Supply chain finance (SCF) is currently a major issue for finance managers at Swiss companies. This was evident at the Swiss WCM Summit 2018: more than 130 participants attended the industry event to learn about the opportunities and challenges of cross-company finance management solutions, which are becoming increasingly important in a globalized and digitally connected economy.
Swiss WCM Summit 2018: Swiss companies need to act on supply chain finance
Taking advantage of win-win situations along the supply chain
With SCF, the key issue is which stakeholder in the supply chain (for example, a logistics service provider, supplier or customer) finances which elements (inventory or payments) and with which financing instruments (such as factoring or dynamic discounting). This extends the opportunities of working capital management to the entire supply chain, opening up win-win situations for the company itself as well as for its customers and suppliers and offering the potential to acquire competitive advantages.
Study scrutinizes SCF at Swiss companies
But where do Swiss companies stand in relation to SCF? Answers to this question were provided by the latest WCM Study 2018, which has been published annually since 2015 by the SCF Lab at the University of St. Gallen. Head of the SCF Lab Prof. Dr Erik Hofmann presented the key findings at the summit. These included the fact that there are a wide range of innovative SCF solutions available to Swiss companies, and that these open up new opportunities for holistic WCM in the supply chain thanks to their outstanding networking capabilities and high level of technology penetration. Furthermore, while the top companies surveyed currently finance up to 20% of their total assets with innovative trade finance and SCF instruments, this figure reaches an average of only 5% for all companies surveyed.
Swiss companies need to act
This means that there is room for improvement. Swiss companies also need to optimize their use of SCF solutions compared with other European countries. Dr Daniel Maucher, Head of Solution Development & Operations Working Capital Management at PostFinance, stated: “The latest figures once again show that Swiss companies are still reluctant when it comes to implementing cross-company WCM solutions.” The companies surveyed in the WCM Study indicated that a lack of resources was the greatest obstacle to setting up their own SCF programmes. However, the fact that a third of the finance managers surveyed anticipate a significant change in the financing structure at their companies over the next five years can be seen as a positive sign. They regard SCF solutions for inventory as offering the greatest potential.
Is less always more?
Lively debate was sparked by the study’s finding that the widely held view that “less is more” in WCM should be treated with caution. “Our analysis of SPI companies shows that company performance falls if working capital is both too high or too low. There is an optimal level of net working capital which has to be aligned with the company’s strategic goals and has to take account of the supply chain,” explained Hofmann. Companies are therefore advised to define their individual working capital level, possibly with support from an external WCM consultant.
Swiss WCM Awards: the 2018 winners
The summit ended on a celebratory note with the presentation of the Swiss WCM Awards. The award in the “Performance Excellence” category was won by the Tornos Group. The company, which is based in Moutier and employs around 670 members of staff, specializes in the manufacture of machines designed to produce parts requiring extreme precision and quality. The Tornos Group gave a convincing demonstration of how it succeeded in reducing its net working capital by around 30 percent thanks to consistent, cross-functional WCM. The award in the “Innovation” category went to Tradeplus24. The Zurich fintech company specializes in helping Swiss SMEs meet the challenges of working capital management by offering a simple solution for financing Swiss and international accounts receivable.The winners were selected by a top-class jury of leading figures from business and science.
About the Swiss WCM Summit
The Swiss WCM Summit is the industry event on working capital management aimed at CEOs, CFOs and entrepreneurs. It is organized by Swiss Post, PostFinance and the Supply Chain Finance Lab at the University of St. Gallen. The three partners work together closely in the field of working capital management. The Swiss WCM Summit 2018 focused on the trend topic of supply chain finance. Specialist talks, the presentation of the WCM Study 2018 and a roundtable talk with a top-class panel provided plenty of food for thought – as did the keynote speech on “geopolitics and market prospects” by Oswald Grübel, the former CEO of Credit Suisse and UBS