Guide to Supply Chain Management7物流供应链管理指南7文档格式.docx

1、 l Clarify why supply chain companies are in business l Recognise the impact of supply chain management on the key financial statements l Demonstrate how supply chain management can add value and improve corporate financial performance 9.1 Introduction to Supply Chain Finance 9.1.1 The Business Proc

2、ess Supply chain companies are usually in business to generate cash and give a return to their investors. Also making a profit is important, we can calculate profit by taking our costs for the year and deduct it from the sales for the year. However, whilst companies are still able to continue operat

3、ing when making no profit or having losses for several years, they immediately stop operating when they run out of cash. The authors recommend an excellent text on this subject written by Tennent （2008）, which guides people though the main financial principles, illustrates their application and fina

4、lly provides a toolkit for managing financial responsibility. In order to understand the different financial parameters of a company, the business process can be illustrated （see Fig. 9.1）. C. Scott et al., Guide to Supply Chain Management, DOI 10.1007/978-3-642-17676-0_9, # Springer-Verlag Berlin H

5、eidelberg 2011 141Lets consider an example and assume you would like to start a new company that manufactures drinks, similar to Schweppes or the Coca-Cola Company. You would need some initial capital investment in order to buy assets. Assets are, for example, the factory, raw materials or perhaps t

6、rucks to deliver the finished products. The shareholders and banks on the left, which can be considered as the two sources of capital investment, provide their investment in the form of cash. This is represented by the arrow from shareholders and banks to assets in the centre of the diagram. Once th

7、e assets have been purchased, your company can start selling the drinks product. In order to do so, employees and suppliers must be paid for their work, products and services. The arrow from assets to sales and service represents cash flow out of the business as the employees and suppliers are paid.

8、 The drinks products are then sold to customers, who pay the business. This is depicted by the top right arrow as cash received from customers. If the business sells the drinks for more than the costs involved with manufacture and distribution, a profit is made. This profit is then subject to tax pa

9、id to the government. Finally, from the cash remaining, returns are paid back to the shareholders and banks through interest and dividends as indicated by the arrow on the bottom left. Any monies left over can be retained and reinvested in the business to generate, for example, growth. Now let us co

10、nsider three areas critical to supply chain finance: gearing, returns and hurdle rates. Assets Sales &service Your company Shareholders & banks Capital investment Returns Employees suppliers Customers Government Fig. 9.1 The business process 142 9 Guide to Finance in Supply Chain Management9.1.2 Gea

11、ring The term gearing in business finance identifies how much capital investment in the company is funded by internal or external funds. It is the measure of financial leverage, demonstrating the degree to which a firms activities are funded by owners funds, e.g. shareholders, versus creditors funds

12、, e.g. banks. Capital that is lent by banks is referred to as debt and capital that is invested by the shareholders is referred to as equity. Gearing is a measure and is expressed as:Gearing . Debt as a percentage of total funds （debt + equity）. In many businesses, 3050% of debt is seen as an ideal

13、range of gearing. Managers often ask why businesses are not solely financed by bank debt alone. To answer this question, we need to think about risk. Banks feel reluctant to take 100% of the risk alone and therefore prefer to engage in capital investments where a substantial part is given by shareho

14、lders. 9.1.3 Returns Lets return to our drinks company example. In order to start a drinks company, the banks will inject some investment （say 50%）, and the remaining capital will have to be obtained from investors （shareholders）. Both these parties will require a return from the drinks business. Fo

15、r example, the banks would expect a 5% return in interest and shareholders a 10% return this seems less favourable for the banks. If the drinks company goes bankrupt, the banks own the assets and the shareholders lose everything. By taking more risk the shareholders can receive higher dividends （ann

16、ual payments） and capital growth of the shares they have in the business. 9.1.4 Hurdle Rates As you already know, the return rates have two main components: the cost of debt capital and cost of equity capital. This is referred to as the Cost Of Capital （COC）. Most companies are financed by a combina

17、tion of debt and equity so they need to find a balanced combination of these two. For example, 50% of the company might be financed by debt and 50% by equity. If debt requires a 5% and equity a 15% return then the Weighted Average Cost of Capital （WACC） is 10%. This 10% WACC is known as the “hurdle

18、rate”. The hurdle rate can be described as the required return for a project. A company planning to invest in a new factory, for example, needs to make sure that the return of the investment is greater than the WACC before the investment starts paying off financially. Supply chain projects need to s

19、atisfy at least the returns to the lenders, or there is no benefit to the business and no financial reason why the project should take place. 9.1 Introduction to Supply Chain Finance 143Managers who work in third party logistics companies have the even harder task of jumping two hurdles. Not only do

20、 their solutions need to yield greater returns than their customers hurdle rate, they also need to satisfy their own company hurdle rates before they can go ahead and implement any solution. 9.2 How Companies Cascade Financial Information Companies cascade financial information using three financial

21、 statements: profit and loss account, balance sheet and cash flow statement （Stickney et al. 2009）. The profit and loss account is a detailed summary of the sales revenue for one financial year and the associated costs. The balance sheet summarises how the company has been financed. The cash flow st

22、atement shows the cash in and the cash out for the business, in a given year. Remember from the business process covered earlier that the four arrows represent cash. 9.2.1 Profit and Loss The Profit and Loss （P&L） account is sometimes referred to as the income statement, and it essentially captures

23、how much money goes into and out of the company. It usually consists of four parts （see Fig. 9.2）. Part 1 Revenue X Cost of sales Gross profit （Y） Z Part 2 Operating expenses Operating profit Part 3 Interest （Y） Tax Profit after tax Part 4 Dividend Retained profit Fig. 9.2 Profit and loss account 14

24、4 9 Guide to Finance in Supply Chain ManagementThe first part is a trading account, showing the total sales revenue less the costs of sales and any changes in the value of stock from the last accounting period. This gives the gross profit （or loss）. The second part shows any other income （apart from

25、 trading） and lists administrative and other costs to arrive at an operating profit （or loss）. From this operating profit the appropriate corporation tax is deducted to give the third part, which is the net profit after tax. In the fourth part, dividends （returns to shareholders） are subtracted from

26、 profit after tax; this results in retained profit. Supply chain activities can impact the P&L very significantly by influencing both revenue and cost. It is useful at this point to consider four criteria against which we can illustrate this influence:l Quality l Service l Cost l Time Should manufac

27、turing be substandard or the distribution processes not deliver the required quality of a product, sales will decrease. If we forecast inefficiently, it might result in a short delivery to a customer, so that the service level is affected. Cost can be considered from a competitive perspective rather

28、 than the absolute number. If two products are very similar, but one is more expensive than the other to produce because its supply chain is less efficient, sales revenue is likely to be less. In some of the companies in which the authors have worked, supply chain costs made up between 25 and 70% of total costs. Examples of supply chain costs are:l Raw material purchases l Salaries l Factory conversion costs l Depreciation on supply chain assets l Facility energy costs l Insurance and utilities for facilities l Fuel for vessels and vehicles l Inventory storage and interest