Optimise your value chain with FSCM
The past decade has brought increased volatility to the business environment and heightened competition. As such, companies are forced to seek new ways to gain a competitive advantage, decrease costs and increase profitability; operating in silo is no longer a viable option. Businesses need to leverage their partnerships with their suppliers, distributors and retailers – stakeholders across the entire value chain.
“It no longer pays to just be good at how you operate your business. With greater interconnectivity and more competition, it is far too costly to neglect your relationships. The sooner this is realised, the faster you get to optimise your value chain and realise your true business potential,” said Lucas Chew, executive director and country head of Transaction Banking, UOB Malaysia.
A leading beverage manufacturer in Malaysia understands the value of leveraging their relationship with their distributors to optimise their value chain.
“Our business growth is contingent on the ability of our distributors to purchase more from us. We also needed to improve our days sales outstanding (DSO) position, from the 45 days of credit terms to distributors. In addition, we required a comprehensive cash management solution to assist our distributors, especially for their collection from retailers,” the company’s CFO said.
In order to solve the company’s challenges, UOB Malaysia introduced an integrated Financial Supply Chain Management (FSCM) solution for the manufacturer’s ecosystem, with the company as the anchor and its distributors as the spokes. The Distributor Financing Program was designed to provide a minimum facility size that would address the distributors’ needs. Distributors were onboarded onto the program based on information provided (distributors’ financial standing, market reputation, track record, service quality and historical sales performance) by the anchor.
With the swift credit assessment, credit approval and quick on-boarding of distributors for enablement of working capital facilities, UOB Malaysia has seen more than 10 distributors successfully on-boarded with this program.
To realise the true benefit of FSCM, it has to be coupled with effective cash management.
In order to provide a holistic solution for the beverage company and its distributors, UOB Malaysia also assisted distributors with their cash collection from retailers, using intelligent cash deposit machines placed within the distributors’ premise. These machines automatically count the cash deposited, thereby eliminating the need to calculate deposits manually. It also improves cash flow since all deposits are credited to distributors accounts the next day.
“We have managed to accomplish what we set out to achieve. We have improved our DSO from 45 days to 21 days; have established long-term partnerships and stability with our distributors; provided our distributors with access to competitive and adequate working capital funding for their sales growth, and we have enhanced our distributors’ business efficiency with cash management,” said the CFO of the beverage manufacturer.
As companies become more interconnected, FSCM can help unlock value and benefits that traditional working capital solutions are unable to.
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