Garrett Motion rolls out dynamic discounting across supplier base
Published: Sep 2024
Best Supply Chain Solution
Highly Commended Winner
Garrett Motion Inc
Nicolas Shelton
Senior Manager Treasury Lead
Garrett Motion is a leader in advanced technology for the automotive and other industries. The company designs, manufactures and sells turbocharger, electric boosting and electric vehicle technologies for light and commercial vehicle original equipment manufacturers (OEMs) and the aftermarket.
The challenge
Speak to any company with a complex supply chain, and minimising the risk of one key supplier delaying production of a finished product is front of mind. It’s why for many companies, supporting their suppliers, particularly during times of uncertainty like COVID-19 is a priority. The treasury team at Garrett Motion knew their suppliers had felt the brunt of lockdowns and shifting consumer behaviour, as well as the slow economic recovery coming out of the pandemic and sought to support these extensive and valuable manufacturers.
Garrett Motion’s existing bank-led supply chain finance (SCF) programme had limited credit availability and could not easily onboard additional suppliers. This restricted the number of vendors that could be supported and prevented working capital from reaching the smallest companies in Garrett Motion’s supply chain, including SMEs that are most vulnerable to economic shocks and in need of working capital.
Many SCF programmes also struggle to efficiently manage cash flow across a network of suppliers due to supplier jurisdictions and inharmonious payment terms. Garrett Motion was looking for new digital solutions that would give their suppliers access to early payments in unprecedented market conditions.
“One primary challenge for us was the complex nature of cash flow management within a large and interconnected supply chain network,” says Nicolas Shelton, Senior Manager Treasury Lead.
The solution
By deploying a combination of dynamic discounting and third-party funding, provided by one of its relationship banks, Garrett Motion was able to support suppliers with maximum flexibility.
In February 2023, Garrett Motion introduced C2FO’s Dynamic Supplier Finance (DSF) solution, giving treasury control over how and when suppliers receive early payments. The project aimed to support the funding needs of Garrett Motion and its suppliers by investing surplus cash via dynamic discounting, and then transitioning to third-party funding when cash needed to be retained on the Garrett Motion balance sheet. Powered by C2FO, the world’s largest working capital platform, the programme has seen strong performance with hundreds of SME suppliers registering for the solution.
C2FO’s DSF solution lets Garrett Motion decide how much cash the company wishes to invest and set this limit within the application. The company can manage its desired yield settings, ensuring the cash it deploys returns greater economic benefit and with more flexibility than a deposit solution or investing cash in overnight money markets. The solution allows Garrett Motion the opportunity to use its own cash intra quarter for supplier payments and third-party funding for those invoices that cross a quarter-end period. This flexibility is only available via this particular solution.
The technology and one-click supplier onboarding capabilities brought innovation to Garrett Motion’s SCF practice, allowing the company to employ better cash management whilst supporting a larger group of suppliers compared with conventional bank-funded SCF programmes.
Best practice and innovation
This solution exemplifies best practices and innovation in financing solutions, enhancing operational efficiency and profitability. Key features include:
One-click onboarding – suppliers can enrol in the programme with just one click, meaning the entire Garrett supply chain can participate regardless of size, including SMEs.
Flexible funding – Garrett Motion can fund its suppliers using its own cash or third-party funding provided by their relationship banks.
End-to-end automation – C2FO seamlessly integrates with Garrett’s ERP system, enabling real-time invoice updates and two-way communication.
Key benefits
Cost savings.
Return on investment (ROI).
Increased automation.
Risk mitigated.
Improved visibility.
Manual intervention reduced.
Exceptional implementation (budget/time).
The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
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