Panel Discussion

Supplier Spend Solutions Redesigning Your Supply Chain Payment Architecture

8 May 2014

Treasury and Trade Solutions

Supplier Spend – From Cost Savings to Value Creation

Complex

Supply Chain

Suppliers

differ by…

Size

Location

Spend

Category

Criticality

Value of

Spend

Payment

Frequency

Payment

Terms

Need for

Cash

Access

to Cash

Cost

Client

Goals

Minimise

Risk

Support

Suppliers

Free Cash Flow

Reduce

Costs

Generate

Returns

2

Can companies improve working

capital, reduce costs, generate

returns, minimise supply chain

risk, and support their suppliers,

through the way in which they pay suppliers?

Approach & Best Practice – Mondelez

The Challenge

MDLZ’s European SSC faced challenges in working with multiple

banking providers and using multiple electronic banking channels.

The “One Bank” project focused on three material objectives:

– Bring simplicity, consistency and transparency to treasury operations

– with the goal to rationalise the number of accounts.

– Collaborate, preferably, with just one bank across the entire region.

– Establishing a foundation to build on by migrating to a corporate

SWIFT solution and implementing one global ISO XML file format.

Bank rationalisation – single bank provider

The Solution

• MDLZ has adopted best-in-class

instruments provided by Citi to manage

MDLZ’s account payables

• MDLZ and Citi worked in close

collaboration to accommodate local

requirements

The Result

The “One Bank” solution in place with Citi has achieved the following benefits for

MDLZ:

• Higher operational efficiency through the automation of operational and treasury

payments, which have considerably increased STP / STR rates and allows the focus

on value-adding tasks

• MDLZ is one of the first companies to implement ISO XML Version 3 as single global

file format, using Citi’s expertise in this field, and reducing banking interfaces from

25 to 1

• Integrated approach and infrastructure to managing supplier payments end to

end, including accelerated payments through supplier finance and efficient

disbursement of low-end spend through commercial cards

Significant improvement on

bank KPIs at a glance:

– Reducing clearing from 29

to 1.

– Reducing bank accounts

from 475 to 300.

– Increasing STP payments

from 0% to 95%.

– Reducing file formats from

110 to 2.

– Reducing bank EB

connections from 25 to 1.

– Reducing payment methods

from over 40 to 4.

3

Automated payments in 85 countries

SSC, Vendor payments in Manila,

No. invoices processed yearly 5m

SSC, T&E in Beijing

95% automated payments via H2H

Corporate credit card program

50 countries with cards

>72 000 cards issued

Approach & Best Practice – Ericsson

The Challenge

Networks and network services in 180 countries with

employees in 150 countries

Telecom crises, reduce cost

SOX complains and global processes

Local companies and branches with multiple banks

Local payment and administration solutions with

multiple ERP system

Standard loan netting of intercompany payments

The Solution;

Globalise, Standardise and Centralise

One ERP

SSC structure

Global Master data Team

Global processes

5 cash management banks and account structure

H2H Automated payments solution for vendors and

Travel and expense

The Result

Improved efficiency

Cost reduction

Reduced risk

Close corporation between Treasury, SSC, CC, procurement, and IT

Governance structure for payments incl. cash in regulated countries

Global targets, Follow up

Regular review of quality, services and conditions

Clear directives

Treasury involved in business processes

Reduced number of banks and bank accounts

4

Supply Chain Payments Toolkit – A Simplistic View

5

Suppliers

Spend

per

Supplier

Supply Chain Finance (SCF)

Focus: Improve Working Capital

Negotiate payment terms or discounts based on benefit to

supplier through SCF

Suited for suppliers with >$1MM in annual invoice volume,

usually the top 100-300 suppliers, plus other strategic suppliers

Supplier receives early cash as non-recourse payment (reduce

DSO) at competitive financing rate

Focus: Improve Operational Efficiency, Earn Rebates

Reduce volumes of PO and invoice processing

Benefits from float days and rebates enabled by vendor-

funded costs of card acceptance

Suited for high volume/low value spend suppliers, plus a

growing range of card-accepting spend categories

Business to Business (B2B) Card Solutions

Integrated Payments

Focus: Improve Operational Efficiency

For all other suppliers not needing early payment options

Centralized, automated mass payments structure for straight through processing

Pay just-in-time, through most cost-effective payment method

One size does not fit all – Citi works with clients to review and implement core and innovative

payment solutions to meet working capital and efficiency targets to deliver shareholder value

Advisory Approach

Strategic

Assessment

Qualitative

Assessment

Quantitative

Assessment

(S3 Analytics)

Opportunity

Assessment

(S3 Analytics)

Implementation

Roadmap

• Strategic

objectives

• Key pain

points and

priorities

• Best fit

timelines

• Evaluation tools

based on publicly

available

information

• Includes working

capital and peer

benchmarking

• Workshops

with key

stakeholders

• On receipt of

client data

• Transaction/

supplier-specific

recommendations

• Solutions based

on in-depth

analysis and

insight

• Implementation

roadmap –

bundled or

modular

Solution Ramp-up and Performance Tracking

• Once solutions are live, Citi continues to drive programme adoption and spend ramp-up

Supplier Spend

Solutions

Supply Chain

Finance

B2B Cards

Integrated

Payments

6

What is your experience with Supply Chain Finance?

Live Audience Polling Question 1

7

a) Successful programme in place

b) Recently launched and being expanded

c) Evaluating the business case

d) None – but interested to explore

e) None – not suitable right now

What is your experience with B2B Card Solutions?

Live Audience Polling Question 2

8

a) Successful programme in place

b) Recently launched and being expanded

c) Evaluating the business case

d) None – but interested to explore

e) None – not suitable right now

Which Integrated Payments strategy are you most interested in implementing next?

Live Audience Polling Question 3

9

a) Payment instruction warehousing to ensure just-in-time payments to suppliers

b) Payment batching to minimise payments issued

c) Reduce number of systems and connectivities needed to process payments

d) Shift to lower cost payment instruments where possible

e) None – we’ve achieved most of the above

Live Audience Polling Question 4

10

Which advisory and analytics approach do you prefer Citi to take to help you redesign your supply

chain payment architecture?

a) Modular – respond on a single payment product basis

b) Holistic – provide a holistic review of products available based on my needs, giving

me the option to implement on a modular or bundled basis

“Instruction”

“Collaboration”

Analytics and Insights

11

Supply Chain Data Source

Client

Vendor

Master Data

There are distinct characteristics within your supplier base that are favourable for different

payment strategies. Citi can help quantify benefits of various solutions(1).

(1) On showcase at Digital Experience room

(2) Proof of concept

Accuracy

Sco

pe

of A

naly

sis

Proprietary Analysis Methodology

Data Cleansing

& Enrichment

Rules &

Algorithms

• Parameterisation

• Formulaic analysis of

cash flow & efficiency

optimisation

• Supplier segmentation

• Entity resolution

• Augmenting with

internal & external

data feeds

• Supplier profiling

Citi Big Data Infrastructure Total Benefit Overview

Insights

Segmentation Results

Tailored Client Experience: PDF Reports, online interactive

simulation, bespoke advisory service

Citi

Transaction

Data (2)

External

Supply

Chain Data

Questions?