programme. It signs memorandums of understanding (MoUs) with top suppliers to consider SCF for any project. Supplier participation in the programme allows Vattenfall to better manage its cash flow and boost its return on capital employed (ROCE) helping the company put together a competitively priced bid for the concession. “It delivers a competitive edge for Vattenfall to acquire the strategically important projects to shift energy generation from fossil to renewables,” Deurwaarder’s presentation stated. Depending how long the windfarm takes to build, what payment terms are achieved with suppliers and the expected payback of a project, the expected ROCE is increased by 0.2 to 0.4 percent. This improvement could be key in winning a concession. Under the terms of the SCF programme, payment terms could be extended to 120 days. However, those suppliers on the platform benefit by accessing much earlier payments while Vattenfall enjoys extended payment terms. Vattenfall first launched its SCF programme in 2017. Since then, it has financed €4,377 million-worth of transactions. It has 95 suppliers live and trading on the platform. It partnered with tech company CRX Markets to provide the platform and works with banks including ING, Helaba, BNP Paribas, RBS and SEB. The company is looking at how to add a “real and verifiable” ESG component to the programme. However, Deurwaarder sees some challenges on horizon. SCF could be undermined by changes in IFRS rules and how SCF is treated on balance sheets. Rising interest rates could threaten the appeal for suppliers to participate in programmes. Furthermore, governments could decide to ban longer payment terms which would lessen the benefit for Vattenfall.  Growing geopolitical tensions, particularly with China, are likely to encourage companies to diversify where they build their new factories in the coming years, says Menno Middeldorp, head of RaboResearch at Rabobank.
Speaking at The Working Capital Forum Europe in Amsterdam on 1st December, he forecast that China may lose its “lion’s share” of the total volume of new factories and foreign direct investment that it has become use to in recent years. The lingering aftermath of the covid pandemic coupled with the heightened tensions between the US and China may push many global corporates to consider building factories in new locations or even in their home country. The trend towards “reshoring” or “nearshoring” is being widely and increasingly discussed and is being reflected in the economic data, Middeldorp remarked. Manufacturers are beginning to ask themselves where “can I build confidently where it won’t be part of a conflict between my country and another country”. “As long as you think it is a risk – it makes sense to diversify their manufacturing base,” he said. India is one country that Middeldorp sees “benefitting from the geopolitical change in direction” – given the country’s friendly relations with the US and its lack of reliance on China among other factors. Latin America is another region that could benefit from this trend towards diversification, says Middleldorp. The potential impact of this trend on supply chains could see companies look to have higher inventories to be “robust” in different scenarios, he added. Middeldorp also outlined his forecasts for inflation and interest rates, painting a relatively gloomy picture of high – although stable – food prices over the next year. While gas prices in Europe have slightly come down, he forecasts a potential hike in prices once again next year as the region approaches winter 2023. Europe is currently using up high reserves built with Russian gas, he explained, noting how by next year these reserves would have dwindled, which will inevitably push up prices. He forecasts that world trade growth will slow in 2023 with recessions expected. Reflecting on the actions of central banks to try and control inflation, he asks “the real question is how fast will inflation come down” – noting that although inflation is edging down, it is still nowhere near the 2 percent target held by most countries in Western Europe.  A global supply chain finance programme with ESG at its heart won the Gold Award for Coca-Cola Europacific Partners at last night's Working Capital Awards ceremony in Amsterdam, sponsored by American Express. The Rabobank-run project does not include any payment terms extension for CCEP. Instead the aim is to work towards the group's target to reduce greenhouse-gas emissions across its value chain by 30 per cent by 2030.
Anthony Breach, head of procurement at Coca-Cola EuroPacific Partners, accepted the trophy in front of an audience of treasury and procurement leaders at the Amstel Hotel. Judges were impressed with the company’s use of supply chain finance (SCF) to help encourage sustainable behaviour among its suppliers. The SCF programme works by incentivising suppliers to reduce their carbon emissions in return for more favourable financing rates. The judging panel also recognised Coca-Cola’s efforts to make the programme as accessible as possible, with suppliers of all sizes invited to join. They also praised the soft drink producer’s decision not to link any extension in payment terms to the SCF programme. The winning programme reflects a wider industry trend among multinational corporates to look at how they can reduce the carbon footprint across their entire value chain. Many of this year’s award entries had a sustainability angle to them, with corporates looking at how SCF and other working capital solutions can be part of a broader strategy to reduce carbon emissions and encourage other sustainable practices among their suppliers. Other winners and those awarded Highly Commended this year include global discount store brand Pepco who uses SCF to maintain its market position as a low-cost retailer; the Swiss chocolate producer Barry Callebaut who turned to SCF to meet certain ESG goals, and Arçelik, a Turkish household appliance manufacturer who is using SCF to help its suppliers tackle high inflation. The full list of awards is below. Best Integrated Working Capital project Winner: Teva Pharmacueticals Highly Commended: Arcelik Best use of Supply Chain Finance Winner: Pepco Group Highly Commended: Pick n Pay Best ESG Working Capital Initiative Winner: Coca-Cola Europacific Partners Highly Commended: Barry Callebaut, Pick n Pay Best use of Receivables Finance Winner: HCL Highly Commended: Krispy Kreme Best use of Payables Finance Winner: Arçelik Highly Commended: Coca-Cola Europacific Partners, Henkel Best Cash Forecasting Initiative Winner: Kellogg's Best Working Capital Funding Solution Winner: Pick n Pay Highly Commended: Arçelik, Kellogg's Best use of Technology for a Working Capital Project Winner: Kellogg's Highly Commended: Arçelik, Coca-Cola Europacific Partners Working Capital Champion: Thomas Dunn, Orbian Working Capital Startup of the year: WeFi Working Capital Innovation Award: Calculum  America's largest public companies, 'May have reached the limits of their ability to stretch payables terms with suppliers in mid-2022,' according to a research update from The Hackett Group. The Q2 2022 update to the Working Capital Survey suggests these companies, 'Fairly successfully navigated inventory management in the face of high levels of global uncertainty.'
The report goes on to highlight a fall in DPO of 1.1% (from 56.5 to 55.9 days) in Q2 2022, indicating a shift of leverage toward sellers. “This is the true definition of an inflection point, and a trend that is likely to continue,” said The Hackett Group Director Shawn Townsend. “Buyers have become more concerned with supply assurance, and have had to become less prescriptive about how they receive goods and services. In addition, while supply chain financing remains popular, buyers are more focused on using it to stabilize and reinforce the supply base than to extend payment terms.” The full report is available here  Dole Asia Holdings has chosen Taulia to run its dynamic discounting and supply chain finance programmes. Singapore-based Dole is a global consumer food and beverage company that produces and distributes fresh fruits and vegetables and packaged food products.
Its initial participating funders for the supply chain finance program are two international banks, and Dole plans to add other preferred banks in the future. More than 2,000 suppliers across Singapore, the Philippines, and Thailand will have access to the program. ________________________________________________________________________________________________________________ Taulia will demonstrate its dynamic discounting solution at Working Capital Forum Europe in Amsterdam on 1st December.  Duncan Mavin, author of the definitive book on the downfall of Greensill, will join a panel on the future of SCF at Working capital Forum Europe in Amsterdam on 1st December.
Mavin, whose book offers forensic detail on the story behind the collapse of SCF provider Greensill, will join the panel, entitled End of the wild west? Navigating the disclosure and regulation landscape for supplier finance, along with Sean Edwards, CEO of the International Trade Finance Association, Thomas Dunn, chairman of Orbian, and Frederic Gits, Group Credit Officer, Corporates at Fitch Ratings. The panel will ask whether new guidance on the disclosure of SCF schemes may bring transparency to what has sometimes been seen as an unregulated minefield for corporate and investors. This panel is one of 20+ sessions at Working Capital Forum Europe. The full agenda is here and tickets are free of charge for corporate treasurers and procurement heads.  Total trade flows reached nearly 20% above pre-pandemic levels in 2021, according to new data from The ICC, with default rates dropping across all categories. For supply chain finance, the obligor-weighted default rate decreased from 0.93% in 2020 to 0.06%
The data comes from the 2022 Trade Register report, produced by ICC with partners Global Credit Data (GCD) and Boston Consulting Group (BCG). Despite the current macroeconomic uncertainty, BCG expects global goods trade to continue to grow at a further 5.6% compound annual growth rate (CAGR) over the next 10 years on a nominal basis, and 2.3% in real terms. Despite the current macroeconomic uncertainty, BCG expects global goods trade to continue to grow at a further 5.6% compound annual growth rate (CAGR) over the next 10 years on a nominal basis, and 2.3% in real terms.  Ten companies have been named as shortlisted entries for the 2022 Working Capital Awards, sponsored by American Express. They range from pharmaceuticals to FMCG and from retail to technology. The shortlist is released today after an independent jury spend a week scoring 25 entries. Category winners and 'highly commended' entries will be announced at the Awards Dinner on 30th November at The Amstel Hotel, Amsterdam (above). The evening will also see one entry named as 'Gold Award Winner', representing the best example of working capital among all the entries. There will also be special awards for Startup of the Year, Innovator of the Year and Working Capital Champion. Many of the winning entries will be invited to speak during special sessions at Working Capital Forum Europe at The Beurs van Berlage, Amsterdam, on 1st December. Tickets for the Awards dinner and for the conference are available here.
 Treasury Intelligence Solutions (TIS) has launched Working Capital Insights, which integrates data from multiple sources to deliver working capital metrics and KPIs on one dashboard. TIS, once best known as a payments systems provider, acquired cash forecasting specialist Cashforce in June. TIS says the new solution allows corporations to, 'Integrate their ERPs and corresponding AP and AR data with the solution in order to review payment terms and behaviour for vendors and customers, analyse invoice and billing activity, and measure all elements related to their net working capital status and cash conversion cycle.' As a use case, TIS suggests users can evaluate DPO or DSO to identify discrepancies in payment behaviour across regions or customer groups, and could also analyse payment and invoice terms across their supplier base to look for extra efficiencies or adjustments. Erik Masing, CEO of TIS, described the launch as, 'The perfect addition to our existing cash, liquidity, and payments management capabilities.' TIS will share more details of this solution at Working Capital Forum Europe in Amsterdam on 1st December.
 The Financial Accounting Standards Board (FASB) has issued its long-awaited Accounting Standards Update (ASU) covering the disclosure of supplier finance programmes. Under the newly-published rules, a company that uses a supplier finance program will be required to disclose sufficient information about the program, 'To allow a user of financial statements to understand the programme’s nature, activity during the period, changes from period to period, and potential magnitude.' Specifically, a buyer will be required to provide the following qualitative and quantitative information:
'The new ASU responds to requests from investors for greater transparency around a buyer’s use of supplier finance programs,', said FASB Chair Richard R. Jones. 'It enhances transparency by requiring new disclosures intended to help them better consider the effect of these programs on a company’s working capital, liquidity, and cash flows over time.' The new rules will apply to fiscal years beginning after December 15, 2022. The new regulations - and the future of supplier finance - will be the topic for a special session at Working Capital Forum Europe in Amsterdam on 1st December.
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