Isﬁnance#readyfor#inter0ﬁrm#collaboraon?# · PDF fileinnovation and differentiation, and to keep up with the pace of new technology,ï¿½ said Eric Benedict, managing director

s.media / pixelio.de

Is finance ready for inter-‐firm collabora4on? Insights from the automo4ve sector in a global produc4on network perspec4ve Hans-‐Mar3n Zademach Chris3an Baumeister

Is finance ready for inter-‐firm collabora3on? I Hans-‐Mar3n Zademach / Chris3an Baumeister 2

Point of Departure Financial flows in GPNs

Source: based on Dicken 2003: 356 Source: Daimler AG 2011

Financial intermediaries / capital markets

Daimler AG global produc3on network


Point of Departure Financial flows in GPNs

„The highest financing burdens have to be borne by the weakest members of the supply chain, which face the worst financing condi<ons and capabili<es“

(Manager of a German SME automo3ve supplier, July 2012)


Object and mo3va3on of study GPNs volnurability towards financial stress

Source: based on Dicken 2003: 356

Financial intermediaries / capital markets



DIE ZEIT, 12.02.2009

AUTOMOTIVE NEWS WORLD CONGRESS

Linamar CEO: Hundreds of suppliersmay fail in monthsHasenfratz wants more government and union help for supply chain

Robert SherefkinAutomotive News Europe | February 2, 2009 06:01 CET

DETROIT -- Hundreds of North American auto partsmakers may fail within months as a weakening economyforces automakers to slash production, the CEO of Canada’s second-largest supplier said.

“We will see fewer OEMs and fewer suppliers either as a result of irreparable financial distress or for some as aresult of a strategic shift out of the automotive industry,” Linamar’s Linda Hasenfratz told the Automotive NewsWorld Congress here last month.

In January, at least three Michigan-based US suppliers sought bankruptcy protection or liquidation.

Checker Motors, the partsmaker that once produced the Checker taxi cab, filed for Chapter 11 bankruptcy onJanuary 16.

That same day, electronics supplier May & Scofield shut down after Bank of America foreclosed on its US assets,the Associated Press reported. In addition, Specialty Motors Holding filed for Chapter 7 liquidation.

“The immediate future is a fairly gloomy place,” said Hasenfratz, who is also chairman of the Original EquipmentSuppliers Association (OESA).

But once the market turns back up, “with fewer suppliers and rising production, we all have a future to focus on,”she said.

Hasenfratz called on government and union support along with more cost cutting among her supplier peers torescue the auto industry. She also said suppliers should follow Linamar’s lead in rapidly and deeply cutting costs,reducing staff and overheads to match new sales levels while focusing on “diversifying our businesses to take ourskills to markets that need us.”

“Suppliers are really a step ahead of the process, having already taken the haircut that the government is nowlooking to other parties to sign up to accept,” she said.

She applauded contractual changes from the UAW, but called on labor “to come to the table with furtherconcessions to create a competitive cost environment for these companies to operate in.”

Calling for support

Government is the next target in her sights. Hasenfratz, and the association that she chairs, are followingautomakers in seeking government help.

Their first priority is “quick pay,” she said. She would allow automakers to tap the Troubled Asset Relief Program,or TARP, funds if they would agree to pay suppliers more quickly. “This is an easy, simple way to put more cash insuppliers’ hands today,” she said.

Another priority, she said, is government guarantees for suppliers’ receivables. This would improve access tosupplier financing.

The third priority, she said, would aid suppliers by allowing them access to bridge loans or access to credit linesthrough TARP.

Lastly, she said, OESA is advocating that the government provide debtor-in-possession financing in the event asupplier enters Chapter 11 reorganization.

Hasenfratz cautioned against protectionist policies creeping into government-backed solutions. “It is commonknowledge that protectionist trade policies were a key factor in the escalation of the Great Depression. Let’s notmake those same mistakes again,” she said.

Automotive News Europe http://europe.autonews.com/apps/pbcs.dll/article?AID=/2009...

1 von 2 30.04.12 10:20

(...) „Vehement setzen sich Autobosse wie VW-Chef Martin Winterkorn oder sein Daimler-Kollege Dieter Zetsche dafür ein, dass die Banken die Zulieferbranche nicht in die Kreditklemme laufen lassen. Doch alle Versuche der Branche, einen eigenen Rettungsfonds für ihre treuen Lieferanten aufzulegen, scheiterten bislang kläglich.“ !!

WIRTSCHAFT

1

A U T O Z U L I E F E R E R

Goliath bangt um DavidDie deutschen Autokonzerne brauchen ihre Zulieferer. Ohnederen Innovationen wären sie nur noch halb so gutVON Dietmar H. Lamparter | 12. Februar 2009 - 07:00 Uhr

Wenn Thomas Handtmann, Chef der Albert Handtmann Holding in Biberach, durch dasMetallgusswerk des Oberschwäbischen Familienkonzerns geht, kann er schnell erkennen,wie die Geschäfte bei seinen Kunden aus der deutschen Automobilindustrie laufen: 700Grad heißes Aluminium dampft im Kessel der Anlage, in der die Ölwanne des neuenVierzylinder-Diesels für Hersteller A gegossen, abgekühlt und entgratet wird. In dernächsten Anlage, die normalerweise die Ölwannen für die Sechszylindermotoren fürHersteller B ausspuckt, ist der Ofen kalt. »Der Kunde hat keine Ware abgerufen«, sagt derUnternehmer – dies komme in diesen Tagen häufiger vor.

Die Autoabsatzkrise ist in der schwäbischen Provinz angekommen. Das Metallgusswerkmusste für einen Teil seiner rund 1000 Mitarbeiter Kurzarbeit anmelden. Entspannungist nicht in Sicht: Im Januar brach die deutsche Autoproduktion um 34 Prozent ein. Undein Auto, das nicht gebaut wird, braucht auch keine Ölwanne, keinen Kühler, keineEinspritzanlage und keine Radlager.

Das solide finanzierte Biberacher Familienunternehmen will die Krise aus eigener Kraftbewältigen, aber anderswo brennt es lichterloh. Etliche Betriebe haben schon Konkursangemeldet. Und der zweitgrößte deutsche Zulieferer Conti/Schaeffler mit zusammen fast220.000 Beschäftigten ruft in seiner Not schon um Staatshilfe . Er wird nicht der letzte sein.

75 Prozent der Wertschöpfung eines Autos übernehmen Zulieferer

Denn wie der Biberacher Alugießer oder Conti/Schaeffler hängen alle Autozulieferer dersogenannten ersten Reihe (»Tier-1«) wie Bosch, ZF oder Behr direkt an der Produktion vonAudi, BMW, Daimler, VW & Co. Umgekehrt können diese ohne deren Teile kein Autobauen. 75 Prozent der Wertschöpfung eines hierzulande hergestellten Fahrzeugs tragen dieZulieferer bei, sagt der Verband der Automobilindustrie (VDA). Die rund 1300 Betriebebeschäftigen 330.000 Menschen. Mit den vorgelagerten Industrien hängen laut VDA, »übereine Million Arbeitsplätze von den Zulieferern ab«. Für die Boschs oder ZFs produzierennämlich wiederum viele – oft hoch spezialisierte – Unterlieferanten, die ihrerseits wiederbeliefert werden. Diese mehrstufige Zulieferpyramide ist hochsensibel: Fällt auch nurein Betrieb aus, kann das die gesamte Lieferantenkette ins Stocken bringen. Denn seitBeginn der neunziger Jahre hat sich in der Autoindustrie die kurzfristige Lieferung direktans Band (just in time) durchgesetzt. Die kapitalintensive Lagerhaltung von Teilen wurdedurchgehend abgeschafft.

30.04.12 Half of tech suppliers face 'financial distress' -‐‑ ComputerworldUK.com

1/1www.computerworlduk.com/news/it-‐‑business/3304374/half-‐‑of-‐‑tech-‐‑suppliers-‐‑face-‐‑financial-‐‑distres…

Half� of� tech� suppliers� face� 'financial� distress'Published:� 19� September� 11,� 15:12� GMT

Almost� half� of� all� IT� and� telecoms� companies� are� at� risk� of� ï¿½near� term� financial� distressï¿½,� according� to� a� major� study� by� AlixPartners,� a

global� business� advisory� firm.

This� financial� distress� ï¿½� the� prospect� of� default� or� bankruptcy� within� two� years� -� among� suppliers� will� further� drive� the� already� high� level� of

merger� and� acquisition� activity,� the� firm� said,� noting� ï¿½the� ï¿½winner-take-allï¿½� trend� (is)� likely� to� continue".

Consumer� electronics� firms� were� most� vulnerable� ï¿½� with� the� study� highlighting� 87� percent� at� risk,� but� telecoms� firms� were� not� far� behind,

with� almost� three� quarters� at� risk,� primarily� from� the� debt� load� taken� on� to� fund� rapid� network� expansion.

Rapid� industry� consolidation� can� create� serious� concerns� to� end� user� organisations� that� have� to� deal� with� the� risk� of� core� systems� and

applications� no� longer� being� fully� developed� or� supported� as� vendors� are� taken� over.

Reduced� R&D� spending� is� another� concern,� with� the� study� noting� that� European� tech� firms� have� actually� reduced� their� levels� of� investment

(capex� as� a� percentage� of� revenue)� from� 10.2%� in� 2006� to� 9.4%� in� 2010.� In� the� UK� the� decline� is� sharper,� down� from� 13.2%� in� 2006� to� 9.5%

2010.

Traditional� hardware-focused� companies� will� be� most� affected� by� the� tough� economy,� according� to� AlixPartners.� It� highlighted� the� way� some

are� trying� to� transform� themselves� to� software� organisations,� such� as� HP� through� its� proposed� acquisition� of� Autonomy� and� its� planned

divestiture� of� its� personal-computer� business.� Profit� margins� for� software� companies� were� high� in� 2010,� averaging� 33%,� the� report� noted.

Michael� Weyrich,� managing� director� at� AlixPartners� said� that� while� the� technology� sector� had� outperformed� many� other� areas� of� the� economy

during� the� current� recession,� it� faced� serious� challenges.� These� included� rapidly� evolving� consumer� demand,� intense� global� competition,

narrowing� margins,� high� leverage� and� the� need� for� substantial� investments� in� capital� expenditure� in� a� tight� capital� market� environment.

ï¿½The� gap� between� winners� and� losers� is� widening,� and� as� a� result,� we� expect� continued,� industry-rattling� moves� and� changes,� particularly

from� the� strongest� players,ï¿½� he� said.

According� to� the� study,� top-quartile� companies� in� the� industry� generated� 4.5� times� higher� earnings� before� interest,� taxes,� depreciation� and

amortisation

(EBITDA)� margins� than� lower-quartile� companies.

The� top-performing� companies� also� invested� four� times� more� in� capex� (capital� expenditures)� as� a� percentage� of� revenue,� meaning� that� the

gaps� between� winners� and� losers� could� accelerate.

ï¿½More� than� just� about� any� other� industry,� much� of� high� tech� faces� a� vicious� cycle� of� the� constant� need� to� invest� capital� to� drive� product

innovation� and� differentiation,� and� to� keep� up� with� the� pace� of� new� technology,ï¿½� said� Eric� Benedict,� managing� director� at� AlixPartners

AlixPartners� High-Tech� Industry� Outlook� studied� 1,195� companies� in� nine� major� high-tech� industry� sectors:� telecommunications,semiconductors,� Internet,� EMS� (electronics� manufacturing� services),� computer� hardware,� consumer� electronics,� software,� multi-sectortechnology� and� channel� (distribution� and� retail).

http://www.computerworlduk.com/news/it-business/3304374/half-of-tech-suppliers-face-financial-distress/


Vulnerability of (global) supply networks during the financial crisis raises aên3on on finance: »  Buyers and suppliers are co-‐dependent and have differing financing op3ons & costs

»  Financial stress and/ or insolvency of suppliers can lead to disrup3ons with tangible and intangible effects on buyers and supply networks

Growing importance of financial aspects for the compe33veness of supply networks due to: »  Lengthening of supply chains as a result of global sourcing »  Predicted impact of Basel III on corporate borrowing


▶  Emergence of new solu3ons for the (collabora3ve) management of financial flows and corporate financing?


Need for a research agenda „beyond produc3vism“

„Commodity produc<on in firms and produc<on networks receives much greater analy<cal a?en<on than the flows of money and capital which finance those firms and networks” (Pollard 2003:380).

Supply Chain Product Informa3on Finance

„For the last decade or so, companies have been focusing significant resources on streamlining their supply chains. (...) Less a?en<on has been paid, however, to the financial side of supply chain management – the flow of money in support of physical movements“ (Atkinson 2008:57).


Financial Supply Chain Management

Op3mize financial flows

§  Speed up cash-‐to-‐cash cycle §  IT-‐integra3on (e.g. SAP-‐Systems

for Financial Supply Chain Management)

„Why is it not possible to manage financial flows in the same way as flows of goods, meaning in a collabora<ve manner?“

(Hofmann/Kotzab 2006:2)

Op3mize financial flows Improve financing through inter-‐firm collabora3on

§  Speed up cash-‐to-‐cash cycle §  IT-‐integra3on (e.g. SAP-‐Systems

for Financial Supply Chain Management)

§  Analyze financing requirements, capabili3es and condi3ons from a network perspec3ve

§  Using differing cost of capital and network rela<ons (e.g. improved informa<on, mutual dependencies) to improve compe33veness & stability of supply networks and its elements


§  From a theore3cal point of view the benefits and poten3al of a collabora3ve financial management in a Supply Chain is non-‐controversial:

»  However, great uncertain3es as regards applicability in corporate prac3ce »  The collec3on of detailed case studies is an open issue (Gomm 2010:141)

§  Inves3ga3on is needed with a focus on: » Mo3ves, forms and benefits of implementa3on »  Obstacles for the implementa3on with aên3on to: -  Power configura3ons/ network architecture -  Ins3tu3onal framework -  Financial System/ financing prac3ces

Financial Supply Chain Management Weaknesses

„In this evolu<on from firm to the supply chain, financial management presents an area that is ready for inter-‐firm collabora<on“ (Randall/Farris 2009:670).


GPN -‐ Footnote 13

érms� incorporated� into� a� production� system� has� having� room� forautonomous� action� within� that� system,� in� spite� of� the� fact� that� suchautonomy�is�central�to�the�possibilities�for�industrial�upgrading�and�thussustained�economic�development.�As�a�consequence�of�these�diféculties,we� énd� a� discourse� of� networks� to� be� more� inclusive,� empiricallyadequate� and�thus�more�analytically� fertile.

Adoption�of�a�network�discourse�also�delivers�other�potential�beneéts.In�particular,�as�long�as�‘production’�is�couched�broadly�to�include�inter-mediate� and� énal� markets� and� as� long�as� the� dynamics�of� power�andknowledge�between�actors�and�institutions�are�understood�in�a�multidi-rectional�and�non-deterministic�fashion,�then�the�GPN�framework�allowsfor� far� greater� complexity� and� geographical� variation� in� producer-consumer� relations� than� the� GCC� approach,� for� instance,� has� so� farachieved.�Speciécally,� it�should� facilitate� our�ability� to�reveal�how�cer-tain�key�knowledges�‘circulate’�between�producers,�consumers�and�inter-mediaries,�rather�than�moving�in�a�uni-directional�manner,�a�key�insightof�the�expanding�literature�on�‘commodity�cultures’�(e.g.�Cook�and�Crang,1996;� Jackson,� 1999).� Moreover,� this� approach� should� also� allow� morecomplex�social�geographies�to�be�revealed,�in�the�sense�that�agents�in�avariety�of�locations�can�be�seen�to�combine�to�inèuence� the�productionprocess.12

Finally,�while�it� is�now�fashionable� to�term�‘global’,�phenomena� andpractices�that�until� recently�would�have�been�more�likely� to�be� termed‘international’� or� ‘transnational’,� our� adoption� of� the� former� term� isdriven�by�our�concerns�with�analytical�precision.�Speciécally,�the�terms‘international’� and� ‘transnational’� derive� from� essentially� state-centricdiscourses.�Thus�while�they�incorporate�notions�of�cross-border�activityof� many� sorts,� they� do� not� adequately� express� the� way� in� which� nonplace-speciéc�processes�penetrate�and�transform�place-speciéc�ones,�andvice�versa.�They�do�not,�therefore,�help�to�deliver�the�imaginative�sensi-bilities�necessary�to�grasp�the�dialectics�of�global-local�relations�that�arenow�a� pre-condition� for� the� analysis� of� economic�globalization� and� itsasymmetric�consequences.

The� global� production� network� as� proposed� here,� is� a� conceptualframework� that� is� capable� of� grasping� the� global,� regional� and� localeconomic� and� social� dimensions� of� the� processes� involved� in� many(though�by�no�means�all)�forms�of�economic�globalization.13 Productionnetworks�–�the�nexus�of�interconnected�functions�and�operations�throughwhich� goods� and� services� are� produced,� distributed� and� consumed� –have�become�both�organizationally�more�complex�and�also�increasinglyglobal�in�their�geographic�extent.�Such�networks�not�only�integrate�érms(and�parts�of�érms)�into�structures�which�blur�traditional�organizationalboundaries�–� through�the�development�of�diverse� forms�of� equity�andnon-equity�relationships�–�but�also�integrate�national�economies�(or�parts

HENDERSON� ET� AL.: � GLOBAL� PRODUCTION� NETWORKS

445

Henderson et al. 2002: 445

6 On� the� former� see,� for� instance,� Jessop’s� (2001)� collection� of� some� of� theseminal�contributions.�On�the�latter�see�Storper�and�Salais�(1997,�particularlychapter�10).

7 Hardly�any�work�has�been�done,�for�instance,�on�households,�states�and�thereproduction�of�labour�power�from�within� a�GCCs�perspective.

8 See,� for� instance,� the� work� on� the� Brazilian� ‘reserved� market’� for� personalcomputers�(Evans,� 1986;� Schmitz�and�Hewitt,�1992).

9 See,�for�instance,�the�essays�collected�in�Gerefé and�Korzeniewicz�(1994)�andthe�special�issue�of�the�IDS�Bulletin (32/3,�2001).�See�also�Clancy�(1998);�Dolanand�Humphrey�(2000);�Bonacich�and�Appelbaum�(2000)�and�Kaplinsky�(2000)among� others.� The� ILO’s� research� institute,� the� International� Institute� ofLabour� Studies,� sponsored� a� programme� on� ‘global� commodity� chains’�in� the� late� 1990s.� The� continuing� media� attention� to� the� exploitative� work-ing�conditions� evident� in�the�supplier�companies� integrated� into� the�chainsof�the�likes�of�Nike�and�Gap,�for�instance,�underlines� the�utility�of�the�GCCframework� for�agencies� such�as�the�ILO.

10 Speciécally�it�implies�rejection�of�the�term�‘global’�as�a�simplistic�geograph-ical� construct� (see� our� later� discussion).� Similarly� economic� ‘globalization’,comes�to�refer�to�the�extension� of�functionally� integrated� (and�thus�sociallyrelational)� economic�activities� across� national� boundaries� (cf.�Dicken,� 1998:5).� The� implication� of� this� for� the� conceptualisation� of� GPNs� is� that� theycome�to�be�seen�as�dynamic� typologies�which�potentially�change�shape�andscope�over� time.

11 Though� he� had� previously� worked� with� the� notion� of� the� ‘internationalproduction�network’,�Ernst�érst� used� the� term� ‘global�production�network’in�a�conference�paper�of�1999� (Ernst,� 1999).�Our�érst�attempt� to�elaborate� aGPN� framework� appeared� in� a� research� proposal� that� same� year� (Dickenand�Henderson,� 1999).

12 See,�for�instance,�Hughes’�(2000)� study�of�the�cut-èower� trade.13 It�is�unlikely� to�be�of�particular�help,� for�instance,� for�the�analysis� of�some

forms�of�énance� capital� such�as�bank� loans� and�portfolio�investment.14 For� a� discussion� of� regional� politics� and� production� networks,� see� Cabus

and�Hess� (2000).15 In�other�works,�a�continuum�of�scales� (see�Swyngedouw,�1997;� Dicken�and

Malmberg,� 2001).16 There� is�a� growing� literature� that� addresses� these� concerns�with� respect� to

differing� ‘qualities’� of� foreign� direct� investment.� See,� for� instance,� Turok(1993,�Amin� et�al.� (1994)� and�Young�et�al.� (1994).

17 We�have�in�mind�the�continuing�dis-investment� in�British�subsidiaries� (withknock-on�effects�for�local�suppliers)�by�foreign� companies.�Since�1998� thesehave�included�at�a�minimum:�Siemens,�Samsung,�LG�and�Motorola�(in�elec-tronics),�BMW,�Ford�and�General�Motors�(in�automobiles)�and�Corus�(steel).�

18 Germany,� on� the�one� hand,� and� Britain� and� the�USA,�on�the�other,� consti-tute�polar� opposites� in� this� sense.� In� the� latter,� shareholders� have� supremepower�over� the� disposal� of�proéts� and� assets,� while� in� the� former� ownersare�obliged�to�consider�the�interests�of�other�stakeholders� and�the�workforcein�particular�(Lane,�1989).�Indeed�in�Germany,�property�holders�have�a�consti-tutional�obligation�to�exercise� their�rights�in�the�interests�of�the�public�good(Hutton,�2001).

19 Although�not�theorized� in�terms�of�power,�Humphrey�and�Schmidt’s�(2001)discussion� of� the� governance� structures� of� ‘value� chains’� is� an� importantcomplement,�at� this�point,� to�our�work.


459



Empirical observa3ons on financial collabora3on in the German automo3ve industry


Collabora3ve working capital/ cash-‐to-‐cash management »  Adapta3on of payment terms according to strengths and weaknesses (cost of capital, cost of inventory etc.) of both partners to achieve mutual savings

»  Possible instruments: e.g. reverse factoring programs, advanced payment, Value Added Services by Banks / Logis3c Providers (UPS capital) etc.

»  Solu3ons with/ without an external intermediary

Collabora3ve financing of fixed assets »  Direct/ indirect lending (e.g. loan guarantees) »  Consultancy & assistance in raising capital (e.g. providing external investors with „insider“ informa3on on prospects of an investment project)

Is finance ready for (permanent) inter-‐firm collabora3on? Forms of inter-‐firm/ supply-‐chain finance

Lieferant

4. Deutsche Bank erhältund prüft frühe Zahlungs-anforderung

6. Bezahlung derLieferantenrech-nung in vollerHöhe am Tag derFälligkeit anDeutsche Bank

Käufer/Obligor

1. Lieferant liefert Güter und reicht Rechnung ein

2. Käufer prüftRechnung undsendet Daten anPlattform

5. Deutsche Bankstellt dem LieferantenFinanzmittel zuattraktivenKonditionen zurVerfügung

3. Lieferantsieht dieakzeptierteRechnung undfordert frühereZahlung an

Web-Portal

Wie funktioniert Supply Chain Finance?Beispiel: Supplier Finance (confirmed payables)

Seite 9

Source: Purr 2010: 9, modified

1. Supplier delivers goods and sends bill

2. Buyer verifies bill and sends Informa4on to plaJorm

3. Supplier checks accepted bill and requests early payment

4. Bank receives and checks request for early payment

5. Bank provides financial means with aLrac4ve condi4ons based on the ra4ng of the buying firm

6. Buying firm pays bill on due date of the payment to the bank

Buyer/ Obligor

Supplier

0. Buyer nego4ates condi4ons with bank and selects suppliers eligible to par4cipate


Preliminary Results Mo3ves and requirements for inter-‐firm financial collabora3on

Mo4va4on/Objec4ves Requirements Bu

yer (e.g. OEM

)

§  Enhance the security of supply through the whole SC

§  Cost reduc3on §  Improve binding and monitoring of suppliers

(posi3ve contribu3on to the supplier rela3onship management)

Supp

lier

“Of course we want to pay as late as possible.(…) But there are excep<ons. If a supplier is in a difficult situa<on, we have to support him by early/immediate payment.”

(Head of financial supplier risk management, German car manufacturer, June 2011)

“We gave a loan to some suppliers, declared as a prepayment for one or several years. Now in 2012 they are reduced to zero. So it payed off, none of our important suppliers got into insolvency.”

(Managing director of purchasing, SME from the mechanical engineering industry, March 2012)




yer (e.g. OEM

)




§  No/limited acceptance of addi3onal risks §  No deteriora3on of own financing condi3ons §  Separa3on of opera3onal and financial risks §  Preven3on of a benefit for compe33ve OEMs §  No/li^le use of addi3onal resources /

benefits must exceed addi3onal costs §  Internal enforceability /in-‐house power

rela3ons (e.g. purchasing vs. treasury)

Supp

lier

“Our mo<ve is the security of supply. But we don´t want to have the risk with us.(…) Therefore we prefer paying à premium of freedom´.”

(Senior Manager project finance , German car manufacturer, November 2011)

“There is a culture of mistrust. Suppliers doubt that we want to do something that is good for them, that there´s a catch”.

(Manager Treasury, German car manufacturer, June 2011)

“Many cases of SCF are not successful, simply because the purchase department refuses to give up a peace of their power game with suppliers. They can not be convinced that an extension of payment terms represents a considerable advantage for the company.”

(Manager, interna<onal bank, June 2012)




yer (e.g. OEM

)






rela3ons (e.g. purchasing vs. treasury

Supp

lier

§  Benefits must be visible (e.g. reduc3on of financing costs/ improvement of payment terms)

§  Build las3ng rela3onships with customers

“A SCF-‐program must have a clear benefit for us suppliers. Payment terms as well as financing condi<ons must improve. As long as this is not the case for SME the implementa<on will be in my opinion difficult.“

(CFO, German automo<ve supplier, SME, August 2012)




yer (e.g. OEM

)






rela3ons (e.g. purchasing vs. treasury

Supp

lier

§  Benefits must be visible (e.g. reduc3on of financing costs/ improvement of payment terms)

§  Build las3ng rela3onships with customers

§  Trust in OEM and SCF-‐program §  Perspec3ve & certainty (crucial for own

financial planning) §  Compa3bility with present form/ means of

finance (e.g. blanket assignment) §  Transparency of design and designa3on of

condi3ons §  No/ li^le use of addi3onal resources/

benefits must exceed addi3onal costs

“We want to provide OEMs as li?le insight as possible into details of our financing condi<ons. We are afraid that this informa<on might be used against us e.g. to lower prices”.

(Logis<cs Manager, SME automo<ve supplier, April 2012)

“We don´t have a choice. If the OEM would instruct us to use the program we would have to do it. From our side we don´t want it. We want to keep our independence and remain financial self-‐sustaining.“

(CFO, German automo<ve supplier, SME, August 2012)


Is finance ready for inter-‐firm collabora3on? »  Ambiguous picture: poten3al of inter-‐firm financial collabora3on is mainly iden3fied by OEMs

»  Different solu3ons with varying actors involved are in place/ being developed »  Some problems remain s3ll unresolved (e.g. crea3on of new risks) and fundamental change in the network culture is doubjul

Success factors: »  Trust is the core success factor, interest spread must be sufficiently high »  Power rela3ons (inter-‐ & intra-‐company) determine the design of financial rela3ons

»  To be accepted and sustainable: Inter-‐firm financing solu3ons must not only be to the benefit of the most powerful network partner, but generate benefits for all other involved partners

Summary Lessons learned


§  Open ques3ons: »  Dependency on legal environment & financial system, country specific network culture

»  Implica3ons for regional development

§  Contribu3on of Economic Geography to ongoing debate in SCM-‐literature: »  Research on embeddedness, trust, proximity as prerequisites for inter-‐firm finance (e.g. Dei Oâ3 1994, Lazzarel et al. 2004)

» Mul3scalar perspec3ve & established heuris3cs to analyze power rela3ons, forms of value crea3on, socio-‐cultural & ins3tu3onal frameworks

»  Tradi3on of & experience with case studies / qualita3ve research methods »  Extension to a considera3on of the impact of new possibili3es of access to finance on regional economic development in the global North & South

Outlook

s.media / pixelio.de

Is finance ready for inter-‐firm collabora4on? Insights from the automo4ve sector in a global produc4on network perspec4ve Hans-‐Mar3n Zademach Chris3an Baumeister


§  Day sales outstanding of a supplier are equal to day payables outstanding of a buyer; changes in only one of both lead to a zero sum game:

Collabora3ve Cash-‐to-‐Cash Management

5.3 Collaborative Cash-to-Cash Management 71

die Investition bezuschussen oder vorfinanzieren. Ein Beispiel für ein solchesModell liefert der Bremssystemhersteller Knorr-Bremse, der mit kleineren Zulie-ferern und der Deutschen Bank ein System zur Kostenreduzierung durch unterneh-mensübergreifende Finanzierung von Investitionsgütern implementiert hat.12

In wirtschaftlich angespannten Zeiten kann es jedoch zu einer Verknappung derKreditvergabe kommen, so dass beiden Akteuren ein Zugriff auf Kredite verwehrtbleibt. Des Weiteren setzt dieser Ansatz ein hohes Maß an Vertrauen auf beidenSeiten voraus und ist konzeptionell (noch) nicht vollständig ausgereift. Ferner isteine indirekte Finanzierung von Investition bereits heute gegeben, indem die Kostenmeist auf den Einkaufspreis umgelegt werden.

5.3 Collaborative Cash-to-Cash Management

Die Notwendigkeit des Collaborative Cash-to-Cash Managements zeigt Abb. 5.6.Daraus wird ersichtlich, dass die die Day Sales Outstanding des Lieferanten(DSOL) den Day Payables Outstanding des Abnehmers (DPOA) entsprechen.Die Summe der Cash-to-Cash Cycle Time des Lieferanten und des Abnehmersbleibt bei Veränderung dieser Zeitspanne konstant (Nullsummenspiel). Ziel desCollaborative Cash-to-Cash Managements ist daher die unternehmensübergreifendeOptimierung des Cash-to-Cash Cycles innerhalb einer Supply Chain-Partnerschaft,um Stärken und Schwächen gegenseitig auszugleichen und im Resultat für dieinvolvierten Akteure zu einem besseren Ergebnis zu gelangen. Voraussetzung isteine vertrauensvolle Basis und der Wille auch über Finanzkennzahlen Auskunft zugeben.

Zahlungsausgang an Vorlieferanten

Verkauf der Vorprodukte

Zahlungsein-gang vom Abnehmer

DPOL

DSOL=DPOA

Cash-to-Cash Cycle TimeL

DIHL

DSOA

Cash-to-Cash Cycle TimeA

DIHA

Warenein-gang der

Ressourcen

Zahlungsausgang an Lieferanten

Verkauf der Fertigrodukte

Zahlungsein-gang vom

Kunden

Lieferant (Index L)

Abnehmer (Index A)

Wareneingang derRessourcen

Abb. 5.6 Unternehmensübergreifende Cash-to-Cash Cycle Time Betrachtung

Im ersten Schritt werden hierzu die jeweiligen Cash-to-Cash Cycles sowieFinanzkennziffern wie der durchschnittlich gewichtete Kapitalkostensatz und

12Vgl. Leendertse (2009), S. 56.

Source: Hofmann et al. 2011:71


Is finance ready for (permanent) inter-‐firm collabora3on? Trade credit in the German automo3ve industry

▶  No signs for a changing „financing-‐paradigm“ in supply networks

OEM Supplier: medium Supplier: large Supplier: very large

N= 6 24 44 6

Source: Own calcula3ons based on Amadeus / BvD

!20$

!15$

!10$

!5$

5$

10$

15$

20$

2006$ 2007$ 2008$ 2009$ 2010$

Net$trade

$cred

it$(days)$

Supplier:$medium$sized$ Supplier:$large$ Supplier:$very$large$ OEM$

“The adapta<on of payment terms is a popular tool to support a supplier in need”. (Manager Finance Department German OEM, July 2012 )


§  Small < 10 million €

§ Medium ≥ 10 m € < 50 m €

§  Large ≥ 50 m € < 1 billion €

§  Very large > 1 bn €

Classifica3on of firms by opera3ng revenue


SCF-‐solu3ons for the automo3ve industry Sugges3on for a SCF-‐program carried out by an OEM cap3ve

OEM

Hinweis zum Urheberrecht: Teile dieser Methode beziehen sich auf die Patente US 2002/0198808 A1 sowie US 2006/0277129 A1

OEM Finanzierungsgesellschau

Web-‐Portal

2. Lieferung

4. Elektronische Meldung der Verfügbarkeit der Zahlung und Übermi^lung aktueller Kondi3onen (Transparenz!) z.B. 3 Monats-‐Euribor + Aufschlag X

5. IT-‐ gestützte Anforderung der Zahlung

6. Auszahlung 100-‐((100*(Euribor+X)/365)*30)

7. Bezahlung (100, 30 Tage)

Investoren

Refinanzierung am Kapitalmarkt

3. Prüfung der Lieferung und Rechnung; Möglichkeit der Reduk3on des Rechnungsbetrages (u.a. Mängel); Elektronische Übermi^lung des Rechnungsbetrags

Zulieferer B

Zulieferer A

Zulieferer B

Zulieferer B

Lieferbeziehung mit OEM: Direkt Indirekt

Zulieferer B

Zulieferer A

Zulieferer B

1: OEM wählt Key Supplier nach Wert/Relevanz für SC aus (Ausfallszenario; Szenario Preisans3eg/Folgen für Endpreis; Qualität; Alterna3ven am Markt)


Theore3cal considera3ons


GPN -‐ Footnote 13

▶  The (enlarged) GPN-‐framework is suitable to capture financial flows and rela3ons

▶  Financial rela3ons are crucial for understanding the configura3on of GPNs!

érms� incorporated� into� a� production� system� has� having� room� forautonomous� action� within� that� system,� in� spite� of� the� fact� that� suchautonomy�is�central�to�the�possibilities�for�industrial�upgrading�and�thussustained�economic�development.�As�a�consequence�of�these�diféculties,we� énd� a� discourse� of� networks� to� be� more� inclusive,� empiricallyadequate� and�thus�more�analytically� fertile.

Adoption�of�a�network�discourse�also�delivers�other�potential�beneéts.In�particular,�as�long�as�‘production’�is�couched�broadly�to�include�inter-mediate� and� énal� markets� and� as� long�as� the� dynamics�of� power�andknowledge�between�actors�and�institutions�are�understood�in�a�multidi-rectional�and�non-deterministic�fashion,�then�the�GPN�framework�allowsfor� far� greater� complexity� and� geographical� variation� in� producer-consumer� relations� than� the� GCC� approach,� for� instance,� has� so� farachieved.�Speciécally,� it�should� facilitate� our�ability� to�reveal�how�cer-tain�key�knowledges�‘circulate’�between�producers,�consumers�and�inter-mediaries,�rather�than�moving�in�a�uni-directional�manner,�a�key�insightof�the�expanding�literature�on�‘commodity�cultures’�(e.g.�Cook�and�Crang,1996;� Jackson,� 1999).� Moreover,� this� approach� should� also� allow� morecomplex�social�geographies�to�be�revealed,�in�the�sense�that�agents�in�avariety�of�locations�can�be�seen�to�combine�to�inèuence� the�productionprocess.12

Finally,�while�it� is�now�fashionable� to�term�‘global’,�phenomena� andpractices�that�until� recently�would�have�been�more�likely� to�be� termed‘international’� or� ‘transnational’,� our� adoption� of� the� former� term� isdriven�by�our�concerns�with�analytical�precision.�Speciécally,�the�terms‘international’� and� ‘transnational’� derive� from� essentially� state-centricdiscourses.�Thus�while�they�incorporate�notions�of�cross-border�activityof� many� sorts,� they� do� not� adequately� express� the� way� in� which� nonplace-speciéc�processes�penetrate�and�transform�place-speciéc�ones,�andvice�versa.�They�do�not,�therefore,�help�to�deliver�the�imaginative�sensi-bilities�necessary�to�grasp�the�dialectics�of�global-local�relations�that�arenow�a� pre-condition� for� the� analysis� of� economic�globalization� and� itsasymmetric�consequences.

The� global� production� network� as� proposed� here,� is� a� conceptualframework� that� is� capable� of� grasping� the� global,� regional� and� localeconomic� and� social� dimensions� of� the� processes� involved� in� many(though�by�no�means�all)�forms�of�economic�globalization.13 Productionnetworks�–�the�nexus�of�interconnected�functions�and�operations�throughwhich� goods� and� services� are� produced,� distributed� and� consumed� –have�become�both�organizationally�more�complex�and�also�increasinglyglobal�in�their�geographic�extent.�Such�networks�not�only�integrate�érms(and�parts�of�érms)�into�structures�which�blur�traditional�organizationalboundaries�–� through�the�development�of�diverse� forms�of� equity�andnon-equity�relationships�–�but�also�integrate�national�economies�(or�parts


445


6 On� the� former� see,� for� instance,� Jessop’s� (2001)� collection� of� some� of� theseminal�contributions.�On�the�latter�see�Storper�and�Salais�(1997,�particularlychapter�10).

7 Hardly�any�work�has�been�done,�for�instance,�on�households,�states�and�thereproduction�of�labour�power�from�within� a�GCCs�perspective.

8 See,� for� instance,� the� work� on� the� Brazilian� ‘reserved� market’� for� personalcomputers�(Evans,� 1986;� Schmitz�and�Hewitt,�1992).

9 See,�for�instance,�the�essays�collected�in�Gerefé and�Korzeniewicz�(1994)�andthe�special�issue�of�the�IDS�Bulletin (32/3,�2001).�See�also�Clancy�(1998);�Dolanand�Humphrey�(2000);�Bonacich�and�Appelbaum�(2000)�and�Kaplinsky�(2000)among� others.� The� ILO’s� research� institute,� the� International� Institute� ofLabour� Studies,� sponsored� a� programme� on� ‘global� commodity� chains’�in� the� late� 1990s.� The� continuing� media� attention� to� the� exploitative� work-ing�conditions� evident� in�the�supplier�companies� integrated� into� the�chainsof�the�likes�of�Nike�and�Gap,�for�instance,�underlines� the�utility�of�the�GCCframework� for�agencies� such�as�the�ILO.

10 Speciécally�it�implies�rejection�of�the�term�‘global’�as�a�simplistic�geograph-ical� construct� (see� our� later� discussion).� Similarly� economic� ‘globalization’,comes�to�refer�to�the�extension� of�functionally� integrated� (and�thus�sociallyrelational)� economic�activities� across� national� boundaries� (cf.�Dicken,� 1998:5).� The� implication� of� this� for� the� conceptualisation� of� GPNs� is� that� theycome�to�be�seen�as�dynamic� typologies�which�potentially�change�shape�andscope�over� time.

11 Though� he� had� previously� worked� with� the� notion� of� the� ‘internationalproduction�network’,�Ernst�érst� used� the� term� ‘global�production�network’in�a�conference�paper�of�1999� (Ernst,� 1999).�Our�érst�attempt� to�elaborate� aGPN� framework� appeared� in� a� research� proposal� that� same� year� (Dickenand�Henderson,� 1999).

12 See,�for�instance,�Hughes’�(2000)� study�of�the�cut-èower� trade.13 It�is�unlikely� to�be�of�particular�help,� for�instance,� for�the�analysis� of�some

forms�of�énance� capital� such�as�bank� loans� and�portfolio�investment.14 For� a� discussion� of� regional� politics� and� production� networks,� see� Cabus

and�Hess� (2000).15 In�other�works,�a�continuum�of�scales� (see�Swyngedouw,�1997;� Dicken�and

Malmberg,� 2001).16 There� is�a� growing� literature� that� addresses� these� concerns�with� respect� to

differing� ‘qualities’� of� foreign� direct� investment.� See,� for� instance,� Turok(1993,�Amin� et�al.� (1994)� and�Young�et�al.� (1994).

17 We�have�in�mind�the�continuing�dis-investment� in�British�subsidiaries� (withknock-on�effects�for�local�suppliers)�by�foreign� companies.�Since�1998� thesehave�included�at�a�minimum:�Siemens,�Samsung,�LG�and�Motorola�(in�elec-tronics),�BMW,�Ford�and�General�Motors�(in�automobiles)�and�Corus�(steel).�

18 Germany,� on� the�one� hand,� and� Britain� and� the�USA,�on�the�other,� consti-tute�polar� opposites� in� this� sense.� In� the� latter,� shareholders� have� supremepower�over� the� disposal� of�proéts� and� assets,� while� in� the� former� ownersare�obliged�to�consider�the�interests�of�other�stakeholders� and�the�workforcein�particular�(Lane,�1989).�Indeed�in�Germany,�property�holders�have�a�consti-tutional�obligation�to�exercise� their�rights�in�the�interests�of�the�public�good(Hutton,�2001).

19 Although�not�theorized� in�terms�of�power,�Humphrey�and�Schmidt’s�(2001)discussion� of� the� governance� structures� of� ‘value� chains’� is� an� importantcomplement,�at� this�point,� to�our�work.


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Isﬁnance#readyfor#inter0ﬁrm#collaboraon?# · PDF fileinnovation and differentiation, and to keep up with the pace of new technology,ï¿½ said Eric Benedict, managing director