supply chain finance models part 1: bank-agnostic models, bank-funded and managed approaches
TRANSCRIPT
Supply Chain Financing – Bank Funded
Solution
Stephen Kunz– Director of Corporate Finance, Working Capital Lead
Sean McDermott – Manager, North America Accounts Payable CBS
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
GlaxoSmithKline Mission
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
Strategic priorities
Our business is focused around the delivery of five strategic
priorities, which aim to increase growth, reduce risk and improve
our long term financial performance
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
GSK Structure
Finance
Business Service Centers
Business Process
Outsourcing
North
America
Europe
Asia
Pacific
HR
Procure
-ment
Real
Estate
IT
CBS
R
E
G
I
O
N
A
L
G
L
O
B
A
L
Working
Capital Team
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
Cash Cycle Performance - External View
Progress Versus Benchmarks - Ranked by 2010 Performance
Days Inventory Outstanding Days Sales Outstanding Days Payable Outstanding
308
243
232
224
203
201
190
186
161
146
120
98
92
62
Novo Nordisk
Pfizer-Wyeth
Merck-SGP
Eli-Lilly
GSK 2008
GSK 2009
GSK 2010
Sanofi
Novartis
Roche
Bayer
AstraZeneca
Bristol Myers
Unilever
79
76
75
70
67
66
66
66
66
62
55
54
47
31
Pfizer-Wyeth
Roche
GSK 2008
GSK 2009
Sanofi
GSK 2010
Novartis
Bayer
AstraZeneca
Bristol Myers
Merck-SGP
Eli-Lilly
Novo Nordisk
Unilever
2010 Data from published reports and Citigroup Investment Research and Analysis
13
21
23
24
26
26
29
36
37
37
42
46
47
55
Roche
GSK 2008
Eli-Lilly
Novo Nordisk
Merck-SGP
GSK 2009
GSK 2010
Bayer
Pfizer-Wyeth
AstraZeneca
Novartis
Sanofi
Unilever
Bristol Myers
10
GSK 2011
GSK 2011
GSK 2011
161
61
192
43
Evolution of Working Capital Efficiency 2008 – 2011
Dec-2008 Dec-2009 Dec-2010 Dec-2011
DSO 75 70 66 61
DPO 21 26 35 43
DIO 203 200 190 192
Total CCC 257 224 221 210
WCAP
% of Sales 34% 27% 23% 21%
2011 FY Investor / Analyst Results Presentation
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
GSK - DPO Journey to Best in Class
Key Activities:
–Centralized Working Capital Team
–Procurement
–Finance
– Standard Terms
– Payment from Receipt of Invoice
–Contract Terms to Spend Actual
– Supplier Rationalization
– Supply Chain Finance Program
0
5
10
15
20
25
30
35
40
45
50
2009 2010 2011
DPO
DPO
Keeping Your Business Partners Happy
• Terms and Conditions.
• Payables Process. Communication
• Efficient receipt and processing of invoices.
• Supplier visibility of payment process.
Streamlined Payables
Operations
• Supply Chain Financing
• Discounting Programs
• Procurement Card Spend
Multiple Solutions
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
17
Supply Chain Financing - Bank Model Process
SUPPLIERS
E-Invoicing Portal
Invoice Data
Sent to Bank
Supplier decides to
accelerate
payment and paid
by bank
Payment is made to bank based on
suppliers terms.
Invoice
Submission
Invoice
Receipt and
Approval
Program Implementation
Supplier Engagement
• Internal Champions
• Identify suppliers
• Communicate Benefits:
• Accelerate DSO
• Alternative Source of liquidity at a potentially lower cost
• Manage cash flow needs
Supplier onboarding
• Collaboration required between all parties.
• Agree Strategy
• Complete Legal and Technology activities
• Provide Training
• Process overview.(internal)
Go Live
• Ensure internal process is well documented.
• Monitor program suppliers
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
Key Learning and Takeaways
Learnings:
– Ensure payables process is streamlined.
– Key business partners need to be educated when their supplier moves onto the
program.
–Change in process rules internally must be identified
–Change in company policy need to be communicated to bank.
Takeaways:
–Communication with you bank partner is critical.
–Understanding at the operation teams who is the key contacts.
– Ensure your suppliers are betting the benefit!
Agenda:
GSK - Who we are
Strategic priorities
Structure
External view
Working capital program
Bank funded supply chain solution
Lessons learned
Questions
Stephen Kunz– Director of Corporate Finance Working Capital Lead
Sean McDermott – Manager, North America Accounts Payable CBS