Best Supply Chain Finance Solution

Winner: Philips
Published: Jul 2019

Photo of Andrew Burns, C2FO, Abdel Belkassem and Alexandros Diamantopoulos, Philips.

Alexandros Diamantopoulos
Finance Business Partner, Group Procurement

Abdel Belkassem
Project Manager Treasury

The Netherlands

Philips is a leading health technology company headquartered in Amsterdam, The

Netherlands. With a multinational workforce of approximately 77,000 employees and
global presence with sales and services in more than 100 countries worldwide, Philips
aims to improve the lives of three billion people a year by 2030.

in partnership with

For a global corporate, offering a supply chain

finance programme is challenging; this company
found a solution
The challenge

Philips’ existing SCF programme started in 2009. It was a bank-led reverse factoring
scheme, leveraging Philips’ balance sheet for its strategic suppliers. Though still
successful, it doesn’t suit all suppliers. Philips sought a solution capable of satisfying
every supplier, at the right time, at the right price, at the right underlying currency, whilst
also satisfying the needs of every internal stakeholder.

It also wanted to cover its huge spend in a short timeframe, even though that spend was
dispersed across an IT landscape of multiple ERP systems which itself has been under
pressure from the company’s biggest ever standardisation programme. Furthermore,
Philips wanted to support various government initiatives promoting access to liquidity for
SMEs.

The solution

In response to the creation of the Philips Early Payment Programme, C2FO was the
chosen technology provider. Its innovative solution uses artificial intelligence to help
Philips turn its trade payables into EBITDA. It is also cited as very easy to use and
flexible, with options for suppliers to choose how they want to discount, and rapid
payment processing to assist these suppliers’ cash flow planning.

Best practice and innovation

In the first nine months of operation, the programme delivered hundreds of registered
suppliers, facilitating a significant amount of accelerated payments to SMEs across
multiple countries around the globe. The success of the solution helped evolve a
mindset change, both from within Philips and spreading across the entire value chain.

Project success was aided because none of the internal stakeholders disagreed with the
objectives: everybody who embraced it became part of that success. All teams involved
(including treasury, finance, procurement, business and markets, IT, tax, information
security, accounting operations, purchase-to-pay and external shared services) put
Philips first. This overcame obstacles pertinent to individual KPIs, placing the overall
benefit of the company as paramount.

The project team established collaborative working groups, educated various

departments on the programme, and found solutions able to navigate challenges and
support each other. The programme is fully resonant with the company’s “Digital
Solution Creation and Automation” competency; this is one of the key strategic priorities
for Philips Finance until 2020.

The Philips Early Payment Programme was delivered on time, within budget and ahead
of plan. Instead of piloting the programme to one ERP system, at one buying entity, and
with a few suppliers of limited volume of transactions, the company went ahead with a
major roll-out. It was able to technically capture a substantially high percentage of
Philips’ total spend globally across six different ERP systems.

As this was a combined business and IT-driven large-scale project, the cost perspective
should not be overlooked. The programme’s innovative and light-touch technical
approach prevented Philips from engaging in an unnecessary deep ERP-integration
exercise. This made internal and external implementation costs significantly lower,
allowing investment in additional roll-outs which scaled-up the programme tremendously,
resulting in a surprisingly high ROI.
Philips has also changed its thinking about its suppliers. For example: although its
traditional bank-led reverse factoring programme is designed to cover the needs of its
top spend suppliers, the C2FO programme also appeals to its large suppliers. One of its
strategic suppliers in the personal health sector of its business, with a double-digit million
spend per annum, is actively using the new programme to manage its domestic currency
fluctuation and poor performance versus euro. Ultimately, the objective is to provide the
programme to more than 50,000 Philips suppliers.

Key benefits

 Implemented in ten weeks across multiple countries globally.

 Project payback period in less than 30 days.

 Technical connection of six SAP kernels.

 Hundreds of eligible suppliers onboarded to date.

 Accelerated significant value of early payments to SMEs.

Flex, Highly Commended, Best Supply

Chain Finance Solution
Published: Jan 2018

Photo of Sooria Narayanan, Flex and Thomas Aubry, Citi.

Flex has developed a three-pronged solution with its partners, comprising supply chain finance,
dynamic discounting and purchasing card. Importantly, the solution took only weeks to complete
from a single country pilot to full globalisation.
Vivian Peng

APAC Treasurer, VP Treasury

With over 100 sites in 30 countries, and six Product Innovation Centres, Flex provides
design, engineering, manufacturing, real-time supply chain insight and logistics services
to companies of all sizes across almost every industry. The company is involved in the
design, manufacturing, distribution and aftermarket services fields and aims at improving
speed, efficiency and cost effectiveness throughout the entire lifecycle of its customers’
products.

in partnership with

Dynamic supply chain finance

The challenge
Over the past few years, against a backdrop of changing global market volatilities, Flex’s
treasury team has faced challenges in improving its liquidity, working capital and
profitability, as well as adapting to an increasingly digitised and disrupted world.

To address these challenges, Flex’s treasury team was looking for an innovative
bespoke solution package to achieve the following goals:

 Deploy and introduce a dynamic discounting programme in conjunction with other

alternative working capital optimisation solutions.

 Work holistically with supply chain finance (SCF) to deploy advance technology
and solutions that would help suppliers to streamline and optimise internal pay-to-
order operational process, whilst minimising costs and errors.

 Optimise working capital on a global scale to improve group profitability and

liquidity position.

 Achieve higher returns on cash in Asian markets.

 Feature multi-currency and multilingual capabilities, particularly throughout Asia

Pacific.

 Ensure low risk/high-yield returns on group’s short-term liquidity.

 Ensure Flex suppliers have favourable financing alternatives.

The solution
After careful consideration, Flex chose to partner with Citi and C2FO to implement an
integrated solution package, which comprised of the following:
Supply chain finance
To stabilise the supply chain, unlock Flex’s working capital to improve efficiency,
increase liquidity for suppliers and lower financing costs to suppliers by leveraging Citi’s
balance sheet.

Dynamic discounting
For medium-to-small suppliers to enhance Flex’s rate of return by leveraging its own
balance sheet, provide early payment to suppliers to alleviate their funding needs,
reduce cost of goods, and optimise discount capture.

P-card
For low volume suppliers with small value purchases to increase Flex’s overall
operational efficiency, reduce costs and gain financial rebates from card volume usage.

With this three-pronged solution suite, Flex is now able to maintain an agile position to
nimbly deploy the appropriate solution arrangements, whether on a standalone basis or
a combination of solutions to address specific suppliers’ profile in a controlled and
targeted manner.

In just six months the solution enabled Flex to increase its profitability by an average of
significant incremental return on short-term cash. In certain markets, nearly half of its
supply chain has registered in the platform demonstrating the high receptiveness of the
programme by its suppliers.

Best practice and innovation

With the advent of digitisation and automation, the treasury space is ripe for disruption.
While the challenges facing Flex were not unique to the market, Flex’s treasury team
was determined to stay ahead of the curve and thus was looking to adopt new and
innovative ways to transform its treasury. By partnering with Citi, Flex demonstrated a
forward-thinking mind-set to implement an innovative and holistic trade finance solution,
which coupled SCF and dynamic discounting.

This sophisticated, yet easy-to-implement programme, benefits both sides of the

equation, creating a sustainable and collaborative relationship between Flex and its
suppliers. Under the present low-interest rate environment, the solution has delivered
satisfying return and adoption rate. In addition, the entire supply chain provides the trade
finance optionality with both SCF and dynamic discounting choices.

Moreover, the Flex solution took only weeks to complete from a single country pilot to full
globalisation. In today’s digital and fast-paced era, speed is of the essence to gain
competitive advantages.

Key benefits
 Provides a risk-free option to deploy global operational cash with reward.

 Significant incremental return on short-term cash.

 Enhances returns and gross margins and reduces COGS.

 Improves their global supply chain health by providing suppliers with easy access
to liquidity.
 Innovative approach for discounts awarded to accommodate Chinese VAT
considerations.