FINANCIAL SUPPLY CHAIN MANAGEMENT ONLINE COURSE


This four weeks online course discusses explicitly the close correlation between supply chain management and financial business processes, which we will term financial  supply chain management.  We will explore a wide range of financial risk elements that supply chain managers can favorably influence for the benefit of the organization. This requires the organization to consider purchasing and supply chain management processes from a financial point of view.  By doing this, the organization can optimize information and cash flows within the organization. This can be considered all the more important as traditional areas of cost-cutting potential have been largely exhausted in recent years.  The focus therefore shifts increasingly to purchasing and supply chain management, which can have a massive impact on the company’s overall situation through the optimization of financial processes and can only leverage this potential if he or she has a solid understanding of finance and works together closely with the Chief Financial Officer.

In the future, financial  matters will become an integral part of every purchasing and supply chain manager’s daily tasks. Especially in offshoring, tax optimization, inventory/stock optimization (including Just-In-Time), collection of accounts receivable, and supply chain financing there is an  acute need for training  and  development –since both finance and supply chain management contribute immensely to a company’s overall performance.

The importance of a holistic  view  is  therefore  growing  more  and  more.  This is the  prerequisite  for  any company to become leading edge. Consequently, the willingness of  purchasing and supply chain managers  to  recognize and  take  responsibility for all the  financial  implications of their actions needs considerable improvement.

 This, in turn, requires purchasing and supply chain managers to work shoulder-to- shoulder with  their partners within  the  organization, especially Chief Financial Officers.  Financial supply chain management occupies a position exactly halfway between the two departments.  Neither can act alone and be successful. Taking the plunge into unknown territory demands new skills, creativity, a broader self-understanding and the willingness to question established rules, forms of cooperation, and job descriptions. Everyone involved needs to summon up this courage if they are to make their companies fit for the future.

 

DEFINITIONS

 Finance

A branch of econo mics concerned with resource allocation as well as resource management, acquisition and investment.

 

Supply Chain

The total sequence of business processes, within a single or multiple enterprise environment, that enable customer demand for a product or service to be satisfied.  A supply chain is the process of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. All organizations have supply chains of varying degrees, depending upon the size of the organization and the type of product manufactured. These networks obtain supplies and components, change these materials into finished products and then distribute them to the customer.  There are six key elements to a supply chain: (1) Production, (2) Supply, (3) Inventory, (4) Location, (5) Transportation, and (6) Information.

 

Supply Chain Management

Managing the chain of events in the supply chain process is what is known as supply chain management. Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down.  The decisions associated with supply chain management cover both the long-term and short-term. Strategic decisions deal with corporate policies, and look at overall design and supply chain structure. Operational decisions are those dealing with every day activities and problems of an organization. These decisions must take into account the strategic decisions already in place. Therefore, an organization must structure the supply chain through long-term analysis and at the same time focus on the day-to-day activities.

 

Financial Supply Chain Management

Supply Chain Management decision-making which gives due consideration to the organization’s financial goals and objectives.

 

Financial Supply Chain Management Programs

 

  1. Working Capital (Including Inventory/Stock) Optimization
  2. Supplier Risk Management
  3. Supply Chain Financing
  4. Tax Optimization Purchasing
  5. Impact of purchasing and supply chain management on key financial performance ratios
  6. Efficiency of the accounts receivable and accounts payable processes

 

At the completion of this seminar, students will be able to:

 

Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in optimizing working capital:

  1. Make-or-buy (Outsourcing) Analysis
  2. Supply chain process optimization
  3. Use of consignments and vendor-managed-inventory
  4. Prompt payment discount tendering
  5. Lease-purchasing analysis
  6. Fixed-asset utilization/optimization
  7. Supply Chain Financing
  8. Inventory optimization (including JIT)

 

 Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in reducing supplier risk:

 

  1. Attenuating price volatility of supplier pricing for goods and services.
  2. Minimization of currency risk on contracts denominated in foreign currencies.
  3. Minimizing the risk of potential supplier bankruptcy through financial analysis and surveillance.
  4. Minimizing the cost of supplier financing in developing and emerging markets.
  5. Minimizing the risk of financial control through effective and efficient outsourcing and offshoring.
  6. Reducing the complexity of inter-organizational financial transactions.

 Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in reducing supplier risk:

 

  1. Early payment programs--which will allow your supplier to offer you a discount
  2. Inventory ownership solutions--which could include logistics services as well
  3. Virtual consignment financing with assignment of proceeds--where you buy the raw materials with your added leverage and sell them to the supplier at cost
  4. Formal supplier-risk assessment processes (to understand the capital costs and foreign exchange risks embedded in the unit costs)
  5. Evaluation of payment policies and systems (to assure that what you're paying for is what you've ordered)
  6. Collaborative financing solutions  (since earlier visibility can be leveraged to create flexibility around early payment options for suppliers
  7. Elimination of inventory across the total supply chain (since this reduces costs throughout the supply chain for all parties)
  8. Integration of information about the physical flow of goods with the financial flow (since this allows for financial supply chain optimization)

 

Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in achieving tax optimization:

 

  1. Evaluation of regional and country sourcing and sales options based on tax minimization.
  2. Location of purchasing operations in low value-added and sales tax countries

 

Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in achieving financial metrics important to the organization’s profit and return on investment:

 

  1. Savings from the bidding and negotiation processes.
  2. Savings from the budget (cost avoidance and cost savings).
  3. Contribution to Earnings (Profit) Before Interest and Taxes.
  4. Return on Equity.
  5. Improvement of Cash Flow/Ratios.
  6. Improvement of Current Ratio.
  7. Improvement of acid test/quick ratio.

 

Explain the tools and techniques available to the purchasing and supply chain manager to assist the Chief Financial Officer in achieving efficiency in Purchase to Pay (P to P) and Collection of Accounts Receivable.

 

  1. Reduction of manual processes.
  2. Increase in transparency.
  3. Increase in invoice accuracy.
  4. Increase in compliance with law and regulation.
  5. Reduction in reconciliation effort.
  6. Increase in response time.

 

Relevant cases will be employed for each of the 6 areas.

 

 

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