The world according to Big Buyers

Large Global corporates like Nestles, Unilever, Anheuser-Busch InBev, and Kraft buy billions of dollars of ingredients, commodities, chemicals, and indirects (eg. legal, transportation, marketing, etc) in order to make their brands.  Their payment terms create receivables on their suppliers’ balance sheets.

I recently chatted to the CPO of a typical Fortune 500.  They have 160,000 suppliers (of which 10,000 are for production and 150K our indirect) have the following Segmentation:

Example Supplier Segments Relationship
15 “Innovators” Top Relationships – share Intellectual Property, business plans, and strategy.
50 Joint Business Development vendors These suppliers grow where the large corporate grows (ie, Emerging Markets, BRIC, etc.)
Top 10 suppliers by category As an example, cocoa may not be an important ingredient to the Corporate, but may be very important to one of their main brands.
Top 500 vendors after the above These are typically large counterparties.
The “Rest” Business as Usual – eRFP, auctions, etc.  These suppliers are probably referred to as SMEs- Small, Medium enterprises.

 

The Financing needs of their suppliers vary greatly.  According to this CPO, they are concerned about their top suppliers being able to help them expand into new markets, particularly emerging markets.  They want to be the Customer of Choice with their key suppliers and much of the discussion is around product innovation.  They currently have 250 factories, and are building 23 factories in Asia.  As the CPO mentioned to me, they are a bad payer, with 95 days DPO.  He knows they can't keep squeezing vendors so what is next?  How will he ensure suppliers provide materials in a timely fashion as new factories are built?  They instituted a partnering program to engage key suppliers around this topic.  This CPO knows its important that these companies have the capital and credit to develop factories and delivery capabilities at their new factories.

For the Other Top 500 or so vendors, they can implement programs like Supply Chain Finance or Reverse Factoring.  As for the "Rest" of their suppliers, this is where PCard solutions and Dynamic Discounting can come into play.

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