Taking all relevant stakeholder perspectives into account in any procurement project is key – especially supplier perspectives. A project that merely stretches payment terms is obviously not a recipe for success. As Rick notes himself in the letter:
“Rather than a simple ‘mandate’ which we believe could be punishing for our small/midsize partners, we have developed a solution with pre-selected partner-banks that will enable us to offer a financial product called ‘Supply Chain Financing’ (SCF) that can create a win-win-win for our external partners, P&G, and the banks. This approach not only will help mitigate some or all of the negative impact on the working capital of our external partners, but in many cases will create value, by enabling access to low cost capital for reinvestment. This solution demonstrates P&G’s commitment to drive sustainable value through improved productivity for P&G and our business partners.”
For larger suppliers with low cost of capital, this offering may not be very attractive, but P&G has likely already segmented the suppliers and will be tailoring not only some customized communications to them, but also all the support they’ll need to see the value of the program and exactly how to best implement it to meet their needs. The P&G supplier letter alluded to this:
“P&G Relationship Managers will be contacting our external business partners in the coming months with more details. If you have questions in the interim, please connect with your Relationship Manager at P&G. We will share many more details about how this works, the benefits and watchouts, and the selected banks that will help facilitate this.”
Until that time, we’ve written many papers dealing with supply chain finance, and there are many others such as this detailed primer from Supply Chain Management Review.
This post is based on content contained within the following Spend Matters paper: P&G: A Case Study of Supply Management’s “Non-Invisible Hand” in 10 Easy Lessons. The paper is free to download in the Spend Matters Research Library.