Supply Chain Finance at Procter & Gamble
HBS Case Study No. 216-039
Posted: 2 Sep 2016
Date Written: May 27, 2016
In April 2013, Procter & Gamble (P&G), the world's largest consumer packaged goods (CPG) company, announced that it would extend its payment terms to suppliers by 30 days. At the same time, P&G announced a new supply chain financing (SCF) program giving suppliers the ability to receive discounted payments for their P&G receivables. Fibria Celulose, a Brazilian supplier of kraft pulp, joined the program in 2013, but was re-evaluating the costs and benefits of participating in the SCF program in the summer of 2015. The firm's treasury group and its US country manager must decide whether to keep using the program and, if so, whether to keep their existing SCF banking relationship or start a new relationship with another global SCF bank.
This case requires students to calculate, understand, and interpret financial ratios particularly those related to working capital management (e.g., DPO, DSO, DSI, and CCC). More specifically, it provides an introduction to the mechanics and economics of supply chain finance (SCF), a modern form of working capital management that involves the sale of receivables to a third party SCF bank. What is unique about the case is that it presents both sides of a commercial transaction and shows how P&G's (the buyer) payables are linked to Fibria's (the supplier) receivables. Finally, it provides a forum to discuss various regulatory efforts to encourage faster payment of small and medium-sized suppliers (the US SupplierPays Initiative and the EC Late Payments Directive).
Keywords: Working capital, supply chain finance, accounts payable, corporate treasury, banking, liquidity, financial management, financial statement analysis and reporting
JEL Classification: G20, G32
Suggested Citation: Suggested Citation