This is a multi-bank supply chain finance solution which has received some very positive feedback from the company’s suppliers. Read their case study on page 38 to find out how the company went about achieving it.
Photo of Friedemann Kirchhof, Siemens Financial Services.
Head of Supply Chain Finance
Siemens AG (Berlin and Munich) is a global technology powerhouse that has stood for engineering excellence, innovation, quality, reliability and internationality for more than 165 years. The company is active in more than 200 countries, focusing on the areas of electrification, automation and digitalisation. Via its Financial Services Division (SFS) Siemens can provide business-to-business financial solutions supporting customer investments with leasing solutions and equipment, project and structured financing.
Times are still tough for businesses of all shapes and sizes. Because of this, there is a strong focus on optimising working capital metrics. For a company like Siemens, which sits in the middle of one of the largest supply chains in the world, this is something that it knows all too well.
As Friedemann Kirchhof, Head of Supply Chain Finance explains “our customers are demanding longer payment terms from us. That is why the Siemens Supply Chain Finance programme was developed with the help of Siemens Financial Services. It enables selected Siemens’ suppliers to receive an advance of 100% when they sell their receivables regardless of the amount of the individual receivable. This allows them to significantly increase their liquidity by reducing their tied-up capital. Over the long run, this opportunity will strengthen our working relationships with suppliers.”
But for Siemens the next question was how could they do this efficiently, especially given the size of the company’s portfolio?
After searching the market, Siemens settled on the Orbian SCF solution. This enables the company to ensure that the suppliers receive their cash even earlier than they did before (two days after Siemens approves their invoice), and supports their desicion to agree to extended payment terms. The solution is also set up in such a way that banks can easily be added or removed without it having an impact on the suppliers.
The solution also provides:
Global capability from a single platform with simple implementation and integration guides.
Already embedded in SAP-ERP systems; limited technical integration for other systems.
No integration work necessary for suppliers and funders.
Complete suite of account reconciliation tools and reports for buyers and suppliers.
Simple contracts for buyer and suppliers.
Inventory finance to selected corporate clients.
A reduction in supply chain risk.
Efficient cash management.
Enhanced supplier relationships.
Best practice and innovation:
Siemens’ multibank SCF solution was the first ever implemented in Europe and “since its inception, our programme has been constantly growing: we started with 300 suppliers globally and we have now more than 1,600 worldwide,” says Kirchhof. “Today, the solution is used in 24 Siemens entities, across 11 countries and ten currencies and we are currently working with Orbian to expand the programme to additional countries, divisions and currencies.”
The feedback from Siemens’ suppliers has also been very positive: “Using Siemens/Orbian allows us to achieve best practice – you are independent and don’t have the problems and conflicts the banks and companies have. I’m involved with four SCF programmes and this is the best of them. Your supplier agreement is the best in the industry – it’s head and shoulders above the rest, and I see agreements every day – it’s easy to understand, contains only the important points, and it’s simply a straightforward business document,” said one supplier. “Easy, fast and attractively priced,” said another.