EuroFinance

Supply Chain Finance is often treated as a single idea. In practice, it can mean very different things depending on the business. For some companies, it is a working-capital tool, used to release cash and stretch payables without resorting to conventional debt. For others, it is something broader: a way of distributing liquidity, financing and risk across a whole commercial ecosystem.

That distinction was neatly illustrated by Bjork Hupfeld, Global Treasurer at The Hershey Company, the 11th EuroFinance Treasury & Cash Management Summit West Coast. He spoke about supply chain finance as a strategic lever.

 Hershey: tempering payables into liquidity

At The Hershey Company, a leading snacks company, Supply Chain Finance is first and foremost a working-capital instrument.  Hupfeld said the company had examined the idea for several years before finally taking the decision to implement the first programme in 2019.

“We were looking at it for several years and kept on postponing the inevitable because we had a long period of close to zero interest rates,” he said. “So, the question became, what do I really get out of it from a P&L perspective?”

That changed once the programme came to be seen less as a source of profit and more as a source of financial flexibility.

“Supply Chain Finance should be seen as one the tools available for managing our working capital,” Hupfeld said. “In other words, how would we increase the working capital for the company without having to get leveraged by traditional debt instruments like commercial papers, bonds etc.?”

By that measure, the programme has had a noticeable effect. Hershey launched in 2019 and has since expanded across several markets, Hupfeld added.

“Over the last 4 years it has helped improve Hershey’s working capital generation in a meaningful way supporting increased capacity for strategic business building activities.” Hupfeld said.

Useful, but not free

Hupfeld was careful to puncture one common misconception. Supply chain finance, he said, should not be mistaken for free financing. “A lot of people will try to explain to you that supply chain finance is free financing. It is not,” he said.

The attraction lies elsewhere. The structure may help a company preserve borrowing capacity and create what he called financial “dry powder”, even if suppliers eventually seek to recover the economics elsewhere. “The aim here is to secure financing without leverage, in support of having increased capacity to support business building opportunities.”

In Hershey’s case, the primary target for working capital improvements is concentrated around accounts payable.  Hupfeld placed Supply Chain Finance within the cash-conversion cycle as a tool to facilitate the company’s focus on extending payment terms in line with general market practice.

He was clear that the financing programme itself does not create the extended term; management decisions do.

“Supply chain financing will not extend your terms,” Hupfeld said. “As a company, you make a strategic decision to extend your payment terms.”

The politics of implementation

If the structure of a Supply Chain Finance program is conceptually simple, implementation might not be.  Hupfeld described the internal resistance that often greets such programmes, particularly among procurement teams wary of damaging supplier relationships.

“When you initially implement a Supply Chain Finance program, and you go to a procurement team and say we’re going to do this now, the initial reaction can be like shock and awe,” he said, with remarks like “you’re going to tick off all our suppliers.”

Winning support, he suggested, requires more than financial logic.  It requires management backing, incentives, training and persistence across a wide range of functions.

“It can be a long, windy road,” Hupfeld said.

Legal, IS, Supply Chain, Controllership, Auditors and Reporting teams all need to be involved.  Systems matter too, not least because a programme can quickly become messy if invoices are routed wrongly or reporting does not tally what the banks’ records.

“You have to make sure your systems support the programs you are planning to establish to avoid manual processes to extend possible,” he said.

Even once established, treasurers do not “own” the programme in an operational sense. Hupfeld made that distinction forcefully.

“Treasury does not own Supply Chain Finance programs,” he said. “We promote and sponsor them.  I will push it relentlessly within the organisation.  Once set up, the programs belong to the supply chain function as they are the ones facing the company’s vendors.”

Treasury’s role is to keep promoting the programs, help training internal teams, and as needed be ready to speak with vendors to help them understand the structure and the benefits it brings.

A seat at the table

For Hupfeld supply chain finance is not a standalone treasury product. It is an organisational exercise, crossing procurement, operations, legal, accounting, strategy and capital planning. Treasurers must continue to sponsor, educate and monitor, even if the business owns execution.

At Hershey, it is a disciplined working-capital tool that releases cash and supports strategic flexibility. The underlying task does not: to make capital work harder for the business.