We are entering an era where it is becoming possible to detect supply chain risks much more quickly. A case in point is offered by AGCO. AGCO AGCO +1.96% is a global leader in the design, manufacture and distribution of a wide range of agricultural equipment. In a discussion with AGCO’s Jan Theissen, Director of Strategy and Methods, and Jake Stone, Manager of Supply Chain Risk and Contract Management, I learned about this public, Atlanta headquartered corporation’s journey to improve their sourcing and supply base risk management capabilities.
AGCO’s products are marketed under a number of well-known brands, including Challenger, Fendt, GSI, Massey Ferguson and Valtra. The manufacture and assembly of their products occurs at 34 locations worldwide and historically each of these brands was managed as a separate supply chain. Further, because the company had grown by acquisition, these different supply chains used more than 10 different enterprise resource planning (ERP) solutions for direct sourcing.
Beginning in 2012, Mr. Theissen, a newly appointed procurement leader, led a transformation of the sourcing organization. AGCO moved from a fragmented and decentralized procurement to a centralized commodity management structure in order to better leverage buying synergies and increase the overall maturity level of this organization. Implementation of standardized roles and responsibilities, and global policies and procedures, were supported by an extensive change management program. The company formed a School of Purchasing to further develop the capabilities of the organization.
The risks associated with sourcing became part of each category manager’s job; these managers became responsible for supplier risk management, not just savings. Mr. Stone was brought into establish new, systems, processes and capabilities to manage procurement risk. One thing Mr. Stone put in place was a clear communication and escalation process to deal with risks once detected.
King Trade Capital announced it has established a $1 million supply chain finance solution for a Texas based startup. KTC was contacted by a nationwide factor to help accelerate the startups sales growth in the apparel industry. The owners of the startup have extensive relationships with small to mid-size retailers and years of experience sourcing goods from overseas factories. Through their relationships in the apparel industry they were able to secure annual production programs to manufacture branded goods on behalf of several men’s and women’s brands.
Due to the fact the client was a newly established entity with no financial or operating history, they were unable to obtain funding through traditional financing sources. The client was in need of a financial partner capable of providing the capital and structure necessary to have fabric sourced and garments manufactured overseas.
Initially the client’s factories wanted cash deposits in order to purchase fabric that would then be cut and sewn into finished garments. Payment for the cut and sew operations would then be due upon shipment. The owners, knowledgeable of the risks associated with sending cash deposits overseas, were seeking a safer solution to finance their inventory purchases.
King Trade Capital evaluated the experience of the owner’s and their customer and factory relationships, ultimately gaining comfort in their ability to perform. After negotiating with the factories, King Trade Capital and the client were able to structure individualized solutions for each factory, utilizing letters of credit that allow them to purchase fabric, complete the cut and sew manufacturing process and get paid according to their terms with the Customers.
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