Category: Manufacturing and industrial

Highly-commended: HillenbrandUSA

Partner: PrimeRevenue

Summing up: A successful SCF implementation in one business unit reached even smaller suppliers than originally anticipated. The programme is now being rolled out to the rest of the group.

What the judges said: “Three-quarters of targeted suppliers have transitioned to supply chain finance and more than 90% of uploaded invoices have been traded.”

Key facts:

  • Working capital became a priority after a difficult year
  • A high level of supplier uptake is freeing up cash for Hillenbrand and giving suppliers access to cost-effective liquidity
  • The programme is now being deployed to other business units

The entry:

Indiana-based diversified industrial group Hillenbrand suffered a 50% decline in free cash flow in 2015, after which it sought to drive enterprise value by improving working capital. One aim was to generate cash for investments with higher returns. The CFO’s experience with supply chain finance in previous roles and so mandated Hillenbrand’s treasury function to explore various options.

PrimeRevenue was asked to complete a working capital analysis of nine different Hillenbrand locations with a combined potential qualifying spend of $630m. PrimeRevenue concluded that $25m-35m of cash flow could be freed up from the company’s two largest operations alone, with a total of $65m on the table across the sites examined.

Consequently, the company launched a supply chain finance programme in its Batesville deathcare business, aimed at suppliers where spend exceeded $500,000 a year. Within its first year, Batesville achieved 127% of its Phase I cash flow goal, freeing up around $25m – a significant contribution to the group’s free cash flow of $230m in 2016. The group’s share price has risen from the mid-$30s to nearly $50 a share in July 2018.

More than 74% of targeted suppliers have taken up SCF, helped by PrimeRevenue’s Electronic Time Draft (ETD) solution which cut onboarding time from weeks to days. The solution also enabled the funding bank to reach suppliers where spend is just $250,000 a year – half the initial lower threshold.

In the first six months, 83% of the spend that had transitioned to the SCF programme had been accessed for early payment, providing suppliers with enhanced financing flexibility at a cost-effective rate. That figure has since risen to 90%. For Batesville, DPO went from an average of 14.5 days to 40.7 days, enabling the division to increase cash flow at a time when income had declined.

The programme has now been expanded to Hillenbrand’s process equipment companies.

Winner in this category: Siemens

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