Shift into High Gear: Empowering Suppliers through Supply Chain Finance for an Automotive Component Leader

Supply Chain Finance (SCF) is crucial in industries like automotive component manufacturing due to the vast supplier networks, which often include both large-scale vendors and smaller MSMEs (Micro, Small, and Medium Enterprises). The automotive sector is marked by complex, multi-tiered supply chains where maintaining liquidity and operational efficiency is essential for smooth production. SCF solutions ensure that suppliers, especially smaller ones, receive timely payments, which helps to stabilize the supply chain and prevent disruptions caused by cash flow constraints.

In FY23, India’s automotive components industry had a turnover of ₹5.6 lakh crore (around $68 billion). For FY 2024, the industry continued its growth with a 10% increase, driven by a 9% rise in vehicle production and sales. This sector contributes 2.3% of India’s GDP and provides direct employment to 1.5 million people, underscoring its economic significance

Recognizing the need for efficient supply chain operations, a leading automotive component manufacturer chose to opt for Vayana, to implement SCF programs aimed at promoting inclusivity and reducing risk concentration. This company is known for its commitment to innovation, sustainability, and operational excellence. Faced with the challenge of managing a large supplier base and optimizing financial processes, the company sought to enhance its SCF strategy to benefit both its small and large suppliers.

Objectives of the Program?

1. Compliance with MSMED Act
2. Optimizing cashflow and working capital through the payables program
3. Enhancing supplier engagement and satisfaction by offering timely payments and flexible financing options
4. Minimizing risk concentration through diversified funding sources and financial instruments

Program Details and Implementation

A comprehensive Supply Chain Finance (SCF) project with Vayana was initiated to optimize working capital and enhance supplier relationships across all levels. By automating the payable management system, it aimed to ensure compliance with the MSMED Act, improve reconciliation efficiency, and strengthen the supply chain through sustainable and diverse programs benefiting a broad range of vendors.

Types of Financing Programs opted

1. Vendor Financing Program:
   Targeted smaller suppliers with limited access to affordable credit, offering financing through one of the largest public sector Banks in India. This program provided quick invoice processing and digital onboarding, ensuring swift payments.
2. Payable Financing Program:
   Catered to larger vendors to offer upfront payments through partnerships with two major banks in India.
   

Impact of Vayana’s SCF Program

1. MSMED Act Compliance and Inclusive Access to Credit:
   Guaranteed payments to MSME vendors within 45 days as per the MSMED Act, 2006, while ensuring even smaller vendors had access to credit, enhancing their financial stability.
2. Reconciliation and Automation Efficiency:
   Automated the payable program, minimizing reconciliation efforts, swiftly identifying unpaid bills, and upgrading technology to reduce vendor onboarding time to 15 minutes and payment processing time to 5 minutes.
3. Recycling and Remanufacturing Processes
   Provided robust tech support to vendors, enhancing their operational capabilities through API automation and fully digital processes.
4. Diversified Risk and Financing Options:
   Mitigated SCF concentration risk by implementing multiple programs with various financial partners and diversifying funding structures, optimizing working capital funding.
5. Cost Savings and Efficiency:
   Enabled cost savings through discounts and efficiency improvements, leveraging the corporate’s credit standing to provide affordable credit to smaller suppliers.
6. Vendor Onboarding and Relationship Management:
   Utilized Vayana’s dedicated multilingual network sales team to ensure 100% engagement and utilization of SCF programs.
   

Vayana’s advanced SCF solutions have significantly enhanced supplier visibility into cash flows, streamlining operations and enabling the automotive component manufacturer to focus on strategic growth. This collaboration not only empowers suppliers of all sizes but also reinforces the importance of inclusive financing in building a resilient and efficient supply chain, positioning the company for sustained success in a competitive landscape.