Financial Supply Chain Management


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Presentation on the concepts of Financial Supply Chain Management.

Financial Supply Chain Management

  1. 1. Financial Supply Chain Management Group 5A Amit S Archana K Kamal P Kushagra P Mahesh K Shubham K Venkatesh N
  2. 2. Financial Supply Chain Management The Financial Supply Chain refers to the end-to-end trade processes and information that drive a company’s cash, accounts, and working capital BUYER SELLER procurement-to- Order-to-cash cycle payment process Accounts payable and receivable Cash management Working capital Transaction costs Risk Administration
  3. 3. Physical SCM Vs Financial SCM Movement of Movement of Documents Documents Data Data & & Physical Goods Money Raw Retailer / Goods Manufacturer Customer Distributor Supplier • What to buy? • What and how to pay? • When to buy? • When to pay? • How much to buy? • How much to pay? • From whom to buy? • Who to pay? • Just-in-time-manufacturing • Just-in-time-cash Source:
  4. 4. Physical and Financial Supply Chains across a Transaction Physical Supply Chain Transportation process Factory Inland Port of Lading- Steamship Port of Inland Distribution Dray Terminal Line Discharge- Dray Center Terminal Customs Clearance Booking Request Proof of Delivery Bill of Lading Purchase Order Inventory Update Inventory Update Status Update Status Update Status Update ASN Containers Containers Containers are Containers are Containers Final delivery loaded moved to port Vessel at sea loaded on ship loaded on ship moved DC. of lading. Flow of Goods, Information and Funds Physical Supply Chain and the Financial Supply chain are closely integrated Receivables Pre-shipment Finance Financing Invoice Factoring PO Financing Financial Supply Chain Forfaiting Letters of Credit Buyer Financing Inventory Financing Documentary Post-shipment Finance Collections Buyer’s Credit Supplier’s Credit Source:
  5. 5. Functional Perspective of Financial Supply Chain Collaboration Source of financial Source of financial resources resources Investors/ (external financing) Accounting (external financing) Financial government services/ Use of Use of financial banks financial resources Investment Financing resources (dividends & taxes) (pay loans & fees) Use Source Financial of financial of financial activities resources resources Operating (investment) (internal financing) activities Procurement Production Sales (Outsourcing) Logistics provider Source:
  6. 6. Financial – SCM Connection •SCM can improve the below financial drivers of a company – growth , profitability and capital utilization •SCM strategic and tactical decisions need to be made from an enterprise-wide perspective Source: Financial Supply Chain by Dr. Stephen G.Timme (FinListics Solutions)
  7. 7. Financial and Supply Chain Connection– Top Down Approach CFO adopts a 3 step , top-down approach to make this connection •Identify gaps in the financial metrics as motivation of change •Investigate gaps in SCM related business processes like distribution and logistics , forecasting , demand planning etc •Gaps in business processes are linked to activities , tasks , KPIs like collaborative forecasting , CPFR, strategic outsourcing Top-Down Approach Source: Financial Supply Chain by Dr. Stephen G.Timme (FinListics Solutions)
  8. 8. Characterization of SCF Collaboration Source:
  9. 9. Characterization of SCF Collaboration Source:
  10. 10. Why Buyer Should Focus on SCF? • Pressure to lower the cost of goods sold • Manual-intensive financial processes becoming too burdensome • Opportunity to lower the overall weighted cost of capital for end-to-end supply chain Source:
  11. 11. Buyer Challenges to Better SCF • Suppliers unwilling to extend payment terms as much as needed • Lack of automation for managing SCF processes • Financial transaction processing takes too long / is too costly Source:
  12. 12. Why Supplier Should Focus on SCF? • Pressure to lower the cost of goods sold • Opportunity to lower the overall weighted cost of capital for our end-to-end supply chain • Shortage of funds to support production / work in process / buyer-required inventory • Pressure to shorted DSOs Source:
  13. 13. Supplier Challenges to Better SCF • Cash flow uncertainty • Difficult to obtain short- term financing due to high cost of capitol • Lack of automation for SCF processes • Supporting multiple buyers Source:
  14. 14. Key Market Trends  Enterprises are sourcing more globally, creating a demand for international trade finance products  Letters of Credit are decreasing as a percentage of global trade  Companies are pro-actively driving Banks towards cheaper Open Account solutions  SMEs and Large Enterprises seeking opportunities to lower overall cost of financial supply chains through access to lower cost credit  Banks are open to lending to new enterprises based on improved information made available through use of technology Source:
  15. 15. Thank You Finance Supply Chain