Winner: Arçelik A.Ş.

Partner: C2FO

Turkish manufacturer of household appliances Arçelik has won first place in the Manufacturing category for the SCF Community’s Supply Chain Finance Awards 2022. The company’s innovative early payment and SCF programmes have allowed it to support its mostly SME suppliers at a time when hyperinflation and economic volatility are making it difficult and expensive for them to access other funding.

Arçelik initially used its own cash and credit lines to fund an early payment programme launched in February 2022. Powered by the technology of working capital platform C2FO, the programme helped Arçelik’s suppliers replace their inventories more quickly and defend themselves against rapid depreciation in the Turkish lira. In the first six months of the programme, Arçelik made over $75 million in early payments to its suppliers.

“We began this journey with the aim of improving our overall supply chain finance experience and creating a benefit both for Arçelik and its suppliers,” said Hande Güniçen, manager of foreign trade accounting at Arçelik Global.

“During the times when it becomes difficult to access any loans or finance funds, suppliers gained an alternative way for working capital financing,” she added. “They can access the cash whenever they need it, with lower costs than the traditional sources of funding. And there is no change in their contractual payment terms or bank accounts.”

Discounted early payments are already an established practice in Turkey, but C2FO went a step further by making it an end-to-end digital process and integrating Arçelik’s ERP system into the programme. It strengthened Arçelik’s risk management capabilities by using advanced analytics that let the company control what percentage of receivables are paid early for individual suppliers, according to Serden Kececioglu, managing director, Turkey at C2FO.

For example, it maps Arçelik’s accounts receivables (AR) and account payables (AP) so that only a supplier’s net receivables (what Arcelik owes the supplier minus what the supplier sometimes owes Arçelik, such as for raw materials) are eligible for early payment. Any AP adjustments (receivables of Arçelik due to returned goods) are also automatically deducted from the amount of AP eligible for early payment.

Arçelik then expanded the C2FO programme with a supply chain finance (SCF) programme that launched in Q4 2022. This will allow it to support more suppliers with additional liquidity via credit lines funded through the European Bank for Reconstruction and Development. The ability to leverage abundant credit lines at banks will also enable Arçelik to defend its payment terms and cash conversion cycle.

C2FO says its digital supplier onboarding capabilities have allowed Arçelik to reach a larger group of suppliers compared with conventional bank-funded SCF programmes. And unlike most local Turkish SCF solutions, which are limited to local currency invoices and locally registered suppliers, Arçelik is able to support both local and international suppliers. Around 28% of the 500 suppliers initially eligible for the programme were onboarded within the first two months. This has since increased to 35% of 600 eligible suppliers.

During evaluation of Arçelik’s award entry, judges praised the programmes for their full automation and the capacity for credit invoices to be accommodated into the system. Arçelik’s ability to either use credit lines or self-finance its suppliers also provides them with flexibility and access to cash at any time.

Judges additionally commended Arçelik’s focus on sustainability. The company plans to embed environmental, social and governance (ESG) aspects in the programmes from early 2023, and is exploring how it might offer more favourable rates or improved payment terms to suppliers that contribute to the company’s sustainability goals, according to Hande.

Although currently the programmes do not directly support Arçelik’s tier-two suppliers, over 80% of onboarded suppliers are SMEs, and benefits will further cascade from them into ‘long tail’ of the company’s supply chain, added Kececioglu.

You can watch their video interview here: