Genuine Parts Company Improves Supplier Health and Financial Flexibility with Supply Chain Finance
By • 10 minute read
Founded in 1928, Genuine Parts Company (GPC) has a reputation for its highly competitive automotive and industrial parts business as well as a corporate culture that prioritizes customers and suppliers in every business decision.
When the global pandemic hit, GPC needed to make broadscale working capital improvements that would give its North American, European, and Australasian operations maximum financial flexibility.
Meanwhile, many of GPC’s suppliers were facing financial challenges of their own. Some did not have access to affordable capital to help them strengthen cash flow during the early days of the pandemic. GPC saw this as both a challenge to its business as well as an opportunity to step in and provide some relief.
Despite the company using supply chain finance since 2004, historic disruption prompted GPC to rethink how supply chain finance could increase financial stability for GPC and its suppliers.
New Funders Meet Increased Supplier Demand for Cash
GPC’s treasury team spearheaded a crossfunctional group that collaboratively decided to expand their PrimeRevenue-led supply chain finance program, which would further improve days payable outstanding (DPO) and cash conversion cycle metrics while simultaneously supporting increased cash demand from suppliers across all regions.
One key objective of the expansion was introducing several new funding partners into the program to increase the scope of coverage. It also gave the company the opportunity to develop long-term funding relationships that they could leverage for other treasury requirements and capital needs in the future.
Another critical component was securing executive sponsorship and corporate stakeholder alignment. The team worked to institutionalize working capital objectives in a meaningful way within its executive ranks to ensure accountability.
This incentivized the organization from the top down to systematically improve its cash conversion cycle, push for better supplier payment terms, and promote early payment through supply chain finance.
CASE STUDY GOALS:
PrimeRevenue’s Multi-Funder Approach Delivers Substantial Cash Flow Improvements for GPC and its Suppliers
In partnership with PrimeRevenue, GPC’s refined supply chain finance strategy has substantially improved the financial health of the business and its suppliers.
The company’s DPO has improved from 39 days to 135 days since the inception of its supply chain finance strategy. Additionally, GPC’s cash conversion cycle has improved by 92 percent (from 133 days to 11 days), with even further substantial improvement occurring since the start of the global
pandemic.
On the supplier side, the expanded supply chain finance program has given suppliers greater access to affordable capital.
PrimeRevenue’s multi-funder approach made it easy for the company to bring in new funders that strengthened global coverage for its supplier base.
This has been critically important to sustaining their business during an extended period of disruption and uncertainty, particularly for those businesses where the local cost of borrowing is high or the supplier is nonrated or below investment grade.
As a result, more of GPC’s suppliers are opting for early payment while agreeing to extended payment terms. Suppliers are happy to rely on GPC’s investment-grade credit rating to access non-debt, low-cost capital while maintaining their own liquidity to use for other purposes.
PrimeRevenue’s technology-enabled platform also gives suppliers greater visibility into approved invoices, credit memos, and remittance reporting.
Ultimately, GPC’s PrimeRevenue-led supply chain finance program has exceeded expectations and become one more testament to the company’s customer- and supplier-first culture.
CASE STUDY RESULTS:
135 days
IMPROVED DPO FROM 39 DAYS TO 135 DAYS SINCE 2004
EXPANDED SCOPE OF PROGRAM COVERAGE BY BRINGING IN NEW FUNDERS
GREATER SUPPLIER VISIBILITY INTO APPROVED INVOICES, CREDIT MEMOS AND REMITTANCE REPORTIN
92%
REDUCED CASH CONVERSION CYCLE BY 92% SINCE THE BEGINNING OF THE SUPPLY CHAIN FINANCE INITIATIVE
The company has materially improved key financial metrics to achieve greater financial stability and flexibility, while giving their suppliers around the world a way to achieve the same outcomes.
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