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11 November, 2010
J . P . M O R G A N – S U P P L Y C H A I N F I N A N C E
GFP in Association with VISA Qualifieds
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Martin ScottExecutive Director
English_Commercial Bank
This presentation was prepared exclusively for the benefit and internal use of the J.P. Morgan client to whom it is directly addressed and delivered including such client’s subsidiaries, (the “Company”) in order to assist the Company in evaluating, on a preliminary basis, certain products or services that may be provided by J.P. Morgan. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan. It may not be copied, published or used, in whole or in part, for any purpose other than as expressly authorised by J.P. Morgan.
The statements in this presentation are confidential and proprietary to J.P. Morgan and are not intended to be legally binding. Neither J.P. Morgan nor any of its directors, officers, employees or agents shall incur any responsibility or liability to the Company or any other party with respect to the contents of this presentation or any matters referred to in, or discussed as a result of, this document. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation.
IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
J.P. Morgan is a marketing name for the treasury services businesses of JPMorgan Chase Bank, N.A. and its subsidiaries worldwide. In the United Kingdom, JPMorgan Chase Bank, N.A., London branch and J.P. Morgan Europe Limited are authorised and regulated by the Financial Services Authority
JPMorgan Chase is licensed under US patent numbers 5, 910,988, and 6, 032 and 137
©2006 JPMorgan Chase & Co. All rights reserved.
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Agenda
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J.P. Morgan Trade Finance Credentials 1
Working Capital Optimisation 4
Supplier Segmentation 7
Next Steps 13
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2010
Global Trade Bank of the Year
J.P. Morgan Trade Services Credentials
Providing Global and End to End Supply Chain Services from the purchase order to Structured lending solutions
Global Coverage and Processing Centres
Providing Supplier Financing services since 1994 Over 50 major client
programs Over 50,000 suppliers on
board
Releasing over $2bn of working capital liquidity in a revolving basis
Market leadership in the Trade spaceMarket leadership in the Trade space
2009
Trade FinanceDeal of the Year
2006/2009
Most Innovative and Responsive Trade Services
2008/2009
Best Global Trade
Bank
2009
Best online Trade Finance Bank
2009
Structured Trade Deal of the Year
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J.P. Morgan locations worldwide
230 locations in 57 countries worldwide230 locations in 57 countries worldwide
Canada
United States of America
North America
Belgium
Czech Republic
Denmark
Estonia
Finland
France
Germany
Hungary
Ireland
Italy
Latvia
Netherlands
Nigeria
Norway
Poland
Russia
Saudi Arabia
Slovakia
Europe, Middle East and Africa (EMEA)
Argentina
Brazil
Chile
Colombia
Mexico
Peru
Venezuela
Latin America
New Zealand
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Asia
Australia
China
Hong Kong
India
Indonesia
Japan
Malaysia
Austria
Cyprus
Greece
Iceland
Liechtenstein
Luxembourg
Malta
Portugal
Slovenia
Additional SEPA Reach
S U P P L I E R S P E N D S E G M E N T A T I O N / P O S I T I O N I N G
South Africa
Spain
Sweden
Switzerland
Turkey
United Kingdom
UAE
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Agenda
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4
Working Capital Optimisation 4
J.P. Morgan Trade Finance Credentials 1
Supplier Segmentation 7
Next Steps 13
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REL, CFO magazine WC analysis Medians and quartiles are based on the listed companies; DSOs, DPOs & DIOs were based on financial information made available through the One Source Business BrowserDSO = (Account Receivables / Total Revenue)*365DPO = (Account Payables / Cost of Goods Sold)*365
DSO – DPO analysis: Global Food & Staples Retailing Industry
DSO
DPO
15 days
30 days
0 days
50 days0 days 100 days
Caseys
Carrefour
Jeronimo
Metro
Guyenne
Sainsbury’sWm Morrison
ETS
Koninklijke
Axfood
Laurus
DelhaizeMajestic
Wasgau
Kesko
Sligro
MARR (83,70)
Costco
Pantry
Wild OatsSafewayKroger
SuperValu
Spartan
Pathmark
Whole Foods
Wal-Mart
Smart
Great Atlantic
BJs
Nash Finch
Performance
Ruddick
Winn-Dixie
WeisIngles
Sysco
Walgreen
Longs Drug
Rite Aid
UnitedAndersons
CVS
EU Median
US Median
EU Companies
US Companies
Best in Class
Laggards
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Company A:
Supplier
Company B:
Supplier and Buyer
Company C:
Buyer
Opportunities in the Supply Chain
Receivables Purchase: Company A has the opportunity to discount receivables due from sales to
Company B on an undisclosed basis
Supplier Finance: Company B may choose to support its suppliers via putting in place a Supplier Finance
program whereby Company A has the opportunity to discount receivables due from sales to Company B
Supplier Finance: Company C may choose to support its suppliers via putting in place a Supplier Finance
program whereby Company B has the opportunity to discount receivables due from sales to Company C
Receivables Purchase: Company B has the opportunity to discount receivables due from sales to
Company C on an undisclosed basis
Goods and services Goods and services
Key point to remember is that there are opportunities across the Supply Chain depending on where you sit
Payments Payments
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Supplier Segmentation 7
J.P. Morgan Trade Finance Credentials 1
Working Capital Optimisation 4
Next Steps 13
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Payables Solution Roadmap – Optimise Working Capital
Best-in-class organisations segment their spend to gain visibility by type of supplier
Initial segmentation should include the supplier’s strategic importance and their annual spend
Non-Strategic
Supplier & Spend Segmentation Strategy Supplier & Spend Segmentation Strategy
Transaction Value ££££
Su
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Strategic
Strategic but low spend
Non-strategic and low spend Non-strategic but high spend
Strategic and high spendStrategic but low spend
Non-strategic and low spend Non-strategic but high spend
Strategic and high spend
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The optimal working capital strategy encompasses solutions that vary by supplier
Non-Strategic(Indirect)
Transaction Value ££££
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Strategic
P-Card
Single Use Accounts
Strategic Supplier Low Purchase
Strategic Supplier High Purchase
Non-Strategic Supplier Low Purchase
Non Strategic Supplier High Purchase
Dynamic Discounting
Supplier Finance
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Important to recognise “win-win” scenarios
£6.58
£6.58
30 days
8%
4%
60 days
Suppliers’ working capital financing costSuppliers’ working capital financing cost
Terms extension combined with lower financing costs can leave suppliers indifferent or better off while freeing up cash for buyers.
Financing at suppliers’ cost of fundsFinancing at suppliers’ cost of funds
Extending terms at buyer’s cost of fundsExtending terms at buyer’s cost of funds
Co
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Current cost for 30 days
New term
s at buyer’s
cost of c
apital
Win-Win
£2.00
£3.00
£4.00
£5.00
£6.00
£7.00
£8.00
30 35 40 45 50 55 60 65 70
New Payment Terms (days)
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Supplier Finance – Operational Process
The following process flow describes the operation of program with your suppliers
1. Buyer uploads approved invoices to the multibank APAR system
4. If supplier accepts discount proposal, J.P. Morgan credits supplier immediately, net of discount
2. Supplier logs in APAR and chooses which invoices JPM can purchase
Buyer/Client Supplier
3. J.P. Morgan receives notification of invoices offered for purchase
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Establishing a Supplier Finance programme – Critical Success Factors
Choice of an experienced Bank provider
Dedicated resources on both sides to programme manage the implementation and on-going supplier enrolment
Focused marketing strategy aimed at on-boarding Suppliers
Simple documentation
Capabilities to efficiently incorporate other Bank providers for an expanded programme
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Agenda
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Next Steps 13
J.P. Morgan Trade Finance Credentials 1
Working Capital Optimisation 4
Supplier Segmentation 7
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J.P. Morgan team contact details
Trade SalesTrade SalesPublic Sector Sales Public Sector Sales
Nick HallExecutive Director
Telephone: +44 20 7777 2516
Anthony HolmesVice President
Telephone: +44 (0) 20 7777 5185
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