FOCUS 20 CREATIVE SUPPLY CHAIN COLLABORATION
In an upbeat economy, suppliers share the upside of retailers’ sales growth. So it stands to reason that they help fi nance that growth by taking on some of the working capital risk and inventory burden. Initiatives include both quick fi xes and structural changes in order to optimise working capital performance and guarantee that the right inventory is in place, at the right time and at the right price.
Reduced lead times
• By setting up European depots, suppliers (especially those in Asia) can reduce lead times from order to delivery.
• Minimum order quantities (MOQs) can be brought down by encouraging suppliers to share shipping containers.
• Work-in-progress or ‘greige’ (unfi nished) shipments mean products can be fi nished closer to the point of sale (PoS) when demand is more certain.
Consignment options
• To reduce retailer inventory risk, dedicated warehouses may be set up for suppliers to house consignment stock. Title is transferred only when goods move to the PoS.
Transparency
• Being more transparent about retailers’ inventory levels relative to supplier terms, there will be better understanding of the relationship between cash operating cycles. This may ensure that suppliers’ terms more adequately refl ect the inventory risk.
Supplier fi nance
• Supplier fi nance initiatives improve the working capital of both retailers and suppliers. The supplier raises an invoice, which it sells (once approved by the buyer) to a bank at a discount. Meanwhile, the buyer holds onto capital for longer and the bank collects payment on the due date.
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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WORKING CAPITAL
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