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Using Financial Supply Chain Management to Support Working Capital at Tech Data Corporation

by Helen Sanders, Editor

Tech Data Corporation is one of the world’s largest distributors of technology products from leading IT hardware and software producers. Since its formation in 1974, Tech Data now serves more than 100,000 IT solution providers in over 100 countries. Every day, these value-added resellers depend on Tech Data to support the technology needs of end users cost-effectively, including small and medium businesses, large enterprises and government agencies. Ranked 105th in the Fortune 500, Tech Data generated $23.4 billion in net sales for its fiscal year ended January 31, 2008.

The Importance of Margins

Tech Data is a low-margin business with the cost of goods more than 95% of sales revenue. It is therefore vital for senior executives to find ways to preserve margins and retain the firm’s competitive edge. There are a variety of factors which can affect margins - for example, inefficiencies in the physical, information or financial supply chain.

There are a variety of factors which can effect margins - for example, inefficiencies in the physical, information or financial supply chain.

Tech Data actively manages its financial supply chain in order to maintain working capital. The company avoids using financial institutions wherever possible, reducing interest costs and thereby creating benefits for its suppliers, customers and shareholders. Tech Data has provided roughly $600m of net cash through its operating activities over the past three years and sales have increased by almost $3bn. Treasury has had a major part to play in this business transformation. For example, by extracting liquidity by working the financial supply chain harder, Tech Data’s net interest expense fell by $13.4m or almost 50% in 2007 without compromising its customers or suppliers.