ANNUAL SURVEY: SUPPORTING ROLE
By Anita Hawser
Banks and nonbanks are driving steady growth in both the volume and the sophistication of supply chain finance.
The global financial crisis provided a “light bulb” moment for many buyers and suppliers, demonstrating the vulnerability of their businesses to changes in banks’ lending criteria. Although access to bank liquidity is no longer a given for most companies, the wheels of global trade are still turning, partly thanks to the efforts of the export credit agencies, which stepped into the breach left by credit insurers and increased their guarantee limits at a time when others where shying away from deals. As the market returns more or less to normal, at least for cash-rich buyers, supply chain finance’s biggest promise remains for the small-to-medium-size companies that make up the bulk of multinationals’ global supply chains. These companies continue to feel the pinch of banks’ stricter lending criteria, but supply chain finance offers them an opportunity to get paid earlier and to sell their receivables to a bank or potential investor.
In this year’s supply chain finance awards we highlight the banks and other supply chain finance providers that continue to demonstrate their commitment to this business. They are doing this by investing in technology and developing innovative risk models that enable them to provide a wider range of financing options to service the supply chain from end to end. More banks are beginning to venture into pre-shipment, distributor and inventory financing, and at the same time, nonbanks are getting more involved in supply chain financing. Some cash-rich companies looking to put their cash to work are even looking at self-funding their own supply chain financing programs.
Best Global Supply Chain Finance Provider: Bank
Supply chain financing truly is a global business. Most big buyers’ suppliers are likely to be located outside the buyer’s country of domicile, which means that providers who are serious about servicing the global supply chains of major buyers need to have an extensive global footprint. With in-country trade and supplier-financing experts in 80 countries, Citi fits that bill. In order for a bank to service the financing needs of the supply chain from end to end, it needs a wide range of financing solutions. Citi provides not only supplier finance but also receivables financing and distribution finance. It also works with a number of export credit agencies globally, including US Export-Import Bank, to provide innovative financing solutions to a wide range of companies, including major US exporters and the SMEs that supply them. Citi, moreover, has a strong track record as a supply chain finance provider; its first program dates back 11 years. In the past 12 months it has also worked to help companies put their idle cash to work by using it to self-fund their global supply chains.
Best Global Supply Chain Finance Provider: Nonbank
A consistent winner in this category, Orbian has a strong track record in providing financing, supporting $6.5 billion of transactions in 2010. Last year it also served more than 800 new clients. Orbian attributes its success to a range of initiatives including enhanced supplier support. It also prides itself on the fact that its suppliers are completely independent from funding providers, which it says results in high satisfaction ratings among suppliers. Orbian says its “universal trust-enabled” approach reduces the technical barriers to entry for interested financing providers, which means it attracts participation from some of the largest banks. It also encourages the participation of nonbank investors in supply chain financing. Orbian says that by the end of last year 28% of its outstanding program assets were funded by nonbank (predominantly corporate) investors.
Best Supplier Support and Enrollment
The success of any supply chain finance platform hinges on the ability to rapidly enlist suppliers and get them up and running. PrimeRevenue’s key claim for its supply chain finance platform is that “suppliers can literally on-board themselves” by using its automated system. When suppliers are on-boarded to the PrimeRevenue platform, they can access a customized website that features the buyer’s branding. The site also guides them through the registration process. And it facilitates supplier on-boarding by automating the documentation process and the development of “micro sites” that educate them about the benefits of supply chain finance.
Best Payables Supplier Financing Solution
Given that Standard Chartered often has relationships with both buyers and suppliers in emerging markets, it is well placed to provide innovative financing structures that meet the needs not only of buyers who want to extend their payables but also suppliers who are looking to get paid earlier. By taking the time to understand the businesses of its customers, the bank is able to customize solutions to their needs. Companies can manage their working capital by increasing days payable outstanding without recourse to their balance sheet while ensuring that suppliers get paid earlier, enabling them to do more business with the buyer. “Our client-centric strategy and strong balance sheet have allowed us to stick with our clients throughout the crisis,” says Ashutosh Kumar, global head of local corporate products and receivables at Standard Chartered. “Our global presence and unique network focused on emerging markets in Asia, Africa and the Middle East reinforce our position as a global supply chain finance partner of choice.”
Best Pre-Shipment Financing Solution
BNP Paribas Utexam Logistics
Dublin-based Utexam Logistics is a wholly-owned subsidiary of the French bank BNP Paribas. Utexam is a novel concept among banks as it buys, sells and holds inventories on behalf of customers, thereby providing access to financing much earlier in the process than most conventional bank supply-chain financing programs. Utexam Logistics was established in 1989 and is a trading company, which BNP Paribas says is transparent in terms of its operations and is services a wide range of customers and products.
Best Customer Implementation of Supply Chain Financing Solution
Citi, US Export-Import Bank and CNH
Export credit agencies (ECAs) played an enlarged role during the financial crisis to keep the wheels of global trade turning. While most of the contingency measures put in place during the financial crisis are now being unwound, some ECAs are still actively engaging in programs to support major exporters. The US Export-Import Bank’s Supply Chain Finance Guarantee Program is reportedly the first to be orchestrated through an ECA and is focused on US exporters and their US supplier base. As part of that program, US Ex-Im Bank worked with Citi, which structured and acted as the purchaser for a financing program for a large US exporter, CNH, an agricultural and construction equipment manufacturer. Under the program CNH’s US-domiciled suppliers can sell their receivables at a discount to the bank. This arrangement ensures the suppliers, who tend to be small and medium-size or mid-market companies, have access to affordable working capital finance and get paid earlier while CNH can extend its account payables. The US Ex-Im Bank guarantees up to 90% of the value of receivables, which minimizes the risks for the bank.
Best Web-Based Supply Chain Financing Solution
MaxTrad is one of the longest-established bank platforms for automating documentation and other processes associated with trade. In recent years, RBS has invested heavily in the platform to bring it up to speed with the latest technology and to improve usability. RBS has added functionality to further streamline processes and help eliminate paper, including digital imaging of trade documentation. One of the interesting aspects of the platform is its ability to support multibank funding for those companies that want a number of banks to participate in their supply chain finance program. The enhanced MaxTrad platform also enables users to track the status of transactions and provides online self-service and chat tools. As cash management and trade become more closely aligned, RBS has integrated MaxTrad with its payments system, Access Direct.
Citi is one of the banks that worked alongside the US Export-Import Bank to provide what is believed to be among the first supply chain finance programs operated via an export credit agency. Under the program, US Ex-Im Bank provides export-agency-guaranteed supply chain financing to US exporters and their suppliers. Citi also joined the Syncada global payments network developed by Visa to enhance the bank’s working capital and supply chain offering by providing clients in certain industry sectors with a specialized accounts payable offering encompassing online billing, payment and financing.
Royal Bank of Scotland
RBS continues to invest in its Web-based supply chain finance and trade platform, MaxTrad, resulting in a number of recent additions to streamline the on-boarding process for suppliers and ease automation of paper-based trade documentation. Recognizing that not all customers may wish to use a proprietary banking solution, RBS is also able to work with third-party platforms. The bank offers financing solutions that are either buyer- or supplier-centric and apply across a wide range of industry sectors. RBS says it is “the supply chain finance bank of reference for large UK and European corporates wishing to have a global program.” It has an extensive footprint in Western Europe and is expanding its network in Central and Eastern Europe. Customer implementations include a supply chain finance program for the overseas suppliers of a major UK retailer as well as solutions supporting the Europe, Middle East and Africa regions.
Standard Chartered considers itself to be a leader in trade and supply chain finance across Asia. As Neil Daswani, head of transaction banking for north Asia at Standard Chartered explains, trade finance is a key locomotive powering Asian exports. “The continued ‘off-shoring’ of manufacturing processes by OECD multinationals and the emergence of middle-class domestic consumers in Asia are fueling the demand for innovative supply chain finance solutions domestically and offshore,” he says. “This is especially so for Asian brands gaining popularity and getting exported globally. Standard Chartered is a partner of choice at both ends of the supply chain, especially for businesses looking to gain penetration in Asian and emerging markets, where trade credit risk mitigation is critical.” Standard Chartered uses proprietary credit risk models to ensure it is able to meet the needs of both buyers and suppliers and to better understand the relationships that underpin global supply chains.
In LatAm, Citi says its share of key markets is bolstered by the presence of its Banamex subsidiary. It provides multicurrency supply chain financing solutions encompassing a number of countries in the region, and it has six hubs to aid supplier on-boarding across the region. It has provided cross-border and domestic supply chain finance solutions for a range of companies across a wide range of industry sectors, including leading retail brands and pharmaceutical companies. The bank supports both buyer- and seller-centric financing solutions.
Central & Eastern Europe
UniCredit focuses not only on traditional trade finance but also on what it calls the “order-to-cash cycle,” which encompasses everything from the time an order is placed via an online marketplace to invoice maturity and actual payment. With its deep knowledge of the CEE region UniCredit recognizes the need to customize solutions to suit the specifics of different markets, depending on their level of sophistication. “Our depth of experience, our proximity to clients in the 19 countries in which we operate and our ability to integrate solutions across the product set are key to our success,” says Andrew England, head of CEE global transaction banking business coordination at UniCredit. Markus Wohlgeschaffen, head of global trade finance and services at UniCredit, believes the bank’s winning this award for several consecutive years is concrete proof of its competence in terms of merging the physical and financial supply chain.
Increasingly, banks are focusing on all aspects of a company’s financial supply chain. SEB calls it the “corporate financial value chain.” Niklas Callerström, global head of supply chain services, product management, at SEB, says: “Our approach based on making it easy to understand and easy to join has proven successful, and the fact that many suppliers and buyers who have been with us for several years now still work closely with us confirms the success. The work now continues by integrating our working capital products, giving our clients a full view along the financial supply chain.” That means providing clients such as Scania with an integrated solution encompassing cash management, trade finance and logistics. The bank also continues to refine its inventory financing solution in order to provide working capital earlier in the supply chain.
With a footprint in 14 markets in the Middle East, HSBC has a wider geographical presence than its foreign peers. It is also well placed to understand the needs of all parties in the supply chain whether they are big buyers or small suppliers because it services all customer segments from large corporates to mid-market and small-to-medium-size companies. It provides solutions for both importers and exporters, and clients can benefit from a wide range of automated solutions, which help streamline the trade documentation process.
Standard Chartered’s buyer and supplier finance solutions are available in all 13 African countries in which the bank has a direct presence. It also uses its alliance-banking network to provide more extensive coverage across sub-Saharan Africa. The bank provides a range of financing solutions, including vendor prepay and pre- and post-shipment financing. Peter Sun, regional head of transaction banking in Africa, says the strength of Standard Chartered’s network in emerging markets enables it to service cross-regional deals and leverage trade corridors. “Some of the fastest-growing trade corridors include Africa-China and North Africa–Middle East. With a strong presence and expertise in Asia, Middle East and Africa, we are well positioned to partner with our clients and help them realize value when they are transacting on either ends of these corridors.”