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Optimize Working Capital: Strengthen Trading Partner Relationships

Optimize Working Capital: Strengthen Trading Partner Relationships. Brook Ballard – Sysco Corporation Scott Hughes – Wells Fargo . April 4, 2011. Working capital management. Goal: Fund necessary day to day operations and invest assets optimally

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Optimize Working Capital: Strengthen Trading Partner Relationships

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  1. Optimize Working Capital: Strengthen Trading Partner Relationships Brook Ballard – Sysco Corporation Scott Hughes – Wells Fargo April 4, 2011

  2. Working capital management • Goal: Fund necessary day to day operations and invest assets optimally • Inventory, cash, receivables and payables management are all levers of WCM

  3. Industry challenges

  4. Industry challenges • How do you extend Days Payable Outstanding (DPO)? • How do you shorten Days Sales Outstanding (DSO)? • How do you optimize Days Inventory Outstanding (DIO)?

  5. Industry challenges (cont.) • 94% of CFOs consider cash flow optimization to be important or very important 1. • 59% of CFOs rated better cash management as their top priority 1. • The Working Capitalist, REL, YEAR

  6. Challenges to Converting Accounts Payable to more Cost Efficient Methods • Management Buy In • System Enhancements • Customers willingness to accept change • What is in it for me? • Check to ACH • Check to Card • Maintain check but extend terms

  7. Managing Working Capital can be a Real Bear

  8. Technology to improve AP processes Source: IAPP 2008 Member Benchmarking Survey 8

  9. Adoption of submitting electronic invoices is increasing. Paper invoices Electronic invoices Source: PayStream Advisors, Q1 2009

  10. B2B payments study How payments are made Trends over the past 18 months Paper 62% Source: Aberdeen Group, June 2009 10

  11. “Best in class” payment mix Source: IAPP Member Benchmarking Survey

  12. Sysco’s Annual Payment Tender Type

  13. Maturity framework of electronic payments *Overall processing cost per payment Source: Aberdeen Group

  14. Calculating Cash Flow Impact • How does Sysco Calculate the value of AP? • AP-DPO calculation • Why is this important?

  15. Trading partner tension Suppliers’ Objectives Buyers’ Objectives • Aim to reduce DSO • Inefficient receivables posting, cash application and collection processes. Heavy use of Lockboxes • Inability to forecast accurately • Paper intensive invoice delivery and receivables • Manual/inefficient dispute resolution • Resource intensive order to cash • Maintain or extend DPO • Inefficient trading partner relationships results in higher cost of procurement & payables • Inability to forecast accurately • Paper intensive processes • Inability to capture early payment discounts • Resource intensive purchase to pay • Reduce fraud VS.

  16. Payables Optimization Analysis • Payables focused, demonstrates how much liquidity can be realized by improving the purchase-to-pay processes • Provides intelligent routing to expedite payment, minimize costs and DSO but maintain DPO • Provide insight for dynamic discount management • Factors in time value of money

  17. Payables Optimization Analysis Overview 1.Gather Data: Master Vendor File is uploaded 2.Control Data Review: Cost per disbursement, DPO, float, cost of funds, discounts available, average ticket, quick pay vs. slow pay. 3. Output shows total hard dollar savings, broken out by payment issuance savings, cost of funds impact, additional rebate and early payment discount all based on a best-in-class target mix 4. Recommended actions are tailored to improve trading partner relationships

  18. Payables Optimization Analysis: Data elements needed

  19. Example output: Potential Hard Dollar Savings

  20. Example output: Optimum spend mix

  21. Sysco Payment Conversion Challenges • Segregated Vendor Population • System Rollout • Training • Resistance to change • Negotiating Terms

  22. Supplier Onboarding • Migrate suppliers from check to more beneficial payment forms and terms • Reduced disbursement costs • Optimized DPO • Payment status visibility for suppliers • Improved Vendor Relations and Maintenance of supplier payment information

  23. Supplier Analysis & Onboarding support 4

  24. Recommendations for success • Involvement of executives is critical to achieve goals • Segmentation of vendors • Tracking working capital metrics • Automation and standardization of payment processes • Creation of a compensation system based on improving working capital

  25. Questions Brook Ballard Sysco Corporation Phone: 281-584-1334 Email: Ballard.Brook@corp.sysco.com Scott Hughes Wells Fargo Phone: 770-551-4663 Email: Scott.Hughes@wellsfargo.com

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