Supply-chain-finance-optimizing-financial-flows-in

Supplychainfinance:optimizingfinancialflowsinsupplychainsHans-ChristianPfohl1andMoritzGomm2(1)ChairofManagementandLogistics,TechnicalUniversityofDarmstadt,Hochschulstraße1,64289Darmstadt,Germany(2)MomaxGmbH,Klappacherstr.30,64285Darmstadt,GermanyReceived:10March2009Accepted:4November2009Publishedonline:19November2009AbstractIssuesrelatedtoflowsofgoodsandinformationarefrequentlydiscussedinthelogisticsandSupplyChainManagementliterature.But,onlyfewcontributionsareexploringthefinancialflowsassociatedwithsupplychains.Thisarticlereviewsthestate-of-the-artofresearchregardingfinancialflowsinsupplychains.Indoingso,itbecomesapparentthatanexplicitexaminationandoptimisationofthecostofcapitalhasbeenmissingsofar.Inordertoclosethisgap,aconceptualframeworkandamathematicalmodelof“SupplyChainFinance”isproposed.1Supplychainfinance—researchgapSupplychainmanagement(SCM)isappliedintoday’sbusinessworldtooptimisetheflowsofgoods,information,andthefinancialflowswithinandbetweencompaniesbyfunctionalandcross-companyintegration.1Inthepast,academicpapersregardingSCMmainlydealtwiththedesignandoptimisationoftheflowsofgoodsandinformation.2Thefinancialflowsbetweencompaniesofthesupplychain,however,wereoftenneglectedandhaveonlyrecentlyfoundgreaterattentionintheacademicSCMliterature.3ThispaperanalysestheroleoffinancialflowsinsupplychainsandtheimpactSCMcanhaveonoptimisingsuchflowsintermsofcapitalcost.4AframeworkforthefinancialaspectsofSCMisdeveloped.Furthermore,amathematicalmodelisproposedtoexplainfinancingactivitiesacrosssupplychains,whicharereferredtoas“supplychainfinancing”(SCF).Thebasicideaofthemodelisthatsupplychaininformationcanbeusedtodecreaseinvestmentrisksandthuscapitalcostsoffinancingprojectswithinsupplychains.First,inthispaper,supplychainflowsareanalysed,andtheroleoffinancialaspectsarediscussedonthebasisofapreliminaryreviewofrelatedliterature.Itisshownthatthecostofcapitalinsupplychainshasbeenmostlyneglectedsofar.Thefollowingpartofthediscussion(Sect.3)proposesasupplychainfinanceframework.Itcoverstheobjects,actors,andleversofsupplychainfinancing.Finally,inpart4,amathematicalmodelisdevelopedtobetterunderstandtowhatextentfinancialSCMcancontributeindecreasingthecapitalcosts.Thepapercloseswithadiscussionoftheresults.2LiteraturereviewonfinancialflowsinSCMSupplychainmanagementisaninterdisciplinarymanagementconcept5whichisbasedontheideaofholisticoptimisationofthevariousflowsconstitutingasupplychain.Therearenumeroussuggestionsaboutthekindsandlevelsofflowstobeconsideredintheliterature.Pfohl6distinguishesbetweenflowsofinformation,rights,goodsandfinancialflows.Croometal.7differentiatebetweengoods,financialresources,humanresources,information,knowledge,andtechnologiesas“elementsofexchange”.Cooperetal.8includetheflowsofmaterial,goods,andinformationinonedirection,andreverseflowsofinformationandfinancialresources.Mentzeretal.9considerproducts,services,information,financialresources,informationaboutdemand,andforecastsas“supplychainflows”.WithrespecttotherangeofactivitiescoveredinSCM,thelogisticschannelaswellasthemarketingchannelareusuallyconsidered,i.e.thechannelofinteractionofacompanywithitssourcesofsupplyandsalesmarkets.10Forthepurposesofthisdiscussion,therelevantfabricofflowsissummedupunderthenotionsoftheflowofgoods,theflowofinformation,andthefinancialflow,asshowninFig.1.Fig.1FlowswithinsupplychainmanagementReviewingtheacademiccontributionsonSCMregardingtheoptimisationoffinancialflows,againanumberofdifferentapproachesarefound.11Pfohletal.12denominatetheflowoffinancialresourcesasthe“financialsupplychain”andlocatethelatterattheinterfacebetweenthefieldsoflogisticsandfinance.TheyexaminethemanagementofthenetcurrentassetsasanimportantissuewithinthescopeofSCM.13Beyondtheoptimisationoftheflowofgoodswithafocusonthephysicalreductioninstocks,theyanalysetheinstrumentsofcashmanagement.Asprimaryleversformanagement,theyconsideroptimaltimingofactivities,thecontrolofreceivables,liabilities,andadvancepayments.Moreover,theoptimisationandsupportoftheinventoryandcashmanagementsaredescribedwithinthescopeofprocessmanagement.StemmlerandSeuring14wereamongstthefirstauthorstousetheterm“supplychainfinance”.Theyspeakofthecontrolandoptimisationoffinancialflowsinducedbylogistics.Logisticallyinducedfinancialprocessescompriseinventorymanagement,thehandlingofthelogisticallyinducedfinancialflowsaswellasthesupportingprocesseswithanimmediatereferencetologisticsas,forexample,theinsurancemanagementforstocks.Anotherapproachtotheoptimisationoffinancialflowswithinsupplychainsis“logisticsfinancing”asdefinedbyStenzel15:the“[…]activemarketingoffinancialservicesinadditiontologisticsservicesbylogisticsserviceproviders.”Thisopensupanotherfieldofcompetenceforlogisticsserviceproviderswithinthescopeoffinancinglogisticsstructures.16Inthiscontext,Steinmüller17examinespossibilitiestofinancelogisticsrealestateandFeinen18particularlydealswiththeleasingoflogisticsrealestates.Theterm“FinancialChainManagement(FCM)”,whichisalsousedinthecontextoffinancialflowresearch,19hastobeseenincontrasttothetermsupplycha