Financial Financial Supply ChainSupply ChainManagementManagement

Financial Financial Supply ChainSupply ChainManagementManagement

Group 5AGroup 5A

Amit SAmit SArchana KArchana KKamal PKamal PKushagra PKushagra PMahesh KMahesh KShubham KShubham KVenkatesh NVenkatesh N

Group 5AGroup 5A

Amit SAmit SArchana KArchana KKamal PKamal PKushagra PKushagra PMahesh KMahesh KShubham KShubham KVenkatesh NVenkatesh N

Financial Supply Chain ManagementFinancial 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

BUYERBUYERBUYERBUYER SELLERSELLERSELLERSELLER

procurement-to-payment process

procurement-to-payment process Order-to-cash cycleOrder-to-cash cycle

Accounts payable and receivableCash management

Working capitalTransaction costs

RiskAdministration

Accounts payable and receivableCash management

Working capitalTransaction costs

RiskAdministration

Physical SCM Vs Financial SCMPhysical SCM Vs Financial SCM

• What to buy?• When to buy?• How much to buy?• From whom to buy?• Just-in-time-manufacturing

• What and how to pay?• When to pay?• How much to pay?• Who to pay?• Just-in-time-cash

Movement ofDocumentsData&Physical Goods

ManufacturerManufacturerManufacturerManufacturer CustomerCustomerCustomerCustomerRetailer / Retailer / DistributorDistributor

Retailer / Retailer / DistributorDistributor

Raw Raw GoodsGoods

SupplierSupplier

Raw Raw GoodsGoods

SupplierSupplier

Movement of DocumentsData&Money

Source: www.apec-ecba.org/english/ppt/CarlWegner.ppt

Physical and Financial Supply Chains Physical and Financial Supply Chains across a Transactionacross a Transaction

Bill

of

Ladi

ng

Financial Supply Chain

Containers loaded

Factory

Containers are loaded on ship

Port of Lading-Terminal

Final delivery

Distribution Center

Pur

chas

e O

rder

SteamshipLine

Vessel at seaContainers

moved to port of lading.

InlandDray

Containers moved DC.

InlandDray

Containers are loaded on ship

Port of Discharge-Terminal

Flow of Goods, Information and Funds

Boo

king

Req

uest

Pro

of o

f D

eliv

ery

Transportation processA

SN

Inve

ntor

y U

pdat

e

Inve

ntor

y U

pdat

e

Sta

tus

Upd

ate

Sta

tus

Upd

ate

Cus

tom

s C

lear

ance

Sta

tus

Upd

ate

Physical Supply Chain and the Financial Supply chain are closely integrated

PO Financing

Receivables Financing

Invoice Factoring

ForfaitingLetters of Credit

Documentary Collections

Pre-shipment Finance

Post-shipment Finance

Inventory FinancingBuyer Financing

Buyer’s Credit Supplier’s Credit

Physical Supply Chain

Source: www.apec-ecba.org/www/upload/2.ppt

Functional Perspective of Financial Functional Perspective of Financial Supply Chain CollaborationSupply Chain Collaboration

Financial activities

AccountingAccounting

InvestmentInvestment FinancingFinancing

Operating activities

Production Sales

Logistics provider

Investors/government

Financial services/

banks

Useof financial resources

(investment)

Sourceof financialresources

(internal financing)

Source of financial resources

(external financing)

Source of financial resources

(external financing)

(Outsourcing)

Use offinancial resources (dividends & taxes)

Use of financial resources

(pay loans & fees)

ProcurementProcurement

Source: www.baft.org/content_folders/1stEuropeanBank...

Financial – SCM ConnectionFinancial – 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)

Financial and Supply Chain Connection–Financial and Supply Chain Connection– Top Down Approach 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)

Characterization of SCF CollaborationCharacterization of SCF Collaboration

Source: www.baft.org/content_folders/1stEuropeanBank...

Characterization of SCF CollaborationCharacterization of SCF Collaboration

Source: www.baft.org/content_folders/1stEuropeanBank...

Why Buyer Should Focus on SCF?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: www.apec-ecba.org/www/upload/2.ppt

Buyer Challenges to Better SCFBuyer 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: www.apec-ecba.org/www/upload/2.ppt

• 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

Why Supplier Should Focus on SCF?Why Supplier Should Focus on SCF?

Source: www.apec-ecba.org/www/upload/2.ppt

Supplier Challenges to Better SCFSupplier 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: www.apec-ecba.org/www/upload/2.ppt

Key Market TrendsKey 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: www.apec-ecba.org/www/upload/2.ppt

Thank YouThank You

FinanceFinanceFinanceFinance

Supply ChainSupply ChainSupply ChainSupply Chain