Arnaud, can you explain what are the current challenges faced by Fashion Cube?
Fashion3 has a large portfolio of suppliers based in Inland China, Turkey, Bangladesh, Myanmar and India, managed from Hong Kong. Financial support of these suppliers has always been a key driver to enhance our production chains and support development, employment and investment in these countries. With the current period of high uncertainty, access to credit or guarantee is getting difficult. Everywhere but also in emerging countries, financing supply chain has become a strong demand from suppliers. In order to answer these requests but also to maintain healthy providers and support our long-term partnership with them, our financial team has decided to implementation of a global solution to finance the supply ecosystem since mid-2020.
What is the solution implemented by fashion cube to overcome these issues?
Given the cycles of the textile industry and the size of each of our suppliers, we have decided to shorten the cash conversion cycle while simultaneously supporting our suppliers with self-generated programs. The implementation of an early payment program (Reverse Factoring) appeared very quickly as the best solution. Our suppliers in Asia are now benefiting from advanced payment of invoices with a discount on the price though the Kyriba’s Supply Chain Finance solution.
How did you build the solution?
The other issue was the accessibility of the tool to our suppliers whatever their size or region. We had to select a tool that would deliver an easy-to-use solution to suppliers based in a large variety of countries in the Asian region. There was also a need for a proven experience in the financing of supply chains to onboard several bank partners.
Kyriba offered to connect our providers to a multi banking Reverse Factoring Program with several tier 1 Financial Institutions that we selected to fund the program. Partnering with an IT platform which is easy and secure, with strong presence in Asia was one of the main advantages offered by the Kyriba’s platform. The capacity to monitor suppliers’ effective financing rate was also key to us to be able in the future to add some CSR criteria to our financing rate offered. Finally, the platform also connects to our Enterprise Resource Planning systems (ERPs), which allows us to automatically update our company accounts.
What are the lessons learnt with this project?
SCF’s programs are sensitive because they are multi-partner. The project is impacting multiple teams in the Treasury and Procurement/Sourcing units. Obviously Legal and IT where also involved as advisors in the process. As of today, we focus on the onboarding of our supplier base and the next steps is to vary the financing rate based on supplier CSR performance. For this, it is key to work with a company able to support you in the long term and to behave as a partner.
Fashion Cube HK Ltd (Fashion3) is the strategic sourcing company of the Pôle textile of Association Familiale Mulliez. The Pôle textile is an economic interest group that gathers several European brands of textile (Jules, Brice, Bizbee, Pimkie, Orsay, Rouge Gorge, Grain de Malice). Fashion3 is dedicated to mutualise their sourcing activities to get the best access to innovative products and enhance their CSR efficiency.