Credit Program ~ Description
Since the Credit Program approach is a new and unique way of reducing costs in the supply chain it deserves some explanation.
A Credit Program is very much analogous to a steel purchase program, in that it looks to use the purchasing power of the client to establish a predictable source of debt capital (or a set steel price in the analogy) at pre-determined terms and conditions, with templated loan documentation.
In the past, when progress payments were the norm, tooling suppliers embedded no interest cost in their purchase orders and quotes. As the trade terms for tooling procurement lengthened dramatically to "payment at PPAP", thereby lengthening and increasing the financing requirement of the tooling supplier, it is now not unusual to see the interest costs embedded in tooling purchase orders aggregating 8% to 15% of the total tooling cost.
Similarly, as Vehicle Manufacturers looked to amortize the price of tooling over the parts production life via Supplier Owned Tooling (SOT), the embedded cost of capital in the SOT also increased dramatically as the "bank vaults" closed for auto parts manufacturers during the economic slow down. Previously abundant debt capital has become very scarce for most non-investment grade parts manufacturers.
T&E Capital, via its Credit Program approach, looks to "cap" the interest costs and avail access to incremental and highly predictable debt capital into the supply chain.
Think of a Credit Program as applying "lean manufacturing" to the finance process.