The strong partnership between Lanxess’ finance and logistics teams, together with clear objectives determined from the onset, were critical to the success of this project which demonstrated first class relations. The approach was key when they embarked on a search for a new trade finance provider.
Lim Joo Joon
Chief Financial Officer
LANXESS Aktiengesellschaft (AG) is headquartered in Germany and is a leading specialty chemicals company focusing on the development, manufacture and marketing of chemical intermediaries, additives and plastics. The company is listed on the Dow Jones Sustainability World and FTSE4Good, two leading sustainability stock indices. Its Singapore subsidiary LANXESS Pte Ltd (LANXESS) serves as an important business, technical services and production hub of the group’s operations in the Asia Pacific region. The company generated revenues of US$170m in 2016.
Finance and logistics collaborate to deliver solution
In August 2016, LANXESS embarked on the search for a new trade finance provider when its incumbent bank was no longer able to support the firm’s trade direct collections business. LANXESS saw the development as an opportunity to revisit work flows and listed the key challenges it hoped to address with its new banking partner. They included:
Short onboarding timeline:
The finance and logistics teams were under pressure to onboard a new bank within a short period of time to ensure minimal disruptions to its existing business flows.
Standardised business operations:
The firm’s multiple business units operated under different processes with its previous incumbent bank, and did not have any formal standard operating procedures (SOP) in place to speed up the transition process.
Need for a secure platform:
LANXESS was receiving its letters of credit (LC) via email which were unsecure and exposed the firm to potential security risks.
Ability to track performance:
The firm lacked comprehensive data to track transaction status, processing times, days sales outstanding (DSO) cycles and freight forwarder performances.
LANXESS’ finance and logistics teams secured buy-in from its stakeholders across the firm’s five core business units to appoint J.P. Morgan Singapore branch as its new banking partner, due to the bank’s strong industry reputation and robust trade finance capabilities.
Lim Joo Joon, Chief Financial Officer explains, “The finance and logistics teams took the lead in facilitating the transition, spearheading a working committee that involved multiple representatives from several lines of business and functional teams across LANXESS and J.P. Morgan.”
Collaborating closely with the bank, LANXESS was able to complete the onboarding and full implementation of the bank’s trade solutions in less than two months.
Best practice and innovation
The strong partnership between LANXESS’ finance and logistics teams, together with clear objectives determined from the onset, were critical to the success of the transition.
As there was no prior relationship between LANXESS and J.P. Morgan Singapore branch, the ability to select a new banking partner and complete the onboarding, planning and implementation of the solution in less than two months (average industry turnaround for similar complex implementation is about three to four months) demonstrates the strong leadership and well-structured approach of the finance and logistics teams in managing internal and external relationships.
The strong collaboration between both firms ensured a smooth transition to the new banking partner, with minimal disruptions to flows between LANXESS and its buyers and freight forwarders. By leveraging automation, LANXESS is also moving away from manual trade processes, which means increased efficiency and the ability to refocus resource towards more value-added activities.
The bank undertook a thorough review process to ensure a good fit with LANXESS and was able to deliver solutions that met its client’s objectives and timeline. The bank also shared best practices on ways to further streamline LANXESS’ processes across its businesses. Following implementation, LANXESS and the bank conducted regular reviews to continuously make improvements to the firm’s trade finance processes.
“The collaborative efforts produced immediate efficiencies in terms of improved DSO, reduced LC discrepancy rates and lower operational costs,” concludes Lim Joo Joon.
Reduction in manual processes, with real-time access to online LC advising, transaction enquiries and management reporting.
Improved DSO cycles through outsourcing the document preparation process, resulting in increased operational efficiencies and turnaround time.
Improved cash flows through faster collection of trade receivables.