As the financial supply chain for The Stanley Works began to grow with the proliferation of offshore vendors, Craig Douglas, treasurer of the New Britain, Conn.-based tool manufacturer, thought he had one option if his company was to reduce its working capital: push the additional costs required by a longer chain onto the various supplier links. That was before he discovered a Web-based supply chain technology tool from Citibank. "Companies in the middle can't bear the cost of carrying a lot of working capital, but we don't want to increase the cost to the supply chain," Douglas says. "Citibank's system lets us push off some of the costs onto the vendors, but in a way that allows them to get reasonably priced financing so the costs are not that great."

The Orbian Way

The award-winning program that Stanley Works implemented, with the help of Citi, revolves around a payment automation system called Citibank Payment and Receivables Service. Formerly named Orbian after its foundation technology, the Citi system has reduced Stanley's annual working capital requirements by $45 million through extended payment terms, while still cushioning the financial blow to vendors. Here's how the system–which is only offered to U.S. suppliers that invoice Stanley for more than $100,000 annually–works: With Orbian, Stanley can provide vendors specific dates for payment, allowing suppliers to plan adequate financing. Once Stanley approves an invoice and sets a payment date, the bank offers qualifying suppliers, most of which are below investment grade, earlier payment at a discount rate closer to Stanley's own attractive cost of funds and well below the rates these vendors would otherwise have to pay.