SCF BAROMETER 2018/2019 - ENTERING A NEW ERA OF MATURITY AND SOLUTIONS - PWC
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SCF Barometer 2018/2019 Entering a New Era of Maturity and Solutions
Foreword
First of all, the Supply Chain Finance Community and PwC, would like
to thank the contributors to the 3rd annual survey, their feedback is
incredibly important and without their contribution there would not be a
2018/2019 barometer.
The barometer provides an extremely useful ‘snapshot’ based on those
actually planning or operating SCF programmes enabling us to reflect
where the Supply Chain Finance industry has come from, its current
reality and highlights the factors, which will influence and shape the
industry’s future direction.
Michiel Steeman in his forward to the 2017/2018 barometer
emphasised that the Supply Chain Finance industry is “going through a
Dr. Simon Templar growth phase and change phase”, this still remains the case. Working
capital optimisation is seen as an essential driver for the adoption of
Board member – Supply Chain Finance. Reverse factoring is the most common solution
currently and will continue to expand. The findings from the study also
SCF Community
highlight that dynamic discounting is a “favourite for future
implementation”.
Looking forward, the barometer highlights a number of challenges and
opportunities facing the industry. Emerging technology such as the
block chain and artificial intelligence are going to have an increasing
impact on every aspect of our business and personal lives. Therefore,
the Supply Chain Finance industry needs to innovate, developing new
solutions that will satisfy the future expectations of the marketplace.
The barometer findings suggest that SCF landscape is also changing
with the arrival of new entrants including platform providers, suppliers
and logistics service providers. The survey’s feedback also highlighted
the continue need to invest in training, building and enhancing
relationships between buyers and suppliers and increased functional
involvement in the adoption of supply chain finance initiatives.
From my perspective, Supply Chain Finance industry will have an
increasing and significant role in enabling the development of
financially sustainable supply chains and networks.
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 2
Agenda
Introduction 02
1. General Status 06
2. SCF Adoption 12
3. Costs & Benefits 16
4. Drivers & Barriers 19
5. Technology & Funding 22
6. Future Plans & Ambition 27
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 3
Supply Chain Finance (SCF) Barometer
Introduction
Goal of the survey Type of questions Respondents profiles
• Understand the current status • Implementation features • >80 responses of which c. 50%
and key developments are running a SCF programme
• Solution and supplier selection
• Present (perceived) successes • Diverse range of functions
and challenges • Drivers and barriers for the
adoption of SCF • Variety of industries and size
• Identify major costs and
benefits • Key stakeholders involved • Global footprint
• Share key market insights • Future plans and developments • Different levels of maturity
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 4
Supply Chain Finance
Supply Chain Finance (SCF)
improves working capital
management by looking at the LSP
entire supply chain to identify and
address company-wide issues and
can be used as a tool to optimise
financial structures, working capital
and payment flows in company
networks
The aim of SCF solutions is to SUPPLIER PLATFORM BUYER
create added value between
suppliers, purchasing companies,
and external financial and logistics
service providers by adopting a
holistic approach to financial
processes
FUNDER
Note: see appendix for overview of different SCF solutions
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 5
1 Profiles
Awareness
Solutions
General
Status AdoptionSurvey findings represent a diverse, global view
Participants are from a variety of sectors and regions
SECTORS REGIONS
6%
Manufacturing 6%
Other; 17% Manufacturing; 15%
Consumer goods
Transportation & Logistics Northern Europe
4% Other 15% Southern Europe
Engineering & Construction
Consumer goods; Northern Europe. Southeast Asia
5% Energy
15%
47%
Utilities and Mining Northeast Asia
5% Chemicals
Metals USA
Southern Europe.
6% 11% 26%
Technology
Other
6%
9%
7%
Sectors which typically have relatively high levels of SCF adoption Survey participants remain largely in Northern European,
are well represented in the survey; followed by respondents from Southern Europe and Asia
Consumer Goods, Transportation & Manufacturing
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 7Survey participants differ in size
The finance function remains top functional respondent
SIZE FUNCTIONS
4%
< €250m 16%
22%
15%
€250m - €500m Finance & Controling & Credit
Management
€500m - €1,000m
Finance & Treasury
€1,000m - €5,000m 15% Controling & Credit
Management. Supply Chain & Procurement
€5,000m - €25,000m 52%
17% Other
27% €25,000m - €100,000m
> €100,000m
17%
14%
Size still matters Survey respondents have diverse roles ranging from CEO to Supply
>50% of respondents have an annual revenue size Chain Manager
of >1 billion Euro Like in previous years of our SCF Barometer study the Finance
department represents the top functional respondent category
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 8Most respondents have or are considering SCF
Reverse factoring is by far the most implemented solution
S CF S O LUTI O NS AND AWARE NE S S
14% 13%
of respondents are 21%
55% 24% 22%
running a SCF
programme
37%
of respondents are 60%
23% running more than
one SCF programme
64% 57% 63%
of respondents who
41% are not running a
SCF programme are
49%
27%
16% 19%
14%
considering or
implementing a SCF REVERSE INVENTORY P R E - AP P R O V E D P U R C H AS E O R D E R D Y N AM I C
F AC T O R I N G W I T H F I N AN C I N G AN D INVOICE F I N AN C I N G ( P R E - DISCOUNTING
programme SUPPLIERS AS S E T B AS E D F I N AN C I N G SHIPMENT) WITH SUPPLIERS
LENDING
Note: see appendix for explanation of different SCF solutions
Adopted/Under Implementation Considering/Aware Unaware
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 9RF is by far the most implemented SCF solution
Some smaller sized companies are still unaware of this solution
RE V E RS E FACTO RI NG
Respondents show different
levels of SCF maturity
10% 19%
Larger companies are more 2%
2% 2%
likely to be running Reverse
6%
Factoring (RF), but mid-market is 6%
growing
12% 12%
7% 9%
6% 1%
2% 1%
< €250M €250M - €500M - €1,000M - €5,000M - €25,000M - > €100,000M
€500M €1,000M €5,000M €25,000M €100,000M
Adopted/Under Implementation Considering/Aware Unaware
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 10Reverse Factoring is the preference SCF solution
followed by Dynamic Discounting
INDUSTRY AND COMMON PREVALENT SCF SOLUTION REGION AND MOST COMMON PREVALENT SCF SOLUTION
100% 100% Dynamic
Dynamic
Discounting Dynamic Dynamic Discounting Dynamic
90% Dynamic 90% Dynamic
Discounting Discounting Discounting Discounting
Discounting
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
Reverse
30% 30%
Factoring
Reverse Reverse
20% Factoring Reverse 20% Factoring
Reverse Factoring Reverse
10% Factoring 10% Factoring
Reverse
Factoring
0% 0%
Consumer Goods Manufacturing Other Northern Europe Southern Europe Asia USA
Note: see appendix for overview of different SCF solutions
Reverse Factoring Inventory financing and asset Pre-approved invoice Purchase order financing (pre- Dynamic Discounting
based lending financing shipment)
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 112 Actors
Relationships
Size
SCF Adoption FunctionsThe trend for SCF roll-outs continues to grow
often driven by the finance function
YEAR OF IMPLEMENTATON
Smaller companies are beginning to 100%
introduce Supply Chain Finance. Prior 80%
to 2012, SCF programmes were 60%
predominantly implemented in 40%
20%
companies with revenues >€1bn
0%
Before 2011 2012 2013 2014 2015 2016 2017 2018
2010
I NV O LV E ME NT P E R FUNCTI O N I N S CF I NI TI ATI O N < €0.25b €0.25b - €0.5b €0.5b - €1b €1b - €5b €5b - €25b €25b - €100b > €100b
L E G AL
ICT
P U R C H AS E
Finance and Procurement are the departments
most involved in the adoption of SCF solutions
S AL E S
LOGISTICS
F I N AN C E Logistics and Sales, not surprisingly, had most
AD M I N I S T R AT I V E
limited contributed
No contribution Key contribution
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 13SCF: still a game for the big players? Spend value and
strategic relationships are key drivers for supplier selection
SCF solutions are often still not
available to suppliers with limited 15% of these suppliers are eligible for SCF solutions
spending, financial issues and/or poor
access to credit; i.e. those probably
most interested in SCF
26% of the spend is covered by a SCF solution
SUPPLIERS INVOLVEMENT IN SCF ADOPTION
very
importance
of driver
limited
Suppliers with long- Suppliers with a Suppliers with a key Suppliers with a key Suppliers with a key Suppliers with poor Suppliers with Suppliers with a
term alliances and significant spending impact in terms of impact in terms of impact in terms of access to credit financial limited spending (€)
cooperative (€) quality of your final costs of your final differentiation of issues/challenges
relationships product product your final product
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 14Is the SCF landscape increasing? Moving from traditional
providers to an integrated ecosystem of influencers
I NFLUE NCE RS I NV O LV E D AND THE I R CO NTRI BUTI O N LE V E L
TO THE ADO P TI O N O F THE S CF S O LUTI O N(S )
CONSULTANCY FIRM
Banks and Factors remain important
LOGISTIC SERVICE PROVIDER
financial actors involved in the adoption
MY SUPPLIER process of a SCF solution
INFORMATION PROVIDER
However, also strong involvement of
PLATFORM PROVIDER ‘non traditional providers’:
1. Significant presence of platform
INSURANCE COMPANY
providers
PRIVATE INVESTOR 2. Suppliers, and
3. Logistics Service Providers
INVESTMENT FUND
FACTOR who seem to play an important role in
BANK
the SCF adoption
No contribution Key contribution
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 153 Selection
Implementation
Financial
Economical
Costs & BenefitsCosts of SCF
Implementation and use above all else
RELEVANCE OF COSTS
Management and control costs
The costs for implementing and
running SCF solutions are more
Financial costs
relevant than the costs to assess
and select the solution
Contract management costs
Among specific costs drivers, the
most relevant is the financial cost Change management costs
of using SCF, followed by contract
management and change System purchase and set-up costs
management costs
Consultancy services costs
Consultancy and vendor selection
are the least relevant costs Vendor selection/evaluation costs
Strongly Strongly
irrelevant relevant
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 17Working capital optimisation is the most important
benefit of implementing a SCF programme
Both Buyer and Supplier improve their working capital, but also their mutual relationship
The supplier has a higher benefit in reduced cost of debt and default risk, and better access to credit
Economic benefits are less important
BENEFITS COMPARISON – BUYER VERSUS SUPPLIER
strongly = Buyer
agree
= Supplier
strongly
disagree
Better
ROI Better Credit Cost of Lower Processes Better Enhancement of Relationships Improvement in Purchasing Increase in
NOWC C2C Access to
ROE Rating Debt Default Risk efficiency Effectiveness Relationships with Banks Sustainability Costs Revenues
Credit
Financial Benefits Operational Benefits Supply Chain Benefits Economic Benefits
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 184 Resources
Stakeholders
Technology
Drivers &
Barriers ProcessKey drivers for a successful SCF solution adoption …
SCF DRIVERS
Buyer-supplier cooperation
Change of trade finance instruments
Market
New enabling technology SCF programme key
drivers
success factors:
Increased competition
• Close cooperation
Globalization and trade growth Buyer – Supplier
• External pressure for
working capital
External pressure for working capital optimization optimisation
Financial
Lower access capability to credit
drivers
Intensified compliance regulations
Strongly Strongly
disagree agree
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 20… factors that hamper adoption of a SCF solution!
SCF BARRIERS
Lack of enough transaction volume
Low supplier's interest rate
Economic-
financial Cost of adoption Top 3 potential obstacles
barriers Resistance to information sharing to manage well as part of
Lack of enabling technology a successful SCF
programme:
Poor collaboration within the firm • Supplier interest rate
Supply Poor collaboration between (other) firms
chain
• Sufficient transaction
barriers
Uncertainty about supplier/buyer operations volume
Lack of top management commitment
• Alignment of buyer and
supplier objectives
Cultural Different buyer-supplier objectives
barriers Lack of training
Strongly Strongly
disagree agree
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 215 ERP
FinTech
Banks
Technology
& Funding E-invoicingA bank operated platform remains by far the most
widely used SCF option
PLATFORM ADOPTED FOR SCF IMPLEMENTATION
4% 2%
Bank operated platform
11%
SCF solution Most used SCF platform
Other SCF platform (in % of total per SCF solution)
Reverse Factoring Bank operated (52%)
Enterprise Resource Planning System
Bank operated Inventory Financing / Bank operated (83%)
11%
platform; 46% Procurement to-Pay / E-invoicing platform Asset Based Lending
Pre-approved Invoice Bank operated (40%)
Treasury Management System Financing
Purchase Order Financing Bank operated (24%)
12% Own in-house developed platform
Dynamic Discounting Bank operated platform / Dedicated Early
Payment / Dynamic Discounting platform
Dedicated Early Payment / Dynamic (40%)
Other SCF
Discounting platform
platform; 14%
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 23Due to significant developments in recent years more
platform solutions are becoming mainstream and
driving more diverse adoption
YEAR AND THE SCF PLATFORM IMPLEMENTED
100%
90%
80% Since 2016 there is
70% an increased usage
60% of multiple platform
50%
solutions driving by
a wider range of
40%
SCF solutions
30%
becoming more
20%
mainstay
10%
0%
2011 2012 2013 2014 2015 2016 2017 2018
Bank operated Platform Other SCF platform Own in-house developed platform
Enterprise Resource Planning system Procurement to-Pay / E-invoicing platform Treasury Management System
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 24Most SCF platforms offer a wide range of
functionalities
FUNCTIONALITIES OF THE ADOPTED PLATFORM
None of the above
Advanced business intelligence analytics and simulations
Transaction Risk Management (TRM) The vast majority
Credit Risk Management of the adopted
Mobile access to the system SCF platforms
Support to international relationships however, is still
Customization of the SCF service
rather limited in
the use of more
Communication tool between financial provider and client
advanced
Cash planner
functionalities like
Supplier on-boarding
business / artificial
Real-time visibility on onvoices' status intelligence,
Digitalization and dematerialization of documents mobile access and
Integration with ERP and management systems customisation
Report automation and data analysis
Track of historical information
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 25Funding for SCF solutions is still predominantly
provided from banks
SOLUTION’S FUNDERS
100%
90%
‘Banks’ and ‘Factors’ are the
80%
most important financers for
‘Reverse Factoring’ solutions 70%
60%
For other SCF solutions the 50%
vast majority of respondents 40%
have no visibility of its
30%
(potential) financers
20%
10%
0%
Reverse Factoring Inventory Financing Pre-approved Invoice Purchase Order Dynamic Discounting
and Asset-Based Financing Finance
Lending
Bank Factor Investment Funds Private Investors Focal Company N/A, no visibility
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 266 FinTech
Technology
Growth
Future Plans
& Ambition OperationalSCF programmes are generally viewed as a success
with Dynamic Discounting favorite for future implementation
• 54% of the respondents are satisfied with the SCF SCF SOLUTION IN PLACE
solution in place, 42% are “neutral”. Just 4% are
dissatisfied with their SCF solution
54% 42% 4%
• Most respondents are looking forward to expand or
continue their Reverse Factoring programme
• Dynamic Discounting is favorite for additional future 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
implementation Satisfied Neutral Dissatisfied
FUTURE SCF PLANS
100%
90%
80%
70%
Unsurprisingly, satisfaction is key for
60%
50%
expansion, with most respondents
40%
30%
stating that they will continue, expand
20%
10%
current solutions or implement new
0%
ones. SCF engagement drops with
Reverse Factoring Inventory Invoice Financing Purchase order Dynamic Any SCF solution
Financing Financing Discounting lower levels of satisfaction from their
Implement Continue Extend Downsize Stop No plans
current SCF programme
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 28New emerging technologies are expected to
significantly impact SCF in the near future
In terms of new emerging
technologies ‘artificial
Large Impact intelligence’ and in particular
Little Impact
‘blockchain’ are expected to
Neutral
have the most impact on SCF
No Impact
in the near future
A RT I FI CI A L B L O CK CHA I N I NT E RNE T O F T HI NG S
I NT E L L I G E NCE
Stages in the Technology and networking Physical and financial integration
Liquidity-oriented SCF solutions
development of 1 (e.g. Letters of Credit and Factoring) 2 capability driven SCF solutions 3 of SCF solutions
- (e.g. Reverse Factoring) (e.g. Block Chain, AI)
SCF solutions:
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 29SCF Barometer Most common SCF solutions:
Key findings • reverse factoring
• bank funded
• collaborative, high volume suppliers
Working capital optimisation key
common driver
Growing interest in (innovative) SCF,
mainly at SME’s
Overall SCF perceived as successful
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 30Authors of the SCF Barometer Study
William Extra Rob Kortman Danny Siemes PwC is a multinational professional
Director Partner Director
PwC - United Kingdom PwC - Germany PwC - The Netherlands services network. PwC’s Working Capital
+44 7803 455 643 +49 170 987 9253 +31 6 3024 5711 Management Network consists of a global
william.b.extra@pwc.com gerard.k.kortman@pwc.com danny.siemes@pwc.com network of experienced working capital
and supply chain finance specialist
dedicated to delivering sustainable
working capital and cash flow
improvement across operations
Federico Caniato Luca Gelsomino Antonella Moretto
The Supply
Chain Finance Full Professor Senior Researcher Assistant Professor
School of Management Windesheim University School of Management
Community is a not-for-profit Politecnico di Milano of Applied Sciences Politecnico di Milano
association of all those involved in +39 02 2399 2801 +31 88 469 6088 +39 02 2399 3976
supply chains. Its founder members federico.caniato@polimi.it lm.gelsomino@windesheim.nl antonella.moretto@polimi.it
are 23 business schools across Europe
supported by corporations, banks,
consultancies and technology vendors
Agostino Bonzani Renate Corten Stephan Dellermann Laura Monagan Alessio Ronchini
Research fellow Manager Senior Manager Manager Research fellow
Co-authors of the study Politecnico di Milano PwC – The Netherlands PwC – Germany PwC – United Kingdom Politecnico di Milano
agostino.bonzani@polimi.it renate.corten@pwc.com stephan.dellermann@pwc.com laura.e.monagan@pwc.com alessio.ronchini@osservatori.net
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 31Global Supply Chain Finance and Working Capital Network
PwC Supply Chain Finance Community
Australia Belgium Denmark www.scfcommunity.org
• The Supply Chain Finance Community is an independent global community consisting of
James Fowler Jeroen Theys Rene Brandt Jensen
james.fowler@pwc.com jeroen.theys@pwc.com rene.brandt.jensen@dk.pwc.com knowledge institutions, corporations, and supply chain finance professionals who share
best practice and new research in an open, collaborative environment
• The aim of the SCF Community is to promote and accelerate the understanding,
France Italy Malaysia development and implementation of supply chain finance models
• Its founder members are leading business schools supported by corporations, banks,
François Guilbaud Domenico Dimita Ganesh Gunaratnam consultancies and technology vendors
françois.guilbaud@pwc.com domenico.dimita@pwc.com ganesh.gunaratnam@my.pwc.com
• In 2013 the SCF Community held its first conference at Nyenrode Business University in
The Netherlands. Since then, the SCF Community Forum has evolved into an annual
event that brings together more than 200 participants from corporates, business schools,
Middle East Singapore Switzerland banks, technology firms and governments. At the same time, the Community itself has
expanded to include more than 1,500 SCF practitioners in every continent
Mihir Bhatt Caroline Clavel Benjamin.rutz
mihir.bhatt@pwc.com caroline.yl.clavel@sg.pwc.com benjamin.rutz@ch.pwc.com • Today the SCF Community supports research projects conducted by institutions
connected to the Community and endorses several SCF initiatives such as the Global
Student Challenge and the SCF Academy. From 2016 the SCF Community’s activities
are expanding to include a global awards scheme, enhanced digital resources and events
USA Vietnam www.pwc.com in both Europe and Asia
Bruno Lopes Mohammad Mudasser • The SCF Community is a not-for-profit institution managed by an executive board
bruno.lopes@pwc.com mohammad.mudasser@pwc.com consisting of leading professionals and scientists in the field of supply chain finance
SCF Barometer 2018/2019
PwC & Supply Chain Finance Community 32SCF Barometer 2018/2019 © 2018 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
Key terms and explanations • C2C: Cash conversion cycle between outgoing and incoming payments • Dynamic Discounting (DD): dynamic settlement of invoices where for every day of advanced payment with respect to a pre-defined baseline, the supplier grants to the buyer a discount on the invoice nominal value • Inventory financing and asset based lending: lender (usually a bank) loans money to a firm with the maximum amount of the loan linked to the firm’s assets in the form of cash, inventory, and accounts receivable • LSP: Logistics Service Provider • NOWC: Net Operating Working Capital; i.e. working capital required for business operations minus current liabilities (often equated with liabilities from suppliers and services • Pre-approved invoice financing: factors purchase accounts receivables from suppliers upon buyer receiving invoice and based on data driven likelihood of buyer ultimately meeting payment obligation • Purchase order financing (pre-shipment): lender (usually a bank) loans money to a supplier for the sourcing, manufacture or conversion of raw materials or semi- finished goods into finished goods which are shipped to a buyer, having as guarantee purchase orders • Reverse factoring (RF): provides a supplier with the option of receiving the discounted value of an invoice prior to its actual due date or of an account payable due to be paid by a buyer to the supplier at a future date • ROE/ROI: Return on Equity/Return on Investments • SCF: Supply Chain Finance SCF Barometer 2018/2019 PwC & Supply Chain Finance Community 34
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