财务管理外文文献.docx

财务管理外文文献.docx

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财务管理外文文献

ProjectSchedulingintheFinancialManagementofSupplyChains（excerpts）

Author:

DurukanKalyoncu,Guldane

AcceptanceDate:

June2012

Inliterature,numerouspublicationsonmanagingsupplychainsexistmostofwhichhasfocusedonthephysicalaspectsofthesupplychains.Althoughthebottomlineisveryimportantformanagers,therearealimitednumberofpublicationsthatcombinethefinancialmanagementofsupplychainswiththephysicalmanagement.Thosestudiesaddressthesupplychainfinancialperformancemeasurementwithdifferentapproachesandmeasures;oneofwhichhasbeenCashConversionCycle（CCC）.CashConversionCycleisametricthatmeasuresthetimeelapsedfromthepaymenttothesupplierstillthereceiptofmoneyfromthecustomers.Thusitisatwodimensionalconceptthatincorporatestimeandfinancialconsiderationssimultaneously.Inthatrespectitenablescompaniestointegratetheoperationalschedulingwiththefinancialscheduling.

WhenthecomponentsoftheCCCareexaminedseparately;theAveragePayableandAverageReceivableTermsarerelatedtothecompanyfinancialpolicyandcontracttermsbetweensupplychainpartners.Ontheotherhand,InventoryConversionPerioddependsonthefirm’sinventorypolicy.Figure1assumesthattheinventoryisinretailer’swarehouseonthesamedaywithorderplacementtothemanufacturer.Alsoitassumesthatthereisnooutboundtransportationtimesoonthedaythatinventoryleavestheretailer’swarehouseitisreceivedbythecustomerandAccountsReceivableisissued.AccordingtothoseassumptionsInventoryConversionPerioddependsontheoptimalorderingquantity.

Inthesensethat,CCCisembracingAccountPayable,AccountReceivableandInventoryConversionPeriod;firsttwoarerelatedtotimingofcashinflowsandoutflowsandthethirdisrelatedtofirm’soperationspolicy,itisabridgingmeasurementbetweenoperationalandfinancialplanning.

Also,sinceCCCisthetimepassedfromcashoutflowtocashinflow,itmeasureshowlongthefirmneedsoutsidefinancing.Thusmanyscholars（FarrisandHutchison（2002）,Soenen（1993）,BintiMohamadandBintiMohdSaad（2010））statedthattheshorterCCCthebetterthecompanyfinancesare.However,therearesomecomplicationsregardingtheCashConversionCyclemetricapproachinfinancialmanagementofsupplychains.Eventhoughsupplychainpartnersputconsiderableeffortstohavecontroloverthestreamofcashinflowbymanagingpaymentterms,thesecashinflowsaremostlyprobabilisticduetounpredictableconditionsofthedownstreamplayers.Ontheotherhandcashoutflowstotheupperlayersofthechainisdeterministic;howeverthisdependsonthecashavailableatthetime.Figure2depictsthe“downstream”and“upstream”supplychainpartners.

UpstreamPartnersDownstreamPartnersVendorManufacturerDistributorRetailerCustomer.SupplyChainLevelsAsseenfromtheGuptaandDutta’sstudy（2011）,theearlypaymentofthedebtsresultinthelowestcashoutflowatthecurrentperiod,yetitdoesnotnecessarilyresultinthelowestpresentvalueofthecashoutflow.Thusmanagingcashflowsinanefficientwayisnotaneasytasktakingintoaccounttheprobabilisticinflowsinadditiontothetradeoffsbetweenpromptpaymentofthedebt,whichreducestheamounttobepaid,andlatepayment,whichincreasestheinterestearnedoncashdeposits.ThosefinancialconsiderationsbecomeevenmorecomplicatedforsupplychainswithlongLeadTimes.SoLeadTimereductionhasahugestrategicimportanceforsuccessfuloperationofthosechains.Nevertheless,managingLeadTime,whichismostlydeterministic,isnotaneasytaskeitherbecauseitaffectsthecashflowstreamindirectorindirectways.Indirectly,LeadTimereductionaffectsthecashflowsbyimprovingcustomerserviceandresponsivenesstodemandshifts.Firstofall,LeadTimecompressionisacostlyprocessincludinglaborcostandadditionaltransportationcost.Second,inventoryholdingcostcanbereducedduetolowerrequirementforsafetystock.Third,reducingLeadTimereducestheCashConversionCycle.AstheCashConversionCyclemeasureshowlongthecompany’scashistiedtoaccountspayablesandinventoriestillfulfillinganorder;shorteningtheLeadTimedecreasescostofborrowing,andalsoitenablesthecompanytodelivertheproductsorservicessooner;thusthereceivablecollection

periodstartsearlier.AlthoughmanyscholarsworkedonLeadTimecompressioninsupplychainssuchasBeesley（1996）andTowill（1996）theybothignoretheinvestmentcostsneededtoachieveareductioninLeadTime.AlsoneitherBeesleynorTowilltouchthecostofborrowingissue,butrathertheyemphasizetheindirectfinancialeffectsoftimereduction,suchasfastresponsetomarketandenablingamoreaccuratedemandforecast.Whatismore,mostofthesupplychainfinancialmodelingarticlesarenottakingintoaccountthetimeflexibilityfactor.Asknown,companiescanreduceLeadTimesinexchangeforacost.Sowhilestudyingthefinancialaspectsofthesupplychainthisflexibilityshouldbetakenintoaccount.WhereasBen-DayaandRaouf’s（1994）studyfocusesontheLeadTimeflexibilityissuebystudyingthecostsofLeadTimereductionalongwiththeeffectsontheinventorypolicysuchasreorderpointandoptimalorderquantitywhichaffectsorderingandinventoryholdingcosts,theirstudydoesn’tmodelawholesupplychainwherethetransactionswithupstreamplayersaretakenintoaccount.

Tosumup,inliteraturethereislackofacomprehensiveapproachforthefinancialmanagementofthesupplychains.Alsotoday’sincreasinglydynamiccompaniescannotbemanagedwithstaticmodels.Thus,predictiveintegratedmodelsthattakeintoaccountinstablefinancialmarketsandalsocapableofensuringrequiredliquiditywhileprovidingtimelyandefficientresponsetoordersiscrucial.So,withthepurposeofbuildingacomprehensiveapproachthatembracestimeandmoneyconsiderationssimultaneously,ourstudyusesCashConversionCycleasthedecisionvariablewithrespecttowhichweassesstheFinancialPerformance.Byusingproject-schedulingmethodsintimingoftheoperationsandpayments,ourstudyaimstofindtheoptimalCashConversionCyclethatgeneratesthehighestaccumulatedcashattheendoftheone-yearperiod.

However,inourmodelcashinflowisprobabilisticthuswedon’thavecontroloveritseffectontheoptimalCCC.AsaresultsomeofthevaluesthatarechangedinordertofindtheoptimalCCCareorderquantity,reorderpointandtheLeadTimeandPayableterm.Soourstudystartswithanalyzingtheissuesaffectingfinancialmanagementofsupplychainsandthencoverstherelatedpreviousworkthatthemodelisbuiltupon.InthenextissuesaffectingthefinancialmanagementinSCarediscussed.InsectionIIIreviewoftheliteratureispresentedandinSectionIVthemathematicalmodelispresentedwiththeobjectiveofmaximizingtheaccumulatednetcashattheendofaone-yearperiod.ThemodelconsiderstimingofthecashinflowandoutflowsandLeadTimecrashingcostssimultaneously.Finallyillustrativeexampleandsensitivityanalysisarepresentedfollowedbytheconclusionpartsummarizingfindingsofthestudy.

Bullwhipeffect:

Itisoneofmostsignificantreasonsofsupplychaininefficiency.Itistheamplificationofdemandvarianceasthedemandinformationpassesfromthelowerlevels（customers）ofthesupplychaintotheupperlevels（manufacturerslevel）.Itmaybeseverelydestructiveforthefinancialmanagementofthesupplychainasawhole,particularlytheupperlevelsaretheonesmostaffected.Eachpartner,knowingthattheforecaststheyretrievefromthelowerpartnersarenotonehundredpercentaccurate,buildssafetystock.Thustheorderstotheupperlevelsincreaseasmoreandmoresafetystockisbuiltinthesystem,whichleadstheuppertierstohaveanimpressionthatthedemandismorethanitsactuallevel.SolongerLeadTimesresultinhighersafetystocklevelswhichinturnleadsbiggeramplificationsintheupperlevelsasknownastheBullwhipEffect.Demandforecast:

Formaketostockinventorysystemsdemandforecastisthemostimportantaspectofproductionmanagement.Ascycletimeincreases,forecastshavetobemadeforfartherperiods,whichinturnincreasestheforecasterrors.Andwhentheaccuracyoftheforecastdecreases,firmsareforcedtokeepmoresafetyinventoryandthusincurhigherinventoryholdingcost.Ontheflipsideofthecoin,evenifafirmdecidestokeeplowinventorylevels,insuchablurryenvironmentthereishighprobabilitythatitfallsshortinrespondingtocustomerorderswhichhurtstheprofitsasmuchastheinventoryholdingcosts.Thus,byshorteningthesupplychaincycletimetheentirechainbenefitsfromaccuratedemandforecast.

Costofborrowing/investing:

Costofborrowingisanotherkeyaspectofthefinancialmanagementofthesupplychain.Sincemoreinterestischargedwiththetimeelapsedovertheissuedateofthedebt,firmsshouldensurecollectionofmoneyfromthecustomersasearlyaspossibleinordertopaythedebts.Apparently,collectionperiod’sprimarydeterminantisthecycletimesincethecustomersusuallyarenotwillingtopaybeforetheyreceivetheproductunlesssomeincentivessuchasdiscountsareofferedinadvance.

Inventoryholdingcost:

AccordingtoBen-DayaandRaouf’s（1994）economicorderquantity（EOQ）model,asLeadTimeincreases,optimalorderquantityQ*increases;thereforetheaverageinventoryheldbythefirmovertheyear,andcorrespondingholdingcostincrease.Apartfromthephysicalcostofinventoryholding,higherobsolescencecostrelatedtohigherlevelsofin