Improving working capital is a “huge focus” behind Dutch firm Royal DSM’s supply chain finance programme, said Sebastien Leroy, director, finance and control, group sourcing.
The chemicals and plastics producer first established its programme in 2010 with just three suppliers and a spend of €150m. By 2017 it had 78 active suppliers covering a spend of €1bn.
The aim of the programme was originally to address the problem that the company’s working capital needs were increasing and diverting funds away from other investment opportunities. This led the firm to consider how SCF could help them, Sebastien explained.
Today, the company’s DPO DSM is now 101 days, close to an “industry best”, he said. “Our DPO [days payable outstanding] is really good.”
Last year, the company launched a new strategy setting new targets. It is looking to expand globally building on its foundations in Europe and its growing presence in China and the US. The company secured its first active supplier in China in 2013 and moved into the US in 2015.
Latin America is the next target market for the company. “[There is] still very little traction in LatAm – this is a focus area,” said Leroy. It managed to secure two suppliers in Latin America in 2015.
The company is also aiming to increase its average annual net operating free cash flow by 10 percent by 2021 as well as achieve high single-digit percentage annual adjusted EBITDA.
However, Leroy said the company was not seriously looking at dynamic discounting as an option yet, as it did not want to “trade-off” working capital for gains in EBITDA.
Leroy said the future of the company’s SCF programme will take “smaller steps” as it brings on board smaller suppliers. Most of the large corporate clients in its main markets tend to already be involved in the programme.