Financial

Supply Chain
Management

Vikas Saini
 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
 Physical SCM Vs Financial SCM
Movement of
Movement of
Documents
Documents
Data
Data
&
&
Physical Goods
Money

Raw
Retailer /
Goods Manufacturer Customer
Supplier Distributor

• 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: www.apec-ecba.org/english/ppt/CarlWegner.ppt
 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
g
Booking Request

Proof of Delivery
n

Inventory Update
Purchase Order

id
Inventory Update

Status Update

Status Update

Status Update
a
L
f
o
l
i
B
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
Inventory Financing
Buyer Financing
Documentary Post-shipment Finance
CollectioBnusyer’s Credit Supplier’s Credit

Source: www.apec-ecba.org/www/upload/2.ppt
 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: www.baft.org/content_folders/1stEuropeanBank...
 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)

 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)

Characterization of SCF Collaboration

Source: www.baft.org/content_folders/1stEuropeanBank...
Characterization of SCF Collaboration

Source: www.baft.org/content_folders/1stEuropeanBank...
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 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
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: www.apec-ecba.org/www/upload/2.ppt
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: www.apec-ecba.org/www/upload/2.ppt
 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: www.apec-ecba.org/www/upload/2.ppt
 Thank You
Finance

Supply Chain