Treasury Today Country Profiles in association with Citi

Flex Group

Flex, Highly Commended, Best Supply Chain Finance Solution

Photo of Sooria Narayanan, Flex and Thomas Aubry, Citi.

Flex has developed a three-pronged solution with its partners, comprising supply chain finance, dynamic discounting and purchasing card. Importantly, the solution took only weeks to complete from a single country pilot to full globalisation.

Photo of Sooria Narayanan, Flex and Thomas Aubry, Citi.

Vivian Peng

APAC Treasurer, VP Treasury

With over 100 sites in 30 countries, and six Product Innovation Centres, Flex provides design, engineering, manufacturing, real-time supply chain insight and logistics services to companies of all sizes across almost every industry. The company is involved in the design, manufacturing, distribution and aftermarket services fields and aims at improving speed, efficiency and cost effectiveness throughout the entire lifecycle of its customers’ products.

in partnership with

Dynamic supply chain finance

The challenge

Over the past few years, against a backdrop of changing global market volatilities, Flex’s treasury team has faced challenges in improving its liquidity, working capital and profitability, as well as adapting to an increasingly digitised and disrupted world.

To address these challenges, Flex’s treasury team was looking for an innovative bespoke solution package to achieve the following goals:

  • Deploy and introduce a dynamic discounting programme in conjunction with other alternative working capital optimisation solutions.

  • Work holistically with supply chain finance (SCF) to deploy advance technology and solutions that would help suppliers to streamline and optimise internal pay-to-order operational process, whilst minimising costs and errors.

  • Optimise working capital on a global scale to improve group profitability and liquidity position.

  • Achieve higher returns on cash in Asian markets.

  • Feature multi-currency and multilingual capabilities, particularly throughout Asia Pacific.

  • Ensure low risk/high-yield returns on group’s short-term liquidity.

  • Ensure Flex suppliers have favourable financing alternatives.

The solution

After careful consideration, Flex chose to partner with Citi and C2FO to implement an integrated solution package, which comprised of the following:

Supply chain finance

To stabilise the supply chain, unlock Flex’s working capital to improve efficiency, increase liquidity for suppliers and lower financing costs to suppliers by leveraging Citi’s balance sheet.

Dynamic discounting

For medium-to-small suppliers to enhance Flex’s rate of return by leveraging its own balance sheet, provide early payment to suppliers to alleviate their funding needs, reduce cost of goods, and optimise discount capture.

P-card

For low volume suppliers with small value purchases to increase Flex’s overall operational efficiency, reduce costs and gain financial rebates from card volume usage.

With this three-pronged solution suite, Flex is now able to maintain an agile position to nimbly deploy the appropriate solution arrangements, whether on a standalone basis or a combination of solutions to address specific suppliers’ profile in a controlled and targeted manner.

In just six months the solution enabled Flex to increase its profitability by an average of significant incremental return on short-term cash. In certain markets, nearly half of its supply chain has registered in the platform demonstrating the high receptiveness of the programme by its suppliers.

Best practice and innovation

With the advent of digitisation and automation, the treasury space is ripe for disruption. While the challenges facing Flex were not unique to the market, Flex’s treasury team was determined to stay ahead of the curve and thus was looking to adopt new and innovative ways to transform its treasury. By partnering with Citi, Flex demonstrated a forward-thinking mind-set to implement an innovative and holistic trade finance solution, which coupled SCF and dynamic discounting.

This sophisticated, yet easy-to-implement programme, benefits both sides of the equation, creating a sustainable and collaborative relationship between Flex and its suppliers. Under the present low-interest rate environment, the solution has delivered satisfying return and adoption rate. In addition, the entire supply chain provides the trade finance optionality with both SCF and dynamic discounting choices.

Moreover, the Flex solution took only weeks to complete from a single country pilot to full globalisation. In today’s digital and fast-paced era, speed is of the essence to gain competitive advantages.

Key benefits

  • Provides a risk-free option to deploy global operational cash with reward.

  • Significant incremental return on short-term cash.

  • Enhances returns and gross margins and reduces COGS.

  • Improves their global supply chain health by providing suppliers with easy access to liquidity.

  • Innovative approach for discounts awarded to accommodate Chinese VAT considerations.