J.P. MORGAN – SUPPLY CHAIN FINANCE
GFP in Association with VISA Qualifieds
STRICTLY PRIVATE AND CONFIDENTIAL
Martin Scott
Executive Director
11 November, 2010
J.P. MORGAN – SUPPLY CHAIN FINANCE
English_Commercial Bank
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Agenda
Page
J.P. Morgan Trade Finance Credentials
1
Working Capital Optimisation
4
Supplier Segmentation
7
J.P. MORGAN – SUPPLY CHAIN FINANCE
Next Steps
13
1
J.P. Morgan Trade Services Credentials
Market leadership in the Trade space
Providing Global and End to End
Supply Chain Services from the
purchase order to Structured
lending solutions
 Global Coverage and
Processing Centres
 Providing Supplier Financing
services since 1994
 Over 50 major client
J.P. MORGAN TRADE FINANCE CREDENTIALS
programs
 Over 50,000 suppliers on
board
 Releasing over $2bn of
working capital liquidity in a
revolving basis
2
J.P. Morgan locations worldwide
230 locations in 57 countries worldwide
J.P. MORGAN TRADE FINANCE CREDENTIALS
S U P P L I E R S P E N D S E G M E N TAT I O N / P O S I T I O N I N G
North America
Latin America
Europe, Middle East and Africa (EMEA)
Canada
United States of
America
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Venezuela
Belgium
Czech Republic
Denmark
Estonia
Finland
France
Germany
Hungary
Ireland
Italy
South Africa
Latvia
Spain
Netherlands Sweden
Nigeria
Switzerland
Norway
Turkey
Poland
United Kingdom
Russia
UAE
Saudi Arabia
Slovakia
3
Additional SEPA Reach
Austria
Cyprus
Greece
Iceland
Liechtenstein
Luxembourg
Malta
Portugal
Slovenia
Asia
Australia
China
Hong Kong
India
Indonesia
Japan
Malaysia
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Agenda
Page
J.P. Morgan Trade Finance Credentials
1
Working Capital Optimisation
4
Supplier Segmentation
7
J.P. MORGAN – SUPPLY CHAIN FINANCE
Next Steps
13
4
DSO – DPO analysis: Global Food & Staples Retailing Industry
DSO
0 days
EU Median
Guyenne
Smart
Caseys
Sainsbury’s
Costco
Pathmark
Wild Oats
Wm Morrison
Kroger
Safeway
Wal-Mart
BJs
Wasgau
Pantry
WeisAxfood
Whole Foods
Ingles
Great Atlantic
Spartan
Winn-Dixie Delhaize Koninklijke
Rite Aid
SuperValu
LaurusRuddick
ETS
Nash Finch
Sligro
Performance
15
days
Longs Drug
Metro
Carrefour
Jeronimo
Majestic
US Median
EU Companies
US Companies
Best in Class
Laggards
Walgreen
CVS
Andersons
WORKING CAPITAL OPTIMISATION
United
Sysco
Kesko
30
days
50 days
0 days
100 days
DPO
MARR (83,70)
REL, CFO magazine WC analysis
Medians and quartiles are based on the listed companies; DSOs, DPOs & DIOs were based on financial information made available through the One Source Business Browser
DSO = (Account Receivables / Total Revenue)*365
DPO = (Account Payables / Cost of Goods Sold)*365
5
Opportunities in the Supply Chain
Receivables Purchase: Company A has the
opportunity to discount receivables due from sales to
Company B on an undisclosed basis
Company A:
WORKING CAPITAL OPTIMISATION
Supplier
Receivables Purchase: Company B has the
opportunity to discount receivables due from sales to
Company C on an undisclosed basis
Goods and services
Company B:
Goods and services
Payments
Supplier and
Buyer
Payments
Supplier Finance: Company B may choose to support
its suppliers via putting in place a Supplier Finance
program whereby Company A has the opportunity to
discount receivables due from sales to Company B
Company C:
Buyer
Supplier Finance: Company C may choose to support
its suppliers via putting in place a Supplier Finance
program whereby Company B has the opportunity to
discount receivables due from sales to Company C
Key point to remember is that there are opportunities across the Supply Chain depending on
where you sit
6
Agenda
Page
J.P. Morgan Trade Finance Credentials
1
Working Capital Optimisation
4
Supplier Segmentation
7
J.P. MORGAN – SUPPLY CHAIN FINANCE
Next Steps
13
7
Payables Solution Roadmap – Optimise Working Capital
 Best-in-class organisations segment their spend to gain visibility by type of supplier
 Initial segmentation should include the supplier’s strategic importance and their annual spend
Supplier & Spend Segmentation Strategy
Strategic
Strategic
Strategicand
and high
high spend
spend
SUPPLIER SEGMENTATION
Supplier Base
Strategic
but low
low spend
spend
Strategic but
Non-strategic
low
spend
Non-strategicand
and
low
spend
Non-strategic
Non-strategicbut
buthigh
highspend
spend
Non-Strategic
£
Transaction Value
8
£££
The optimal working capital strategy encompasses solutions that vary by supplier
Strategic
Strategic Supplier
Low Purchase
Strategic Supplier
High Purchase
Supplier Base
Supplier Finance
Dynamic Discounting
Single Use Accounts
SUPPLIER SEGMENTATION
P-Card
Non Strategic Supplier
High Purchase
Non-Strategic Supplier
Low Purchase
Non-Strategic
(Indirect)
£
Transaction Value
9
£££
Important to recognise “win-win” scenarios
Financing at suppliers’ cost of funds
Suppliers’ working capital financing cost
£8.00
8%
£6.58
£7.00
Current cost for 30 days
Cost of financing £000
£6.00
30 days
Extending terms at buyer’s cost of funds
4%
Win-Win
£5.00
£4.00
£3.00
£2.00
£6.58
SUPPLIER SEGMENTATION
30
35
40
45
50
55
60
65
New Payment Terms (days)
60 days
Terms extension combined with lower financing costs can leave suppliers indifferent or
better off while freeing up cash for buyers.
10
70
Supplier Finance – Operational Process
 The following process flow describes the operation of program with your suppliers
1. Buyer uploads
approved invoices
to the multibank
APAR system
2. Supplier logs in
APAR and chooses
which invoices JPM
can purchase
SUPPLIER SEGMENTATION
3. J.P. Morgan receives
notification of invoices
offered for purchase
4. If supplier accepts discount
proposal, J.P. Morgan
credits supplier immediately,
net of discount
11
Establishing a Supplier Finance programme – Critical Success Factors
 Choice of an experienced Bank provider
 Dedicated resources on both sides to programme manage the implementation and on-going supplier enrolment
 Focused marketing strategy aimed at on-boarding Suppliers
 Simple documentation
SUPPLIER SEGMENTATION
 Capabilities to efficiently incorporate other Bank providers for an expanded programme
12
Agenda
Page
J.P. Morgan Trade Finance Credentials
1
Working Capital Optimisation
4
Supplier Segmentation
7
J.P. MORGAN – SUPPLY CHAIN FINANCE
Next Steps
13
13
J.P. Morgan team contact details
NEXT STEPS
Public Sector Sales
Trade Sales
Anthony Holmes
Vice President
Nick Hall
Executive Director
Telephone: +44 (0) 20 7777 5185
Telephone: +44 20 7777 2516
14