HIGHLY COMMENDED WINNER Best Trade/ Solution

Metso Corporation Helsinki, Finland Minna Helppi, Senior VP, Group Treasurer

Andrew Burns, C2FO, Natasha Condon, Citi and Mikko Vainikka, Metso Corporation

How integrating two supplier fi nance models delivers support for business of all sizes

Company profile With annual turnover of nearly €3bn, Metso is among Finland’s biggest multinationals. It provides the world’s mining, aggregates, recycling, oil, gas, pulp, paper and process industries with industrial machinery.

The challenge discounted is associated with and directly increasing earnings before interest, tax, depreciation and amortisation (EBITDA). Metso’s supply chain extends to more than 30,000 firms. The group has been actively working on supply chain finance (SCF) solutions A pilot of the project was tested in Finland, to identify specific issues that respond to the needs of all of its suppliers. It wanted to provide that needed to be addressed before it was rolled out to other regions. them with the option of leveraging supplier finance solutions – The programme was then piloted in 2017 in Finland, Sweden, regardless of their size and position in the supplier spend portfolio. Denmark, Germany and the UK before being rolled out globally. In addition to making itself a more attractive customer to do business with, Metso also wanted to improve its own position and drive higher yield on its cash. Best practice and innovation SCF programmes have historically bypassed SMEs. Recognising that different tools were required to address this challenge, Metso The solution combined Citi’s SCF and C2FO’s marketplace based dynamic The combination of Citi’s SCF on-boarding process and C2FO’s discounting to give coverage to its entire supply chain, whilst dynamic discounting solution structure is unique. Instead of relying successfully contributing to its and P&L objectives. on traditional buyer-defined top down discount rates, and pushing these onto suppliers, Metso’s suppliers are invited to offer the rate The C2FO dynamic discounting model uniquely puts suppliers in the that they are happy to discount their at for early payment. ‘driving seat’, enabling them to decide whether to make an offer for C2FO optimises these offers, based on a set of parameters controlled early settlement, and what associated discount to offer. by Metso, such as cash available and yield. While treasury was tasked with developing a framework for the The result of this is to maximise benefits for both suppliers and Metso, programme, it was recognised that working internally across all as opposed to old-fashioned early payment options where rates are set functions would be vital in developing a successful solution. Sixty by buyers or third parties, attempting to second-guess supplier needs. percent of the total supply base in scope for this solution has been on-boarded. The SCF project structure is based on Metso maintaining control of which early payment solutions is offered to which supplier and provides the company with the flexibility to assess and update its selection process over time. Key benefits When onboarding the company’s suppliers, it was vital that the local • Delivered Metso an average payment term extension of purchasing managers, who are responsible for supplier relationships, 80 days. were able to manage the programme. This enabled them to promote • Improved return on capital employed (ROCE). the SCF concept to suppliers from the outset. • SCF programme provides balance sheet improvements. Metso and Citi share a single point of contact for SCF onboarding and • Dynamic discounting marketplace provides lower cost of Citi provides training for Metso procurement. This ensures that Metso goods sold directly. is able to leverage SCF to the maximum as a tool in negotiations with • Metso able to negotiate longer payment terms from its suppliers. The ‘two clicks to cash’ basis of the platform makes it its suppliers. easy for suppliers to join the platform and accelerate • Suppliers use SCF to receive payment early. invoice payments. • Suppliers gain full visibility on when they can expect to receive payment. The SCF programme receives off balance sheet accounting Builds trust and an opening for negotiations on other treatment. For the dynamic discounting programme, discounts are • buyer/supplier matters. taken as either a reduction in cost of goods sold (COGS) or operating expenditure (OPEX), depending on which product line item the

treasurytoday Adam Smith Awards © August 2018