财务管理外文文献.docx

1、财务管理外文文献Project Scheduling in the Financial Management of Supply Chains(excerpts)Author:Durukan Kalyoncu, Guldane Acceptance Date: June 2012In literature, numerous publications on managing supply chains exist most of which has focused on the physical aspects of the supply chains. Although the bottom

2、 line is very important for managers, there are a limited number of publications that combine the financial management of supply chains with the physical management. Those studies address the supply chain financial performance measurement with different approaches and measures; one of which has been

3、 Cash Conversion Cycle (CCC). Cash Conversion Cycle is a metric that measures the time elapsed from the payment to the suppliers till the receipt of money from the customers. Thus it is a two dimensional concept that incorporates time and financial considerations simultaneously. In that respect it e

4、nables companies to integrate the operational scheduling with the financial scheduling.When the components of the CCC are examined separately; the Average Payable and Average Receivable Terms are related to the company financial policy and contract terms between supply chain partners. On the other h

5、and, Inventory Conversion Period depends on the firms inventory policy. Figure 1 assumes that the inventory is in retailers warehouse on the same day with order placement to the manufacturer. Also it assumes that there is no outbound transportation time so on the day that inventory leaves the retail

6、ers warehouse it is received by the customer and Accounts Receivable is issued. According to those assumptions Inventory Conversion Period depends on the optimal ordering quantity. In the sense that, CCC is embracing Account Payable, Account Receivable and Inventory Conversion Period; first two are

7、related to timing of cash inflows and outflows and the third is related to firms operations policy, it is a bridging measurement between operational and financial planning. Also, since CCC is the time passed from cash outflow to cash inflow, it measures how long the firm needs outside financing. Thu

8、s many scholars (Farris and Hutchison (2002), Soenen (1993), Binti Mohamad and Binti Mohd Saad (2010) stated that the shorter CCC the better the company finances are. However, there are some complications regarding the Cash Conversion Cycle metric approach in financial management of supply chains. E

9、ven though supply chain partners put considerable efforts to have control over the stream of cash inflow by managing payment terms, these cash inflows are mostly probabilistic due to unpredictable conditions of the downstream players. On the other hand cash outflows to the upper layers of the chain

10、is deterministic; however this depends on the cash available at the time. Figure 2 depicts the “downstream” and “upstream” supply chain partners. Upstream Partners Downstream Partners Vendor Manufacturer Distributor Retailer Customer. Supply Chain Levels As seen from the Gupta and Duttas study (2011

11、), the early payment of the debts result in the lowest cash outflow at the current period, yet it does not necessarily result in the lowest present value of the cash outflow. Thus managing cash flows in an efficient way is not an easy task taking into account the probabilistic inflows in addition to

12、 the tradeoffs between prompt payment of the debt, which reduces the amount to be paid, and late payment, which increases the interest earned on cash deposits. Those financial considerations become even more complicated for supply chains with long Lead Times. So Lead Time reduction has a huge strate

13、gic importance for successful operation of those chains. Nevertheless, managing Lead Time, which is mostly deterministic, is not an easy task either because it affects the cash flow stream in direct or indirect ways. Indirectly, Lead Time reduction affects the cash flows by improving customer servic

14、e and responsiveness to demand shifts. First of all, Lead Time compression is a costly process including labor cost and additional transportation cost. Second, inventory holding cost can be reduced due to lower requirement for safety stock.Third, reducing Lead Time reduces the Cash Conversion Cycle.

15、 As the Cash Conversion Cycle measures how long the companys cash is tied to accounts payables and inventories till fulfilling an order; shortening the Lead Time decreases cost of borrowing, and also it enables the company to deliver the products or services sooner; thus the receivable collection pe

16、riod starts earlier.Although many scholars worked on Lead Time compression in supply chains such as Beesley(1996) and Towill (1996) they both ignore the investment costs needed to achieve a reduction in Lead Time. Also neither Beesley nor Towill touch the cost of borrowing issue, but rather they emp

17、hasize the indirect financial effects of time reduction, such as fast response to market and enabling a more accurate demand forecast. What is more, most of the supply chain financial modeling articles are not taking into account the time flexibility factor. As known, companies can reduce Lead Times

18、 in exchange for a cost. So while studying the financial aspects of the supply chain this flexibility should be taken into account. Whereas Ben-Daya and Raoufs (1994) study focuses on the Lead Time flexibility issue by studying the costs of Lead Time reduction along with the effects on the inventory

19、 policy such as reorder point and optimal order quantity which affects ordering and inventory holding costs, their study doesnt model a whole supply chain where the transactions with upstream players are taken into account. To sum up, in literature there is lack of a comprehensive approach for the f

20、inancial management of the supply chains. Also todays increasingly dynamic companies cannot be managed with static models. Thus, predictive integrated models that take in to account instable financial markets and also capable of ensuring required liquidity while providing timely and efficient respon

21、se to orders is crucial. So, with the purpose of building a comprehensive approach that embraces time and money considerations simultaneously, our study uses Cash Conversion Cycle as the decision variable with respect to which we assess the Financial Performance. By using project-scheduling methods

22、in timing of the operations and payments, our study aims to find the optimal Cash Conversion Cycle that generates the highest accumulated cash at the end of the one-year period. However, in our model cash inflow is probabilistic thus we dont have control over its effect on the optimal CCC. As a resu

23、lt some of the values that are changed in order to find the optimal CCC are order quantity, reorder point and the Lead Time and Payable term. So our study starts with analyzing the issues affecting financial management of supply chains and then covers the related previous work that the model is buil

24、t upon. In the next issues affecting the financial management in SC are discussed. In section III review of the literature is presented and in Section IV the mathematical model is presented with the objective of maximizing the accumulated net cash at the end of a one-year period. The model considers

25、 timing of the cash inflow and outflows and Lead Time crashing costs simultaneously. Finally illustrative example and sensitivity analysis are presented followed by the conclusion part summarizing findings of the study. Bullwhip effect: It is one of most significant reasons of supply chain inefficie

26、ncy. It is the amplification of demand variance as the demand information passes from the lower levels (customers) of the supply chain to the upper levels (manufacturers level). It may be severely destructive for the financial management of the supply chain as a whole, particularly the upper levels

27、are the ones most affected. Each partner, knowing that the forecasts they retrieve from the lower partners are not one hundred percent accurate, builds safety stock. Thus the orders to the upper levels increase as more and more safety stock is built in the system, which leads the upper tiers to have

28、 an impression that the demand is more than its actual level. So longer Lead Times result in higher safety stock levels which in turn leads bigger amplifications in the upper levels as known as the Bullwhip Effect. Demand forecast: For make to stock inventory systems demand forecast is the most impo

29、rtant aspect of production management. As cycle time increases, forecasts have to be made for farther periods, which in turn increases the forecast errors. And when the accuracy of the forecast decreases, firms are forced to keep more safety inventory and thus incur higher inventory holding cost. On

30、 the flip side of the coin, even if a firm decides to keep low inventory levels, in such a blurry environment there is high probability that it falls short in responding to customer orders which hurts the profits as much as the inventory holding costs. Thus, by shortening the supply chain cycle time

31、 the entire chain benefits from accurate demand forecast.Cost of borrowing/ investing: Cost of borrowing is another key aspect of the financial management of the supply chain. Since more interest is charged with the time elapsed over the issue date of the debt, firms should ensure collection of mone

32、y from the customers as early as possible in order to pay the debts. Apparently, collection periods primary determinant is the cycle time since the customers usually are not willing to pay before they receive the product unless some incentives such as discounts are offered in advance. Inventory hold

33、ing cost: According to Ben-Daya and Raoufs(1994) economic order quantity (EOQ) model, as Lead Time increases, optimal order quantity Q* increases; therefore the average inventory held by the firm over the year, and corresponding holding cost increase. Apart from the physical cost of inventory holding, higher obsolescence cost related to higher levels of in