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A Gujarat-based furniture manufacturer (bedroom furniture, storage solutions) had become an IKEA approved supplier after a 2-year qualification process. IKEA' payment terms were 90 days after proof of delivery. This created a significant working capital challenge: the Indian manufacturer was funding 90 days of working capital (raw materials, production, freight) before receiving any payment from IKEA. Indian bank working capital credit at 11% per annum was expensive.
IKEA India sourcing informed the manufacturer about IKEA' Supplier Financing Programme (SFP) — a supply chain finance facility available to all IKEA approved suppliers through a Swedish bank. AJG facilitated the onboarding process. Under the programme, once an invoice is confirmed by IKEA in their supplier portal, the manufacturer can elect to receive immediate payment at a discount of approximately 3.8% per annum (significantly lower than 11% Indian bank credit).
Supplier Financing Programme onboarding completed in 6 weeks. On the first EUR 3.2M annual IKEA order, the manufacturer elected early payment for 75% of invoices. Working capital cost reduced from 11% (Indian bank) to 3.8% (IKEA SFP) on the elected invoices. Annual working capital cost saving: approximately EUR 108,000 on EUR 3.2M order flow. Cash conversion cycle improved from 120 days to 30 days.
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