Pete, can you tell us about your role at Caterpillar?

Pete: I manage a global Supplier Finance team whose primary responsibilities include acting as trusted advisors to Caterpillar’s Global Procurement team. We do that by monitoring the financial health of Caterpillar suppliers and working on proactive solutions to support supply chain resilience in order to avoid interruptions and protect enterprise assets. In addition, our team serves as the global process owner of Caterpillar’s Supply Chain Finance program (Program), which is administered by J.P. Morgan.

Why was the Program created?

Pete: The trade finance relationship between Caterpillar and J.P. Morgan Payments began over a dozen years ago following the Global Financial Crisis. As we prepared for improved economic conditions, Caterpillar and its suppliers needed additional ways to finance their working capital, with the ultimate goal of sustaining the viability of our suppliers and supporting the standardization of our payment terms worldwide. The Program was born in 2010 and has been growing in supplier participation, throughput and eligible Caterpillar facilities ever since.

How does the Program work?

Pete: The Program is one of our top solutions available to Caterpillar suppliers. Suppliers who submit invoices to eligible Caterpillar facilities and enroll in the Program have the option to receive early payment on their receivables at a slightly discounted amount. The Program is an attractively priced working capital solution that is tied to Caterpillar’s mid-A credit rating, because the bank’s risk lies with our repayment obligation at the end of the standard payment term.

The Program offers a great solution that very clearly meets both mutually beneficial goals – optimize Caterpillar’s working capital and maintain our global standard payment terms, leveraging a solution that addresses the liquidity and working capital needs of our suppliers.

What have been the results of Caterpillar’s partnership with J.P. Morgan?

Pete: The benefits of our Supply Chain Finance partnership with J.P. Morgan have been two-fold: 

• Preservation of Caterpillar working capital and payment terms strategies
• A financially stronger, more resilient supply base

What long-term goals are supported by this effort?

Pete: The long-term goals are continued marketing and expansion of the Program. We intend to continue to expand the Program to suppliers of existing eligible facilities via education and marketing, as well as grow the program to new Caterpillar facilities and regions where our business and supply base demonstrate a need.

Patrick, how do Caterpillar’s Procurement and Corporate Treasury functions work together to effectively manage and maximize working capital?

Patrick: Caterpillar’s Procurement and Corporate Treasury collaborate on a wide variety of financial solutions that support effective supplier working capital management and overall supplier financial health. Since our Procurement team has longstanding direct relationships with our suppliers, it is vital for Program growth and participation that Procurement team members fully understand and can articulate the working capital benefit to our suppliers.

As Corporate Treasurer, I am responsible for leading the team that maintains Caterpillar’s balance sheet, financial strength and protects our assets while also working hand-in-hand with Procurement leaders on assurance of supply initiatives.

How is Caterpillar using working capital to drive growth across the business?

Patrick: When it comes to our success, profitability and growth go hand-in-hand – both are necessary for long-term success. When we grow profitably, we’re able to reinvest back into our business – benefiting our customers, our shareholders, our people and our partners, including Caterpillar’s dealers and suppliers. Given the working capital-intensive industries that we serve, maintaining strict controls and offering solutions aimed at optimizing and improving our working capital are key elements that support our profitable growth strategy.

How is J.P. Morgan Payments helping Caterpillar to optimize working capital and support this growth?

Patrick: J.P. Morgan has been a banking partner to Caterpillar for more than 50 years! We selected J.P Morgan to run this initiative because of their leadership in global corporate banking and, specifically, trade finance. This is coupled with their Supply Chain Finance product offering, marketing and growth strategy, and tremendous support team.

The team consults with J.P. Morgan to stay apprised of the changing trade finance landscape, so that we can further expand our toolbox of financial solutions offered to our suppliers.

Throughout the years, J.P. Morgan and Caterpillar have both been leaders in our respective industries and our relationship has expanded across several treasury and banking functions, including bank account management, payment processing, debt capital markets, foreign exchange and commodity risk management and trade finance — to name a few.

What advice do you have for other finance leaders facing similar challenges?

Patrick: Working capital solutions and program implementations can seem complex and daunting, but collaborating with market-leading business partners, including knowledgeable corporate banks, really simplifies the process. Caterpillar Treasury and Procurement evaluate bank proposals and pursue initiatives that both optimize Caterpillar’s working capital and lead to a stronger, more resilient supply chain.