Best Supply Chain Solution Winner: Pepco Group

Published: Jul 2022


Photo of Mateusz Siwa, Martyna Bobowik, Adam Krajweski, Agnieszka Stefaniak, Pepco Group and Mehwish Jangda, Citi.

Alan Chitty

Director of Group Treasury, Tax and Risk

Headquartered in Poland, Pepco is a European chain of discount shops with 20,000 employees and 4,000 stores in 16 countries.

in partnership with

SCF solution for suppliers in Bangladesh, India and China ready to expand

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The challenge

Pepco sources directly from its suppliers from various countries. Globally, the group has around 2,000 suppliers in total, with 115 strategic suppliers that are based in Asia including, amongst others, Bangladesh, India and China. It is these strategic suppliers that are addressed in the first phase of the solution described. Historically, Pepco’s payment terms to its suppliers in Bangladesh, India and China were extremely short because it believed that pricing, which is key to its business model, would be impacted by extended terms, as suppliers would have to finance the payment terms themselves at a relatively high cost in-country. During COVID-19, lockdowns in various of Pepco’s operating countries resulted in stores being closed and/or restrictions on the merchandise sold, which resulted in lower footfall and basket size.

The solution

Pepco decided to extend payment terms for its 115 strategic suppliers from seven-15 days to 30 days, and then later to 60 days. The benefits of this approach were dramatic. Most importantly, there was not the expected large increase in the cost of goods. For Pepco, this was a revelation that inspired its next move. A year into the pandemic, supply chain costs, notably logistics and commodity costs, started to increase as the global economy recovered. as the terms got longer, the impact to vendor grew. Pepco didn’t want to move beyond 60D without supporting its vendor base through some means of supply chain finance (SCF).

Pepco wanted to help its suppliers, ensure supply chain resilience, and minimise the impact on its own cost base. The company decided to extend payment terms further but, crucially, wanted to use SCF to reduce costs for its strategic suppliers because as as the terms got longer, the impact to suppliers grew. The SCF solution enabled suppliers to be paid in ten days, saving them significant effort and expense associated with factoring, and enabling them to offset increased commodity and other costs. While the attractions of the SCF solution were immediately obvious to most of Pepco’s strategic suppliers, there were challenges.

Many Chinese suppliers were reluctant to be first movers on the SCF programmes. Convincing key suppliers to participate in Pepco’s programme was therefore challenging. However, they were ultimately convinced of its merits and Pepco’s relationships with these suppliers have subsequently been strengthened. In addition, managing the bureaucracy associated with supplier relationships in China, India and, especially Bangladesh, was difficult.

Pepco considered working with a bank-agnostic fintech SCF provider but decided it required a global bank with capabilities in Bangladesh, China and India as well as the ability to reach Central and Eastern Europe (which will be added in a later phase). However, while Citi designed and operates the programme, Pepco did not want to be tied to one bank, and three of Pepco’s other relationship banks participate in the programme.

Best practice and innovation

Some of Pepco’s suppliers in China are paid in yuan. This is one of a handful of programmes that offer local currency payment in the country. This is one of the first global SCF programmes encompassing Bangladeshi suppliers and Pepco will shortly update its programme so that suppliers in Bangladesh can opt to be paid in local currency.

As the programme expands to suppliers in Central, Eastern Europe and Turkey, the programme is expected to include Multilateral Agency (MLA) like European Bank for Reconstruction and Development (EBRD) who will not only provide credit participation but also provide the suppliers with a) technological change support by financing the capital expenditure investments; b) behavioural change support by providing advisory support and incentives to decrease their environmental impact, and c) performance linked pricing by providing a transparent and direct link between the SCF pricing and ESG performance.

Key benefits

  • Cost savings.
  • Process efficiencies.
  • Return on investment.
  • Increased automation.
  • Risk mitigated.
  • Improved visibility.
  • Manual intervention reduced.
  • Future proof solution.
  • Exceptional implementation (budget/time).


The Adam Smith Awards is the industry benchmark for best practice and innovation in corporate treasury. The 2022 awards attracted 230 nominations spanning 34 countries. To find out more please visit:

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