TELUS drives growth with SCF

At the recent SAP Sapphire & ASUG Annual Conference in Orlando, Ashifa Jumani, Director of Procurement at Canadian telco TELUS, discussed how the company is using supply chain finance to free up cash flow for M&A, while furthering ESG goals through procurement processes.

Optimizing working capital management is an important activity for Canadian telecoms company TELUS. For one thing, the current economic climate highlights the need for better liquidity management. At the same time, frequent M&A activity means that freeing up cash flow is a significant priority for TELUS, as Director of Procurement Ashifa Jumani explained at the recent SAP Sapphire & ASUG Annual Conference in Orlando.

Supply chain finance is one tool that can enable companies to improve working capital and free up cash flow while giving suppliers access to finance at an advantageous rate – so TELUS decided to investigate this opportunity. “We ran the numbers to find out what the potential benefit would be, and how much cash we could free up by putting in supply chain finance,” Jumani recalls. “We also looked at our payment terms.”

As a result, the company found that its own payment terms were out of alignment with other telecommunications companies, some of which were paying their suppliers in 120 days. As such, the decision was taken to move from payment terms of 60 days to 90 days, while offering suppliers the option of early payment on their invoices via the supply chain finance program.

First things first

Key to the success of the project was having a clear understanding of the expected benefits of the exercise and the cost of the tools and resources that would be needed – although as Jumani points out, “it was actually very cost effective to put the system in place.” It was also critical to be able to communicate the project goals to the CFO from the outset.

“You need to be really clear on the benefits – what’s your working capital gain? Do you have a program in place for the suppliers?” says Jumani. “Because if you’re changing your payment terms, you need to put something in for your suppliers so they can get paid earlier.” For TELUS, the expected ROI of the project was based on generating working capital in order to reduce the amount of borrowing and the company’s interest costs.

While TELUS was already using Taulia as a partner for its dynamic discounting program, it was important to follow a thorough RFP process with different suppliers in order to understand the technology and methodologies available. As Jumani explains, “I’m in procurement so we do need to follow the purchasing policy and do a fair process. And we did end up choosing Taulia for our supply chain financing.” She adds that the existing dynamic discounting program meant that it was straightforward to turn on the SCF element when the time came.

Communicating change

According to Jumani, internal communications is key when it comes to implementing a successful SCF program: “Everyone needs to know what you’re doing, and no one should be surprised.”

Procurement at TELUS is decentralized, with over 12,000 suppliers affected by the project. Jumani’s team sent out a company-wide notice that the company’s payment terms would be changing from 60 to 90 days, and requested details of any relevant contracts from the relevant businesses. “Then the question was whether we were going to open up that contract to change the payment terms, or wait until it expired.” Legislation in specific markets also had to be factored in: Canada, for example, has prompt payment legislation that applied to some of the firm’s contractors.

Another important success factor was having a strong project manager who was able to engage people across various departments such as finance, treasury and legal. “And accounts payable was really key, because we needed them as a strong partner in helping us communicate with suppliers,” Jumani notes. Team members needed to inform suppliers about the new system and ensure that they were given six months’ notice of the change in payment terms.

Sustainable supply chain

Alongside its working capital management initiatives, the company’s procurement strategy is also shaped by a strong focus on ESG. The company has a climate action plan in place to tackle Scope 3 emissions with top suppliers, and partners with the Carbon Disclosure Project (CDP) to collect emissions information from suppliers. TELUS is also a member of JAC, a global association of around 27 telecom operators that are working with their suppliers to audit ESG criteria while reducing the burden on suppliers through a standardized approach.

In addition, TELUS includes corporate social responsibility (CSR) information in its RFPs to ensure that ESG criteria are considered as part of the supplier selection process. The company’s supplier diversity program, meanwhile, is focused on developing opportunities for diverse suppliers, including Indigenous businesses.

On another note, the company’s Supplier Due Diligence program screens the entire Tier 1 supplier base in order to identify any bad actors or sanctions violations. “Screening processes when onboarding suppliers is part of our CSR, as well as helping to make sure they are viable and profitable,” says Jumani.

Secrets of a successful SCF program

For other companies that may be considering a supply chain finance program, Jumani emphasizes the importance of understanding data in the first instance.

“Data is the most important thing – so make sure you understand where your suppliers are, what your current payment terms are and what the opportunity is, because that’s the ROI you’re going to take to your CFO.” In addition, she recommends that companies should look closely at the kind of funding they will need for the project, and ensure that the right people are involved.

Last but not least, choosing the right provider is paramount. “I’d class Taulia as a very strong partner – they helped guide us along the way with things like external communications to suppliers,” Jumani concludes. “Just sending emails is not going to be enough, so having a very strong follow up with suppliers is key to getting them onboarded.”