Vodafone wanted to support its valued suppliers through a Supply Chain Finance programme that would enable them to access funds earlier than would have been available under the terms of contractual arrangements. This would improve the working capital of Vodafone’s suppliers – making its supply chain more robust – while leaving traditional funding sources untouched.
Photo of Mark Tweedie, Citi and Neil Garrod.
Neil Garrod
Group Treasurer
Vodafone is the world’s largest operator of mobile telecommunications networks. Vodafone has equity interests in over 30 countries and partner market arrangements in over 40 countries.
Vodafone grew rapidly through a series of large non-emerging market acquisitions. In 2006 Vodafone signalled a change in its strategy with a focus on regional and local strengths and an emphasis on developing its presence in faster growing emerging markets.
Vodafone’s acquisition of a controlling interest in Hutchison Essar Ltd was the largest example of this strategy.
Vodafone has more recently indicated a preference for in-market consolidation and a renewed focus on showing delivery in its existing emerging market footprint.
in partnership with
Following a Request for Information (RFI), Citi was appointed in early 2010. Citi’s experience, as a major Vodafone payment bank, and Citi’s understanding of Vodafone’s existing infrastructure/SAP platform interface was an important factor in the decision process.
The solution delivered by Citi is fully integrated and allows invoices to be processed at Vodafone’s shared service centres: once three-way matched (purchase order, goods receipt note, invoice) any supplier who has been “onboarded”can access funding immediately. It leverages Vodafone’s existing SAP/bank file-based connectivity for vendor payments – put in place through the company’s EVO Global Transformational Programme – to discount supplier payments.
As Neil Garrod explains “Vodafone’s on-going business transformation programme ‘EVO’ has put the majority of investment into a single instance of SAP – supported by offshore shared service centres. Furthermore, the implementation of the Vodafone Procurement Company (VPC) has centralised the procurement from a single entity. These are both common objectives for corporates. What we and Citi have achieved with the SCF solution is the next step – to leverage the treasury and cash management opportunities brought about by this centralisation – to the benefit of Vodafone, and its suppliers. As such, we anticipate this being of relevance/interest to many corporates.
The solution delivers optionality to Vodafone; based on its own cash profile it can choose to invest in the programme. Should it choose not to, Citi funds the programme using its balance sheet and has the ability to deliver additional capital through the investor community. Any invoices sold by suppliers to Citi would be collateralised by Citi into securities and sold onto interested parties as short term liquid investment products.
The centralisation of spend with VPC, a common ERP, and umbrella contract structure enabled an extremely quick ramp up and after the first six months of operation five Vodafone entities were live, and VPC suppliers alone had sold in excess of €500m of invoices.
In summary:
- The supply chain finance (SCF) solution supports suppliers in challenging credit markets by providing them with access to a new source of liquidity.
- Allows suppliers to access funding at attractive rates.
- Assists Vodafone Procurement Company (VPC) and its Supply Chain Management team in facilitating commercial negotiations with suppliers.
- Fully integrated solution: straight through processing (STP) from Vodafone’s accounting platform to Citi platform allows onboarded suppliers to access funding immediately.
- Global platform: enabling simpler/quicker supplier on-boarding and economies through a consistent and scalable solution.
- One global contract to govern SCF for all participating operating companies in all jurisdictions.
- Neil Garrod concludes “SCF has given Vodafone suppliers an alternative route of obtaining cash early at rates which can be attractive compared to bank financing and which has in turn been a driver behind Vodafone’s own working capital improvements”.
