Introduction Supply Chain Finance SCF Lecture 10 Jan

Introduction Supply Chain Finance (SCF) Lecture # 10 Jan H Jansen E-mail: jansen@han. nl

Lectures period 2 or 4 Lecture Topic Preparation 8 Introduction to value Cool connection round 1 Assignment 6 9 CAPM & EVA Cool connection round 2 Assignment 7 10 SCF instruments Cool connection round 3 Assignment 8 EBA SCF 11 Blockchain in SCM & SCF Cool connection round 4 Cool connection round 5 Cool connection round 6 Cool connection round 7 Test exam Case Philips 12 13 14 Case Unilever Case Heineken Test exam Exam case

Round # 4 The Cool Connection

Recap Lecture 9

Value concept in business

EVATM (Stern & Stewart) EVATM NOPAT Operating Profit Sales - Costs * (1 - tax rate) Costs of Capital Employed Re * ε * WACC + Rd * λ *(1 -t) Re = Rrf +β *(Rm –Rrf)

Economic Value Added •

Lecture 10 SCF instruments

EVA™ Working Capital

Levels of SCF instruments Strategic • Take over • Joint venture • Minority interest Tactical • Equipment financing • Pay on production • Supply risk sharing • Currency risk sharing Operational • Working Capital Management • Reverse factoring • Dynamic discounting • Inventory financing • Purchase order financing Source: SCF, its practical relevance and strategic value, Boer de, R. et al, SCF Community, 2015 Adapted by the author)

Supply Chain Finance Instruments (‘Umbrella’) Source: Standard definitions for techniques of Supply Chain finance, 2015

Dynamic Discounting (Source: Standard definitions for techniques of supply chain finance, June 2015, Global supply chain forum) ‘A number of methods through which early payment discounts on invoices awaiting payment are offered to suppliers. The service is dynamic in the sense that the earlier the payment the higher the discount’

Dynamic Discounting Discount 3. 5% 3. 0% Discount % 2. 5% 2. 0% Discount 1. 5% Linear(Discount) 1. 0% 0. 5% 0. 0% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Number of days crediit

Aim of the report Clear set of definitions, so there is no more: uncertainty, ambiguity and lack of clarity when SCF terminology is used Authors / Members: • ICC • BAFT • EBA • FCI • IFG • ITFA

SCF definition (1) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

SCF definition (2) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

SCF definition (3) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

SCF definition (4) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

SCF definition (5) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

Definition SCF (Source: SCF – European Banking Guide, EBA, 2014)

Physical Supply Chain (PSC) & Financial Supply Chain (FSC) Figure 16 Supply Network management as defined by Slack, A. et al. (Slack, 2011)

Collaboration in the chain • No collaboration • Bilateral collaboration • Collective collaboration

New pattern in trade flows Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

Supply Chain Finance Instruments (‘Umbrella’) Source: Standard definitions for techniques of Supply Chain finance, ICC Global SCF forum. , 2014

Supply Chain Finance Instruments (‘Umbrella’) 1. Accounts payable / Buyer centric a. b. 2. 3. 4. Reversed factoring (Confirming / Approved payables financing) Dynamic discounting Inventory centric a. b. Pre-shipment Purchased Order-based finance Accounts receivable / Supplier centric a. b. c. d. Receivables purchase Invoice discounting Factoring Forfaiting Related a. b. c. d. Documentary trade finance Bank payment obligation (BPO) Asset-based lending Payments & Foreign exchange

1 a Reversed factoring (Confirming / Approved payables financing)

Source: SCF European Market Guide, EBA, 2014

Source: http: //www. newburyconsulting. co. uk/wp-content/uploads/2013/12/supplierfiancemodel. JPG. bmp

1 b Dynamic discounting 3. 5% Discount 3. 0% Discount % 2. 5% 2. 0% 1. 5% Discount Linear(Discount) 1. 0% 0. 5% 0. 0% Source: SCF European Market Guide, EBA, 2014 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Number of days crediit

2 a Pre-shipment

2 b Purchased Order-based finance

3 a Receivables purchase

3 b Invoice discounting

3 c Factoring

3 d Forfaiting Source: SCF European Market Guide, EBA, 2014

4 a Documentary trade finance Source: SCF European Market Guide, EBA, 2014

4 b Bank payment obligation (BPO) Source: SCF European Market Guide, EBA, 2014

4 c Asset-based lending

4 d Risks: Payments & Foreign exchange

Conceptual model SCF for WCM in SMEs