Krispy Kreme Highly Commended Best Use of Receivables Finance at the 2022 Working Capital Awards in Amsterdam for using Orbian’s fixed interest rate Supply Chain Finance solution
A fixed interest rate SCF programme designed to protect suppliers from sudden hikes in global rates
- Interest rates are not linked to floating rate mechanisms
- Suppliers are protected from sudden hikes in rates
- Suppliers of all sizes were able to access the programme
Krispy Kreme is a US-based doughnut brand – famous around the world for its iconic glazed doughnuts. It currently operates in more than 30 countries via partnerships with retailers as well as a growing delivery and e-commerce business arm.
When looking for a supply chain finance solution, one of Krispy Kreme’s goals was to protect is suppliers from shocks such as hikes in interest rates. Managing interest rate risk in supply chain financing has been a long-standing challenge for companies using supply chain finance – particularly those in the fast-moving consumer products and retail sector such as Krispy Kreme.
The problem is particularly acute in today’s climate, with the recent global hikes in interest rates potentially having a significant impact on costs to suppliers. Sharp rate increases could cancel out the net margin suppliers would earn on delivery contracts.
The US Fed announced in early November an interest rate increase that pushed lending rates up to a record 3.75 to 4 percent, with further increases likely. Similarly, the UK’s central bank increased interest rates up to 3 percent.
Krispy Kreme turned to tech firm Orbian for a solution and opted for its fixed rate SCF programme with a virtual payment card.
Orbian’s solution tackles the interest rate challenge by creating a funding model that separates the supplier discount decisions from the underlying source of liquidity for the programme. Rather than basing its pricing on Libor or other floating rate mechanisms, suppliers lock in a rate for a specific period.
These rates are typically based on risk modelling structures built around a culmination of strong historic payment and discount data on the suppliers.
Krispy Kreme also wanted to ensure that all its suppliers were able to access the same favourable SCF terms regardless of where they were based or how much Krispy Kreme spent with them. This goal was reached by adopting Orbian’s Virtual Payment Card tool. The company also achieved its working capital metric targets, such as its DPO goal, through the implementation of this programme.
The programme was put together by a team drawn from Krispy Kreme’s treasury and procurement teams, with staff from offices in North America, Europe and Asia who worked closely with Orbian’s staff in Europe and the US.
Since its launch in 1999, Orbian now has suppliers from 53 different countries participating in its SCF programmes and has financed $240 billion in trade flows to-date for Fortune 500 and Global 500 companies.
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