Optimize Working Capital:
Strengthen Trading Partner
Relationships
Brook Ballard – Sysco Corporation
Scott Hughes – Wells Fargo
April 4, 2011
Working capital management
 Goal: Fund necessary day to day operations and
invest assets optimally
 Inventory, cash, receivables and payables
management are all levers of WCM
Internal Factors
External Factors
Size and growth rate
Banking Services
Organizational structure
Interest rates
Level of working capital
management
Technology and products
Borrowing and investing
positions and activities
Economy and competitors
Industry challenges
3
Industry challenges
 How do you extend Days Payable Outstanding (DPO)?
 How do you shorten Days Sales Outstanding (DSO)?
 How do you optimize Days Inventory Outstanding (DIO)?
4
Industry challenges (cont.)
 94% of CFOs consider cash flow optimization to be
important or very important 1.
 59% of CFOs rated better cash management as
their top priority 1.
1.
The Working Capitalist, REL, YEAR
Challenges to Converting Accounts Payable
to more Cost Efficient Methods
 Management Buy In
 System Enhancements
 Customers willingness to accept change
 What is in it for me?
 Check to ACH
 Check to Card
 Maintain check but extend terms
Managing Working Capital can be a Real Bear
7
Technology to improve AP processes
Source: IAPP 2008 Member Benchmarking Survey
88
Adoption of submitting electronic invoices is
increasing.
70%
Paper invoices
60%
50%
40%
30%
Electronic invoices
20%
10%
0%
2006
2007
2008
2009
2010
Source: PayStream Advisors, Q1 2009
2011
2012
B2B payments study
How payments are
made
Trends over the past 18 months
Paper
62%
Payment type
ACH
P-Cards
9.1%
Wires
7.4%
T&E cards
Checks
-10.0%
9.7%
-5.0%
6.7%
-5.3%
0.0%
5.0%
10.0%
15.0%
Growth
Source: Aberdeen Group, June 2009
10
10
“Best in class” payment mix
Source: IAPP Member Benchmarking Survey
11
Sysco’s Annual Payment Tender Type
5K or 0%
450K or 18%
Check
ACH
2M or 82%
Wire
Maturity framework of electronic payments
Definition of Maturity
Class
Best-in-Class:
Top 20% of aggregate performers
Mean Class Performance
80% of overall payments
processed by electronic
methods
30% of overall payments
Middle 50% of aggregate performers processed by electronic
methods
Industry Average:
Laggard:
Bottom 30% of aggregate
performers
7% of overall payments
processed by electronic
methods
Cost*
$3.53
3.5 days
to process
$11.19
16.0 days to
process
$35.56
27.1 days to
process
*Overall processing cost per payment
Source: Aberdeen Group
13
Calculating Cash Flow Impact
 How does Sysco Calculate the value of AP?
 AP-DPO calculation
AP
DPO
Cost of a Day
2010
Current Period
1,900,000
2,000,000
17.05
17.70
.65
111,437
112,994
73,446
 Why is this important?
Change
Trading partner tension
Suppliers’ Objectives
Buyers’ Objectives
•Maintain or extend DPO
•Inefficient trading partner
relationships results in higher cost
of procurement & payables
•Inability to forecast accurately
•Paper intensive processes
•Inability to capture early payment
discounts
•Resource intensive purchase to pay
•Reduce fraud
VS.
•Aim to reduce DSO
•Inefficient receivables posting, cash
application and collection processes.
Heavy use of Lockboxes
•Inability to forecast accurately
•Paper intensive invoice delivery
and receivables
•Manual/inefficient dispute
resolution
•Resource intensive order to cash
Payables Optimization Analysis
 Payables focused, demonstrates how much
liquidity can be realized by improving the
purchase-to-pay processes
 Provides intelligent routing to expedite payment,
minimize costs and DSO but maintain DPO
 Provide insight for dynamic discount management
 Factors in time value of money
Payables Optimization Analysis Overview
1.Gather Data
2.Control Data
Review
3.Intelligent
payment routing
output
4.Recommended
Actions
1.Gather Data: Master Vendor File is uploaded
2.Control Data Review: Cost per disbursement, DPO, float, cost
of funds, discounts available, average ticket, quick pay vs. slow
pay.
3. Output shows total hard dollar savings, broken out by
payment issuance savings, cost of funds impact, additional
rebate and early payment discount all based on a best-in-class
target mix
4. Recommended actions are tailored to improve trading
partner relationships
Payables Optimization Analysis: Data
elements needed
Mandatory
Optional
Annual Spend
D&B
DBA
Site ID
Early Payment Discount (%)
Vendor ID
Early Payment Discount Threshold Contact Name
(days)
Payment Type
Address (City, State, Zip)
TXN Count
MCC Code
Vendor ID
Tel
TIN
Example output: Potential Hard Dollar
Savings
Example output: Optimum spend mix
Sysco Payment Conversion Challenges
 Segregated Vendor Population
 System Rollout
 Training
 Resistance to change
 Negotiating Terms
Supplier Onboarding
 Migrate suppliers from check to more beneficial
payment forms and terms
 Reduced disbursement costs
 Optimized DPO
 Payment status visibility for suppliers
 Improved Vendor Relations and Maintenance of supplier
payment information
22
Supplier Analysis & Onboarding support
• Extract master vendor file
• Analysis segmentation
• Enrollment strategy
4
• Build marketing campaign
• Execute outreach campaign
• Relationship activation
• Payment and remittance
23
24
Recommendations for success
 Involvement of executives is critical to achieve
goals
 Segmentation of vendors
 Tracking working capital metrics
 Automation and standardization of payment
processes
 Creation of a compensation system based on
improving working capital
Questions
Brook Ballard
Sysco Corporation
Phone: 281-584-1334
Email: Ballard.Brook@corp.sysco.com
Scott Hughes
Wells Fargo
Phone: 770-551-4663
Email: Scott.Hughes@wellsfargo.com