Siemens, Liberty Global press forward with supply chain finance

Supply chain finance programmes are becoming ubiquitous for companies at either end of the credit rating scale. Bija Knowles and Ben Poole report.

Munich-based industrial giant Siemens has increased supply chain finance to 17% of cost of sales according to a presentation given at the International Treasury Management conference in Geneva.  Three thousand of the company’s suppliers are now part of Siemens’ SCF programme, amounting  to €3.45 billion in 2017 as measured by purchase volume outstanding.

In the presentation given by Friedemann Kirchoff, head of receivables and supply chain finance at Siemens, the company said that average terms are of 90 days, while in the past this has been on average 45 days. The terms vary according to industry, with some at 90 days and others at 80.

According to Siemens’ annual report, working capital decreased by €1.5 billion in 2017, partly as a result of increased payables outstanding.

Meanwhile US-based telecoms company Liberty Global has pioneered an innovative SCF programme tailored to its status as a non-investment grade company. The $4 billion programme – accounting for 26% of revenues – extends Liberty’s supplier payment terms up to 360 days, according to director of vendor finance Razvan Coarca.

“As Liberty Global practically cover the costs of the programme, we can persuade suppliers to extend out to a year. This means we are not restricted to suppliers that are smaller than us. In theory we can apply it to any supplier, even those with a higher credit rating than us”.

Asked whether the company plans to continue to grow the programme, Coarca commented: “We have to think about this along with business growth and cash flow needs, for example. The programme is getting to a mature stage, so we won’t reduce it or add to it aggressively”.