Welcome to this ACT breakfast briefing: Supply chain ...
Transcript of Welcome to this ACT breakfast briefing: Supply chain ...
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Welcome to this ACT breakfast briefing: Supply chain finance: realising the potential
Tuesday 17 June 2014
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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Chair’s opening remarks
Colin TylerChief ExecutiveACT
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The importance of supply chain finance
Ana BotínChief Executive OfficerSantander UK
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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The government perspective
Lex GreensillCrown Representative and Senior AdvisorHM Cabinet Office
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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Supply chain finance from A to ZThe corporate perspective
Robert GilhoolyFinancial Shared Services DirectorEDF Energy
Alastair RussellTreasury and Insurance DirectorEDF Energy
The supplier perspective
David GallacherFinance DirectorWeir Services
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SUPPLY CHAIN FINANCE.
“A 360° View”
17th June 2014
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Agenda
• 1. Supply Chain Finance: A win-win working capital idea
- Alastair Russell
Treasury and Insurance Director
EDF Energy
• 2. How to make SCF a reality
- Robert Gilhooly
Financial Shared Services Director
EDF Energy
• 3. The supplier perspective
- David Gallacher
Finance Director
Weir Services
• . 4. Conclusions and final remarks
- Alastair Russell
Treasury and Insurance Director
EDF Energy
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1. Supply Chain Finance. 360° View1
• Legal Procurement
• Procurement
• IT
• Finance (GL, Treasury,
Payments, AP)
• Commercial/Sales
• Finance
• Supplier on-boarding
• IT
• Commercial/Sales
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2.1 EDF Energy. Who are we?
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LARGEST ELECTRICITY GENERATOR IN
UK…
• One of UK’s “Big 6” Energy Companies
• We generate 20% of UK’s electricity
• Largest generator of low-carbon electricity
• Supply gas & electricity to 5.5 million customers
• Main Facts:
• Revenues: £ 8 Bn.
• UK Employees: 15,000
• Assets: £28 Bn.
… PART OF GLOBAL EDF GROUP.
•World’s largest Nuclear generator
•One of the largest integrated energy
companies in the world with 40 million
customers.
• Large presence in France, UK, USA,
China etc.
• Main Facts:
• Revenues: €72 Bn.
• Employees: 160,000
• Assets: €256 Bn.
EDF Energy. Buyer perspective
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1. SCF. A Win-Win Working Capital Idea.
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2.2 Historical view of SCF? ….
• Perceived complexity
• Transition into new IT systems at EDF
• 10 Downing Street
• Working Capital Benefit
(terms extension)
• Support supplier base(reduction of funding costs,
accelerate funding)
…New Approach. Win-Win Solution
WIN
-WIN
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1. SCF. A Win-Win Working Capital Idea.
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2.3 EDF Energy’s Financial Goals
FIRSTLY
•Support our suppliers and help reduce their cost base (and ours)
•Provide liquidity to SME suppliers at suggestion of HM Government
•Rationalise our payment terms
THEN
• Additional operating cash flow generation
• Parent company goal to reduce funding needs
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1. SCF. A Win-Win Working Capital Idea.
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2.4 Working Capital in the Energy Utilities Sector
• Economic context
• Competitive environment
• Pressure on margins
•Cash for investment
Greater Working capital Discipline
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1. SCF. A Win-Win Working Capital Idea.
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2.5 Making the decision to implement a SCF program
•Government request to support UK business by providing source of finance
•Cost/Benefit analysis in achieving working capital targets.
•Senior management sponsorship
• CFO, Finance Shared Services, Treasury, Parent Company
• Request for proposal sent to specialist banks in the area.
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1. How to make SCF a reality.3
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1. How to make SCF a reality.
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3.1 Initial Challenges
• Identify competitive banks in SCF
• Define EDF’s key requirements and timeline
• Delivery of the project within the expected timeline
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1. How to make SCF a reality.3
3.2 Implementation process
Legal (1 month)
IT Set up (2 months)
Supplier On-boarding (2 months)
July November
Accounting
Discussions
August September October
Engage Supply Chain Function
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1. How to make SCF a reality.
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3.3 Lessons learned
Senior Management
Support
Project leader with
specific objectives
Governance
• Set and cascade organization’s
objectives.
• Help to unblock potential
problems.
Partnership with
Procurement teams
• SCF a useful tool for procurement..
• Finance and bank to assist.
procurement in financial discussions
with suppliers.
•Provide appropriate training.
•Engagement with Key Suppliers and
supply base generally.
• Allocate tasks within the
organization.
•Authority to make decisions.
• Coordinate communication with
bank, suppliers and
procurement.
• Ensure deadlines are met.
• Timely review of progress and
next steps with your bank.
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1. Supplier Perspective
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4.1 Weir Engineering. Who are we?
Minerals
Oil & Gas
Power & Industrial
…. Part of Weir Group Plc – FTSE 100 Global
Engineering Group focussed on partnerships with our
customers.
• Design, manufacturing and supply products and solutions to a wide
array of customers mainly in Minerals, Oil & Gas and Power markets.
• Presence in over 70 countries. 1/3 of revenues coming from
Emerging Markets in Asia, S. America and Africa.
• Main Facts 2013:
• Revenues: £2,430M
• Employees: 15,000+
• Free cash flow: £168m up 171%
OUR MAIN BUSINESS AREAS.
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1. Supplier perspective.
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4.2 How was the program introduced to Weir Services?
• Introduced to Finance Director rather than Supply Chain or Treasury
• Who is the right person to contact in the organisation.
• Procurement or treasury team at EDF?
• Terms extension and SCF communication
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1. Supplier perspective.
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4.3 How was the program perceived by Weir?
• Working Capital impact
•Cost of program vs. cost of financing for Weir
• Ease of on-boarding
• Ease of use.
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1. Supplier perspective.
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4.4 Pro’s and con’s
PRO’s CON’s
• Communication and engagement from
EDF
• No system requirement other than
Internet
• Flexibility on cash timing
• Low cost versus benefit
• Simple and effective
• Visibility of invoice status
• Time saving (credit control)
• Extended terms as standard
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1. Conclusions and final remarks.
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5.1 Status of the program and way forward
• Program pilot completed with about [10] large suppliers.
• Program to be rolled out to supplier wider base from July
• Objective to reach 300 to 500 suppliers.
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1. Conclusions and final remarks.
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5.2 Selecting the right partner
• Experience is key:
• Implementation, supplier on-boarding, IT flexibility.
• Ease of on-boarding.
• Marketing resources.
• Ability/willingness to reach small and medium suppliers.
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30 SCF Roll Out 2014
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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Taking supply chain to the next level: a corporate case study
David NiotakisUK Treasury DirectorTesco
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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ACT BREAKFAST BRIEFING17 June 2014
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Agenda
• Tesco at a glance
• Working capital as a strategic initiative
• Improving supply chains
• SCF in Tesco
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Tesco at a glance
• Tesco is the world’s second largest retailer by profit
• We operate in 12 markets employing over 500,000 colleagues globally and we are the UK’s largest retailer
• The company was founded in London in 1919 and has grown from a single market stall to become a multichannel global retailer
• 6,784 stores globally
• Leading online food retailer in UK
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Investing in a strong UK business
Sharper prices,
improved quality,
stronger ranges,
better service
Large stores
that are worth
the trip
Continued
leadership in
convenience
and online
Seamless
multichannel
offer
Differentiated,
added-value
products and
services
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Financial disciplines Guiderails
Generate positive free
cash flow
Allocate capital within range of 4% down to 3.5% of sales
Maintain a strong investment grade credit rating
Trading profit growth
• Mid-single digit
Dividend growth• In line with underlying EPS
• Target cover of more than two
times
Sustainable ROCE
• 12 - 15% range
The importance of cash
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Improving supply chains
• Everything starts with the customer
• The industry is in transformation
• Tesco must help lead the change
• Strengthening relationships with suppliers
• Better value and better products for customers
• SCF can help facilitate investment into supply chains
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Supply chain finance in Tesco
• SCF programmes in 7 countries
• In the UK, the programme was put in place to support suppliers
• Over 100 SMEs actively using the programme
• Taking SCF to the next level
– Clear objectives
– Engagement at the right level
– Linking it to financial guiderails and strategic initiatives
– Win-win relationships with suppliers
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Panel discussion
Chair
Colin TylerChief Executive, ACT
The panel
Alex FarrugiaHead of Supply Chain Finance UK, Santander
David GallacherFinance Director, Weir Services
Robert GilhoolyFinancial Shared Services Director, EDF Energy
David NiotakisUK Treasury Director, Tesco
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Supply chain finance: realising the potential
Tuesday 17 June 2014
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Chair’s closing remarks
Colin TylerChief ExecutiveACT
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FORTHCOMING EVENTS
treasurers.org/events
ACT Europe Conference26 June 2014 | Düsseldorf
ACT Northern Conference2 July 2014 | Leeds
ACT Middle EastAnnual Conference27-28 October 2014 | Dubai
ACT Annual Dinner12 November 2014 | London
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Thank you for attending this ACT breakfast briefing
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Tuesday 17 June 2014