Supply chain finance – the corporate perspective

Clarissa Dann Welcome to Trade Finance TV in lockdown. I’m your presenter, Clarissa Dann and today, we’re going to take a closer look at supply chain finance from the corporate perspective. I’m joined in the studio by Oliver Triebsees, senior manager of Corporate Finance, GEA AG, and Anil Walia, Head of Supply Chain Finance EMEA, Deutsche Bank. Welcome Oliver and Anil.

Oliver Triebsees Thank you, Clarissa.

Anil Walia Pleasure to be here, Clarissa. Thank you.

Clarissa Dann Oliver. I hear you are inplementing supply chain finance all around the world in your organization. Would you like to share with our viewers what made you choose this?

Oliver Triebsees The decision was made in September/October 2019. At this point of time, the working capital increased step by step over the months and years, and it was definitely too high in our organization. In Q3 of 2019, the executive board decided to start a program with different sub streams to reduce the working capital figures, and supply chain finance should be one part of the solution.

Anil Walia A lot of our clients find themselves facing similar decisions, especially since some of the changes that have been happening in the environment and the economy for the past decade. It’s almost a bigger recognition of the fact that the buyer-supplier relationship is symbiotic. It’s not the good old days where the buyer had all the power and the supplier was subservient. Supply chain finance is changing the trade finance paradigm as a result of this.

Clarissa Dann Let’s take a closer look at the actual decision making process. Can you step us through it, Oliver?

Oliver Triebsees The biggest question was, who could be the best and right partner for GEA? Should we choose a bank or a FinTech partner? I had to criterion a list on the basis of the cost, the key integration effort, the supply chain finance platform, the funding solution, the expertize of the partner, the long-term partnership potential, the global presence of the partner, and the supplier onboarding concept.

Supplier onboarding was one of the most important things for selecting the right partner. We had to be assured that the bank or the FinTech company has the right marketing materials and the marketing approach, to prioritize face-to-face discussions, prep meetings, training sessions for procurement colleagues and so on. At the beginning, we thought a FinTech partner could be the better choice, but as you can see here, we selected Deutsche Bank at the end.

Clarissa Dann Turning to the actual implementation of supply chain financing at GEA, what were the learning points along the way? Where there any surprises?

Oliver Triebsees We have over 200 entities worldwide. It was a challenge to find and select the right entities and get the resources from the different local colleagues to make the integration. This complex and big company, we had to build a project team with a lot of colleagues of different cultures and different ways of work. The second challenge was a T-structure and landscape of GEA. We have around 17 different EAP systems. We must have close exchange to our IT colleagues to discuss what makes sense of where we should wait until we have a new EAP system. Now over the interaction and collaboration between IT colleagues and business colleagues, it’s not easy at all times.

The third challenge was everything around the supplier procurement topics. The key is to onboard as many suppliers as possible. You need your procurement department to do this. You should select the right suppliers with more spend volumes to gain a working capital effect fast. And this analysis was very hard. For everyone, 25.000 suppliers and our procurement department was in a reorganization. The spent analysis, which was needed to get an overview of the supplier structure, was very hard and the last point was to train our procurement colleagues. The better the colleagues are trained, the better they can negotiate, and we really needed cooperation between all project members, internal and external colleagues, from the beginning.

Anil Walia One of the first statements I made when we kicked off the implementation was, as of now, we are not client and bank, but we are partners because the success of the project will be measured by the same parameters for both of us. We have weekly meetings and we have steering calls once a month. We are already on phase two and we have implemented over 25 companies. And as we speak, the number of suppliers joining the program is growing at a very good pace.

Clarissa Dann COVID-19 has been with us for more than a year now and most recently we’ve seen a container ship stuck in the Suez Canal. How does supply chain finance protect against these sorts of black swan events?

Oliver Triebsees From my point of view the present finance helped us a lot during COVID-19. It was a good decision to start early. Supply chain finance has a lot of benefits during a crisis. Smaller companies could probably get in trouble with the banks and supply finance offer an alternative funding source for the suppliers. The next point is credit insurance reduced the limits in crisis. The suppliers get programs to cover the risk, but by using supply chain finance, they can reduce the counterparty risk and get an ability to sell more.

Anil Walia We had a lot of clients calling us up as the global situation became more serious, asking whether liquidity could become an issue in the market. We were able to confirm to them, quite happily, that is not going to be the case. We stand by our clients. On the physical side of procurement we have seen companies are rethinking this whole strategy of globalization. Does it make sense to have suppliers closer to you? People are asking us what other clients are telling them, but supply risk is becoming a decision-making sector going into the future.

Clarissa Dann Anil and Oliver, thank you so much for joining me in the studio today.

Oliver Triebsees Thank you, Clarissa, for having me here.

Anil Walia Thank you.

Clarissa Dann I’d like to thank Oliver and Anil for their insights today and, of course, I’d like to thank all of you for watching. To catch up on further insights from Trade Finance TV, do tune in to TRADEFINANCETV.NET.

Published on April 14, 2021