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Supplier Finance Advantage

Companies see payables strategies as a way to generate returns, as well as to help suppliers.

By John Hintze | Updated on May 01, 2012
While supply chain finance (SCF) programs are still relatively rare—only about 200 U.S. companies are thought to have them in place—such programs are gaining momentum in the wake of the financial crisis as companies seek to extend payment terms without putting suppliers at risk and, perhaps, even bolster their own income. A.J. Cederoth, CFO of Navistar International, a $13.9 billion manufacturer of heavy vehicles, says the company launched its SCF program this year as a way to strengthen its suppliers’ working capital. The program also fine-tunes payment terms, allowing Lisle, Ill.-based Navistar to focus on product costs in negotiations with suppliers.

“We have our platform up and running, and we’re working through the administrative and legal hurdles to bring more suppliers on board,” Cederoth says, adding that Navistar expects significant increases in the number of suppliers using the platform, including those in Latin America. “I definitely think suppliers are more interested in SCF than even a year ago,” he says.

Outdoor gear retailer Recreational Equipment (REI) is building a case to replace the sliding-scale discount program in its accounts payable platform with an automated SCF platform, though it has yet to choose a vendor to power it, says Russell Paquette, treasurer at the Kent, Wash., cooperative with $1.4 billion in 2011 revenue.

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