On your marks… set… GO! Okay, so not quite as quick as an Olympic sprint, but agricultural equipment maker AGCO – known for brands such as Massey-Fergusson, Fendt and Challenger – worked with PrimeRevenue to implement its new supply chain finance programme from start to go-live in just 60 days. The programme was initially presented to the top 80% of AGCO’s North American suppliers and more than half of them are now either onboarded or in the process of signing up.
The programme came about after a competitor benchmarking exercise in which AGCO realised that payment terms presented a huge working capital opportunity for them. But as AGCO’s director of logistics and materials management, Dustin Barney, says, “We didn’t want to put our suppliers in a bad spot; we wanted to give them an opportunity to manage their working capital, just like we’re taking an opportunity to manage ours. So, along with our payment terms initiative, we decided to roll out a supply chain finance programme that we could offer to suppliers.”
Barney and PrimeRevenue’s senior director of sales for North America, Brian Medley, explain to SCFBriefing what the key steps were in implementing the programme.
(1) Choose the right partner
Once the decision to embark on a SCF programme was made, it then came down to deciding on the right type of solution. With myriad working capital solutions on the market it is imperative that businesses do their homework. Barney was clear that the process of selecting the right partner was time well spent, even though it was possibly the longest phase in the planning and execution.
Switching platforms after a few years was not an option because of the disruption it would cause to both AGCO and its suppliers. “We wanted to make sure we were partnering with the right company,” says Barney. “It was very critical. Once you implement a SCF programme, it’s not something that you want to change a year or two down the road.”
A cross-functional team with AGCO representatives from purchasing, accounting, IT, treasury, and finance reviewed bank and non-bank solutions, and decided that flexibility was of the upmost importance. “There were a couple of things that differentiated the non-bank versus bank for us. The bank programmes were a little less flexible; we liked the fact that PrimeRevenue works with multiple banks and were able to bring in other banks to fund the programme and compete against each other,” Barney says. “Today, we have two banks funding the programme, one of them being a partner bank of ours and the other being a bank that we previously didn’t have any relationship with.”
Selecting PrimeRevenue also gave AGCO the opportunity to fund the programme, too. “There may come a time where we have cash that we’re not necessarily doing other things with and so we would want to fund part of the programme and take potential discounts,” Barney says.
(2) Alignment is key
With PrimeRevenue ultimately selected as partner of choice, the race to the finish really began. AGCO’s major challenge was the number of ERP systems and accounts payable processes that had grown over time within the group. For PrimeRevenue’s Medley, the approach was all about coordination between the two businesses: “We create clear alignment across the organisation of not only the initiative, but also the focus and resources that are required to do that. We’re heavily dependent on the leadership that Dustin and the AGCO team provide,” he says. “We work very closely with our clients so we’re able to understand the nuances of the programme for AGCO and its suppliers.”
The alignment process includes suppliers, too, of course. ‘’We help to educate suppliers on the benefits of supply chain finance and how it impacts their business specifically, [showing that] it’s not just a one-size-fits-all,” Medley says.
(3) Consistency across the group
With multiple sites and brands under the North American AGCO umbrella, it was decided that the programme would be launched there. Other regions, including Europe, would be looked at after the first phase achieved success. It was important that suppliers were not disrupted in any way, Barney says. “We share a lot of suppliers between our different operational sites in North America, so we were trying to create some continuity for our suppliers. We didn’t want to offer them a programme for two sites and not a third. This was also a way for our suppliers to get on one platform and have one set of rules in dealing with AGCO.”
(4) Talking, talking and more talking
With focused and coordinated teams set up across both companies, the time came to review and segment suppliers. PrimeRevenue’s SciMap tool helped. “SCiMap analyses the spend with suppliers and looks at the objectives around payment terms and cashflow – how to most efficiently find and deploy working capital, term extensions, and overlap with supply chain finance,” says Medley. “It analyses the benefit to AGCO of the term extension, and that takes in a number of factors including the volume of spend, the current terms that they’re on with those suppliers, what jurisdictions are they in, and other nuances about the buyer-supplier relationships that are going to come from this collaboration with AGCO.”
The review also examines details about the suppliers to help identify opportunities for them, too, Medley adds: “We look at how material is the spend to the supplier’s overall business and what terms are they starting on. That helps us understand how much working capital the supplier can generate from participating in supply chain finance.”
Using this information, AGCO and PrimeRevenue were able to use a phased approach by targeting the most appropriate suppliers and initiating conversations with them. Those conversations, understandably, took quite a lot of time.
“For suppliers who were unfamiliar with these types of programmes, the initial reaction was a bit cautious and unsure,” says Barney. “Typically, after the second conversation or maybe a third one, they would say, ‘We understand this now and we want to try it,’ or, ‘No, we do understand it, but we don’t want to go down this road for this reason or that reason.’”
(5) People, process and technology…
A 60-day implementation is no small task but AGCO and PrimeRevenue have proven that it can be done. “It’s really about people, process and technology,” says Medley. Ensuring the right people and the right level of resources are committed to the project was absolutely vital.
Having a clear end-point in mind allowed AGCO to review providers and select one that was flexible with regard to sources of funding; scalable when rolling out across the company; and experienced in ensuring that supplier onboarding was done smoothly.
And while PrimeReveue’s SCIMap tool showed that strategic use of technology allows suppliers to be segmented quickly, its SCIEnable tool helped as well with faster onboarding and training for suppliers. In fact, the implementation was named the ‘Best Customer Implementation of a Supply Chain Financing Solution’ by Global Finance magazine. So, AGCO got an SCF programme that really was outstanding in its field.