© GT Nexus, Inc.

How to Optimize Working Capital and Reduce Risk and Costs through Financing in the Cloud

Transform Financial Supply Chain

A STRATEGIC IMPERATIVE FOR RETAILERS

Sourcing from locations across the globe has become the norm for many retailers, but not without a cost. The longer the distance between point of origin and a retailer, the higher the risk and volatility in the supply chain. When the many players in a fi nancial supply chain are not on a single platform, the costs of manual reconciliation, higher credit risk, and inventory requirements increase signifi cantly and tie up cash that could be better used elsewhere.

Impact of Outdated Supply Chain Finance StrategyWhen retailers don’t have a single, cloud-based system to man-age supply chain fi nance, they’re forced to use technology that doesn’t properly mitigate supply chain risk. Inventory manage-ment becomes more complicated and costly, and payment un-certainty increases. Retailers suffer from the following effects:

Buyers take ownership of inventory overseas, leading to higher inventory working capital in the supply chain

Higher supplier cost of capital passed on in higher cost of goods

Manual processes increase accounts payable expense and missed discount opportunities

Lack of payment certainty and visibility increases supplier credit risk

The Root of the ProblemSourcing from far regions means taking on a more diverse group of supply chain partners. If those partners don’t have a common platform on which to communicate, they’ll have trouble collaborating on payments, taking advantage of fi nancing options, and reducing costs of goods along the way. The uncertainty in longer, more complex supply chains ties up working capital and increases the fi nancial burden on retailers.

1. Longer supply chains mean more inventory risk

When goods are sourced from overseas, the risk of los-ing track of inventory or making mistakes on shipments increases as they pass through many points. To combat this, companies often:

Hold more buffer stock for emergencies

Maintain ownership of in-transit inventory for longer periods of time

Miss opportunities for postponement due to lack of visibility

2. Many suppliers and providers from different regions

Having a large number of suppliers means an increase in payables. Without the right system, these suppliers have a lack of payment certainty and visibility. Together, these fac-tors increase supplier credit risk and call for more manual processes, leading to:

Poor supplier relations

Late or inaccurate payments

More supplier working capital tied up in receivables

© GT Nexus, Inc.

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Increased working capital costs in the supply chain offset the benefi ts of far-sourcing, while manual, expensive payment reconciliation increases costs and risks.

The Challenge

Traditional supply chain fi nance calls for manual reconciliation, leaving room for error across the supply chain.

Manual, moreexpense LC Payments

Automated, open account payment Higher credit risk

Plant

Plant

NetworkConnectivity

Agility

Customers

Customer

DC / Warehouse

Plan

Actual At-Risk DelayDynamic ETA

B

A

Sense more accurately

Operate more efficiently

Respond faster

Make better decisions

3

The SolutionA cloud-based supply chain platform can bring suppliers, fi nancial service providers, and retailers onto the same page. With this technology, suppliers can see when they’ll get paid for goods shipped and access better fi nancing rates. Retailers can take advantage of early payment programs to lower cost of goods sold.

Optimize working capital and reduce risk and costs on a cloud-based network of partners.

Automate electronic payment and fi nancing on a single platform

Manage all aspects of supply chain fi nance from a central location

Use a fi nancial service provider network

How to use a supply chain fi nance platform:

1. Ensure accurate, timely payment reconciliation and approval

2. Reduce risk through payment protection and guarantee

3. Infuse liquidity when needed with supplier pre- and post-shipment fi nancing

4. Execute fi nancing easily on a platform with many fi nancing and payment providers

5. Enable event-driven fi nancing with automated payment reconciliation backbone platform

Value PropositionsBy adopting cloud technol-ogy to transform their supply chain fi nance strategy, retailers can reduce costs and improve relationships with their suppliers. Outdated practices like letters of credit and manual payment reconciliation are eliminated. With a cloud-based platform, they can:

1. Reduce working capital in the supply chain

Lower working capital by extending payment terms

Mitigate impact on supplier cash fl ow with early pay-ment option

2. Reduce cost of capital in the supply chain

Make low-cost third party fi nancing available to suppliers on the platform

Increase return on cash with optional early payment program that offers fi nancing rates to suppliers and reduces cost of goods

3. Reduce operational costs and credit risk

Use automated, n-way payment reconciliation and single source of payment truth

Eliminate letters of credit with payment protection program

Supply Chain Finance and the Networked CompanyTo transform supply chain fi nance, companies must transform themselves from silo-based, inward-facing corporate operators to interconnected, highly agile business network orchestrators.

When far-sourcing, stop looking for ways to cut operating costs. A lot of cash is tied up in work-ing capital, but can be freed up by using cloud technology.

Suppliers need confi dence that they’ll be paid on time, and retailers need to reduce risk and cost as goods move along the supply chain.

Order Issuance Shipment

Payment Protection

Reduce Risk and Cost of Goods

Improve Working Capital

Pre-export Financing

Post-export Financing

Early Payment

Invoice Approval PaymentPaymentInvoice ApprovalShipmentOrder Issuance