Category: Technology and Telecoms

Winner: Philips – The Netherlands

Partner: C2FO

Summing up: A dynamic discounting programme driven by a determination to be ethical and fair towards suppliers, giving them optionality so they can best meet their own working capital needs. Suppliers have been quick to take up the programme.

What the judges said: “The metrics reflect the success: enabling collaboration to achieve an ROI in less than 30 days, 1509 suppliers onboarded in 60 countries globally with 7% of spend accelerated in the first 60 days, and positive feedback from the suppliers.”

Key facts:

  • A programme designed to meet the needs of every single supplier
  • Innovation and a commitment to ethical treatment o

f suppliers were critical objectives

  • Payments accelerated by an average of 41 days

The entry:

As an innovative company, Philips doesn’t believe that innovation starts and stops with finding new products and solutions. That’s just the tip of the iceberg for the company. The bulk of the iceberg lies in challenging the status quo and enabling an environment within the company and beyond, to allow ideas to be accepted, implemented and successful.

With the current political climate challenging many of Philips’ suppliers, the company’s objective was “to support every single one of them, globally,” with an easy-to-use solution that would meet their cash needs.

Philips also wanted a dynamic discounting model, but one which didn’t impose a standard fixed price. Rather, an innovative approach that offered complete flexibility and optionality to suppliers was called for, so that they could request early payment when it suits them to do so.

Within ten weeks, Philips implemented a solution from C2FO that allowed every supplier fair access to liquidity at a rate of their choosing, with the company achieving a return on its investment in less than 30 days. More than 1,500 suppliers were onboarded across 60 countries with 7% of spend accelerated within the first 60 days. In fact, payments have been accelerated by 41 days on average.

Philips pioneered supply chain finance in 2009 with a bank-led reverse factoring programme that still meets the needs of some 65 strategic suppliers. mostly in Europe and the US. But it did not meet the needs of other suppliers, especially in an environment where liquidity is cheap for large and listed companies, but scarce and expensive for those that are small. The company wanted a solution that worked seamlessly with its existing procure-to-pay (P2P) processes and which benefitted the company in “a fair and ethical way”. It was also important to support government initiatives such as the Dutch Betaalme.nu (‘Pay me now’), the EU Late Payments Directive and the UK Prompt Payment Code.

Various functions had different objectives. To list just a few: Procurement wanted to strengthen supplier relationships, for example. Finance wanted additional EBITDA while managing working capital. Treasury wanted more effective use of trapped cash and IT wanted zero integration work at a time when the business was standardising more than 15 different SAP systems across the organisation.

C2FO was chosen because its unique marketplace technology and artificial intelligence allowed Philips to turn its trade payables into EBITDA.

Feedback from suppliers has been very positive. One in particular said that they were told by C2FO, “Philips wants you to have a strong company. It wants its partners to be strong and healthy.” The supplier responded: “That is really rare. Most of the other companies use us as a free loan facility. This way, I am even more motivated to provide extra service and quality to Philips.”

Within Philips, internal stakeholders put the needs of the company ahead of their own individual KPIs. Collaborative working teams and education programmes enabled the company to find solutions to challenges that presented themselves.

In line with the idea of challenging the status quo, Philips has found that its supplier finance programme has prompted other ideas and initiatives, such as working to reduce invoice throughput time; ‘Hedging 2.0’, which is to say natural hedging by accepting early payments in certain currencies to reduce exposure and hedging charges; leveraging the competitive advantage the programme gives it compared with rival customers of its suppliers; and optimising the end-to-end source-to-pay process.

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