Breaking News

P&G Changes Supplier Pay Cycles, Offers Financing

June 7, 2013

• The world’s largest consumer products company didn’t just change CEOs (see p. 124) it’s changing pay terms, too. Next month, Procter & Gamble will increase the time it takes to pay for supplies, but will offer financing to help mitigate the impact a longer payment cycle could have on small and midsize businesses, the company told suppliers earlier this year.

P&G plans to increase the time it takes to pay suppliers by as much as 30 days, which could free up to $2 billion in cash, The Wall Street Journal reported, citing people familiar with the matter. The world’s largest household products company is seeking to pay its bills in 75 days from the average of 45 days it takes currently.

In a letter dated April 5 on a P&G website for suppliers, the company said that its “working capital program will focus on moving to longer payables with our external business partners.”

The letter from chief purchasing officer Richard Hughes said that P&G discovered that its payment cycle was out of line with those of its competitors. Hughes said in the letter that P&G planned to offer supply chain financing through banks.

P&G recently began negotiations with its suppliers about the new payment terms, which are expected to be implemented over three years and could affect hundreds of companies, The Wall Street Journal reported. To help P&G’s suppliers cope with changes, the company is working with banks to offer cash to suppliers after 15 days from delivery for a fee.

According to P&G’s supplier website, its payment terms policy is “net 75 globally, where legally allowed,” for all new suppliers as of March 1. Its largest existing suppliers are set to start to work under the 75-day policy next month, as new or modified agreements are reached. The new policy will be applied to other existing suppliers starting in April 2014, on a rolling basis, according to the site. 
blog comments powered by Disqus
  • What's Next for the UK?

    Sarah Boumphrey, Euromonitor International||June 24, 2016
    Euromonitor weighs in on the implications for consumer product companies.

  • Henkel Grabs the Sun

    Henkel Grabs the Sun

    Ian Bell, Euromonitor International||June 24, 2016
    Euromonitor's Ian Bell on the impact the purchase will have on the US detergent industry.

  • To The Max

    To The Max

    Melissa Meisel, Associate Editor||June 20, 2016
    Velvet 59 is on the rise at locations like Ricky’s NYC.

  • Take Notice

    Take Notice

    Melissa Meisel , Associate Editor||June 1, 2016
    Packaging trends revolve around trendy artwork, eco-conscious materials—and portability is a plus too!

  • Virtual Reality

    Virtual Reality

    Christine Esposito, Associate Editor||June 1, 2016
    An update on nature-identical ingredients for cosmetics and personal care products.

  • Shiseido Advances in the US

    Shiseido Advances in the US

    Tom Branna, Editorial Director||June 1, 2016
    New facility in Windsor, NJ demonstrates its dedication to the US and other markets outside Japan.