Called the “Supplier Alliance Program," it enables eligible suppliers to receive payment for their orders by one of the two bank in 10 to 15 days within Walmart’s receipt of the goods, compared with the more typical 60 to 90 days that a vendor would get paid by the retailer.Īnd Procurement Article - Continued Below) With that as the backdrop, Walmart sent a letter last week to some 1000 suppliers announcing a new program in partnership with mega-banks Wells Fargo and Citigroup. In July, CIT Group had said that if it failed outright, it would also put some 760 manufacturers at risk of failure due to cash flow issues. While the company will survive after restructuring, many of its activities in the market have been curtailed, leaving some manufacturers without a reliable source of funds. In the consumer goods-to-retail supply chain, that process took something of a hit this year when CIT Group, a major provider of factoring and lending services to consumer goods manufacturers, fell into financial trouble and just recently filed for bankruptcy. Many small and mid-sized suppliers are unable to manage the cash flow challenges of slow payment cycles by customers, as are typical in retail, and sell the receivables to well-capitalized banks or others firms that can handle the payment timing. In either case, the goal is to receive the cash faster. The approach Walmart and Kohl’s are taking is a new twist.Ĭonsumer goods manufacturers are major users of “factoring” strategies, in which a company either sells its receivables to a third party at a discount or uses those receivables as collateral for a short-term loan.
Since the financial crisis hit, large companies have looked at a variety of strategies to help key suppliers through the tough times, whether that is changing payment terms, providing direct financing, or other techniques. Walmart announced last week that it was starting a new program that would partially extend its credit rating to more than 1000 of its apparel suppliers to enable them to “factor” their receivables from Walmart at two of the nation’s largest banks.
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