Supply Chain Finance @ Siemens

Finance for a strong supply chain

Supply Chain Finance – alternative way of finance

Supply Chain Finance @ Siemens has been developed by Siemens Financial Services (SFS) especially for selected Siemens suppliers. Being a multibank solution, Supply Chain Finance @ Siemens is an extremely cost-efficient way for suppliers to convert 100% of the value of their receivables into non-recourse cash at a very attractive discount rate.

The Supply Chain Finance Program (Siemens SCF Program) helps to improve the cash flow of selected Siemens suppliers and optimizes their working capital. The cooperation between Siemens and its suppliers will become even more efficient with the utilization of the SCF Program.

SFS is responsible for the introduction of the SCF Program and the organization of cooperation between the involved partners.

For providing a platform for the management of funding, Siemens has opted for Orbian*, one of the leading companies in the field of supply chain finance solutions. Through its Internet-access for Siemens suppliers the Orbian platform offers a very efficient and user friendly interface.

Summary of supplier benefits

+ Cash Flow Improvement

Get paid fast, 2 days following the sale of the Siemens receivable. Receivables can be sold either automatically or case-by-case according to your need for cash.

+ Working Capital Optimization

Sale of receivables for non-recourse cash improves liquidity, reduces Days Sales Outstanding (DSO) and improves the debt/equity ratio.

+ Cost Reduction

Automatically get paid on invoices once they are approved and reduce Account Receivable costs relative to Siemens receivables.

+ Transparency of Cash Flows

Suppliers are immediately able to see the approved payments (receivables) on their SCF web portal and gain early visibility of amount and date of payment.

Supply Chain Finance at work

The Siemens Supply Chain Finance Program enables selected Siemens suppliers to improve their liquidity through the sale of their Siemens receivables to Orbian* at very attractive rates.


Selling options

There are two types of accounts a supplier can choose to sell his receivables:

1. Auto-Discount

Supplier elects up-front to automatically sell all Siemens approved payments (receivables) to Orbian* at the pre-negotiated discount rate.

2. Manual-Discount

Supplier has the option to select which of the approved payments (receivables) it would like to sell to Orbian* at the pre-negotiated discount rate and the timing of such discounts.

Costs

When selling the receivable the supplier has to pay a discount on the face value of the receivable.
The current discount rate is Cost of Funds + 2.5 % p.a.. Cost of Funds are determined daily on the basis of interest in China and currently stands at approximately 4 % (90d). The additional 2.5 % is a fixed fee which covers the costs of the program as well as the banks providing the fund for the benefit of the suppliers.

Example

A supplier delivers products worth RMB 10 million. The payment is due in 90 days net. When participating in the SCF Program the supplier will receive payment 80 days earlier.

Discount rate:

6.5 %

(2.5 % + 4 %)

Discount Charge:

RMB 144,444

(10 m x 6.5 % x (80 / 360))

Discounted value receivable: 

RMB 9,855,556

(Cash received by supplier)

Cash flow benefit:

RMB 2,222,222

(payment after 10 instead of 90 days)

Discount charge as a percentage of the receivable 1.44 %.