For a supply chain financing programme to succeed it needs to provide benefits for both the buyer company and the supplier. A superb example of this is how EDF, the French power group, worked with BNP Paribas to provide a supply-chain financing (SCF) programme for their key suppliers in their programme introduced in 2011.
EDF did NOT extend their payment terms; they just offered their key, vital suppliers full flexibility on whether they make use of the early payment SCF option or not. Suppliers opting to take early payment usually receive it within 48 hours. One of EDF's main objectives was to ensure that they remain a preferred customer for these suppliers.
Frédéric Clauss, Managing Director of Sondages, Auscultation & Maintenance, a small and vital EDF supplier which has been taking advantage of the programme since it began, explains, "The supply chain financing programme has been an important source of cash at market rates when we need it. The key advantages of the programme are its simplicity, the very short response time to receive the cash, and there is no need to change our daily banking arrangements." Clauss feels the SCF option certainly made EDF a preferred customer.
P&G should take note (see). Your key suppliers are vital to your very survival, extending payment terms for all suppliers is bound to reduce supplier loyalty, and they will, if they have the choice, opt to supply other companies. Suppliers are much more vital than you think, just ask Apple about Samsung.