TTS: The Consumer Sector & Role of Treasury

Treasury and Trade Solutions 4 Such insights ensure companies focus on areas that are going to have the most impact. This is shown in the graphic information on page 3 which outlines a range of opportunities to drive further efficiencies in the procure-to- pay cycle of a company. An initial analysis can be performed by Citi to identify opportunities across the entire supply chain to drive a combination of working capital and cost reduction benefits. A direct data feed from the corporate’s enterprise resource planning system can then enable the bank to complete a more holistic analysis that will provide sufficiently granular detail to enable a business case to be built for investment in new solutions. One area that often yields significant results is an assessment of supplier payments. Big data analysis can enable companies to segment their suppliers and pinpoint the opportunities for working capital and COGS improvements. “We can show you a precise cost/benefit analysis for any solution” Many corporates have grown, either organically or through acquisition, but failed to rationalise their banking arrangements as they have expanded. Again, banks are able to leverage the wealth of data to assess account structures and pooling or netting mechanisms (including at third party banks) to ascertain if there are opportunities to create a leaner structure (while still providing necessary support for the business) and lower sales, general & administrative (SG&A) costs. Such initiatives are prudent housekeeping but they can also be a useful way to identify synergies before a merger. For the FMCG sector, working capital represents 17% of total capital compared to 14% for the typical company in the S&P500 therefore improvements in working capital efficiency have a material effect on the returns. Companies that have shortened their cash conversion cycles tend to have: The scale of the opportunity available to FMCG companies as a result of supply chain finance (SCF) is demonstrated by the above graph. Given the multi-billion dollar size of many FMCGs, a one day improvement in days payable outstanding (DPO) as a result of the introduction of a SCF initiative could be worth tens of millions of dollars: the 46-day DPO benefit delivered by SCF programmes is therefore extremely valuable. 90 80 70 60 50 40 30 2011 2012 2013 2014 2015 2016 Consumer Products Industry – DPO (days payable outstanding) 63 days 36 days 86 days With Programme Without Programme 40 days ~ 3x DPO Improvement +36.5% +11.1% Deep thinking delivers results More robust dividend policies Higher levels of reinvestment and higher top-line growth Higher returns on invested capital Superior total shareholder returns