Financial

Supply Chain
Management
Group 5A
Amit S
Archana K
Kamal P
Kushagra P
Mahesh K
Shubham K
Venkatesh N

Financial Supply Chain Management

The Financial Supply Chain refers to the end-to-end trade processes and information that
drive a companys cash, accounts, and working capital

BUYER

SELLER

procurement-toprocurement-topayment
paymentprocess
process

Order-to-cash
Order-to-cashcycle
cycle

Accounts
Accountspayable
payableand
andreceivable
receivable
Cash
management
Cash management
Working
Workingcapital
capital
Transaction
Transactioncosts
costs
Risk
Risk
Administration
Administration

Physical SCM Vs Financial SCM

Movement of
Documents
Data
&
Physical Goods

Raw
Raw
Goods
Goods
Supplier
Supplier

Movement of
Documents
Data
&
Money

Retailer
Retailer/ /
Distributor
Distributor

Manufacturer
Manufacturer

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

Customer
Customer

What and how to pay?

When to pay?
How much to pay?
Who to pay?
Just-in-time-cash
Source: www.apec-

Physical and Financial Supply Chains

across a Transaction
Physical Supply Chain
Transportation process

Containers
moved DC.

Distribution
Center

Final delivery

Proof of Delivery
Inventory Update

Containers are
loaded on ship

Customs Clearance

Vessel at sea

Status Update

Containers are
loaded on ship

Inland
Dray

Port of
DischargeTerminal

Status Update

Steamship
Line

Bill of Lading

Containers
moved to port
of lading.

Port of LadingTerminal

Status Update

Containers
loaded

Inland
Dray

ASN

Inventory Update

Booking Request

Purchase Order

Factory

Flow of Goods, Information and Funds

Physical Supply Chain and the Financial Supply chain are closely integrated

Pre-shipment Finance
PO Financing

Financial Supply Chain

Letters of Credit
Buyer Financing
Documentary
Collections
Buyers Credit

Receivables
Financing
Invoice Factoring

Forfaiting

Inventory Financing
Post-shipment Finance
Suppliers Credit

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

Functional Perspective of Financial

Supply Chain Collaboration
Investors/
government

Source of financial
resources
(external financing)
Use of
financial resources
(dividends & taxes)

Source of financial
resources
(external financing)

Accounting
Investment

Financing

Use
of financial
resources
(investment)

Procurement

Source
of financial
resources
(internal financing)

Production

Use of financial
resources
(pay loans & fees)

Financial
services/
banks

Financial
activities
Operating
activities

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 (

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 (

Characterization of SCF Collaboration

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

Characterization of SCF Collaboration

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

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 shortterm 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
Finance

Supply
SupplyChain
Chain