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

ProjectSchedulingintheFinancialManagementofSupply

Chains（excerpts）

Author:

DurukanKalyoncu,Guldane

AcceptanceDate:

June2012

Inliterature,numerouspublicationsonmanagingsupplychainsexistmostofwhichhasfocusedonthephysicalaspectsofthesupplychains.Althoughthebottomlineisveryimportant

formanagers,therearealimitednumberofpublicationsthatcombinethefinancialmanagementofsupplychainswiththephysicalmanagement.Thosestudiesaddressthesupplychainfinancialperformancemeasurementwithdifferentapproachesandmeasures;oneofwhichhasbeenCashConversionCycle（CCC）.CashConversionCycleisametricthatmeasuresthetimeelapsedfrom

thepaymenttothesupplierstillthereceiptofmoneyfromthecustomers.Thusitisatwo

dimensionalconceptthatincorporatestimeandfinancialconsiderationssimultaneously.Inthat

respectitenablescompaniestointegratetheoperationalschedulingwiththefinancialscheduling.

WhenthecomponentsoftheCCCareexaminedseparately;theAveragePayableandAverage

ReceivableTermsarerelatedtothecompanyfinancialpolicyandcontracttermsbetweensupply

chainpartners.Ontheotherhand,InventoryConversionPerioddependsonthefirm’sinven

policy.Figure1assumesthattheinventoryisinretailer’swarehouseonthesamedaywithorder

placementtothemanufacturer.Alsoitassumesthatthereisnooutboundtransportationtimesoon

thedaythatinventoryleavestheretailer’swarehousebytheitiscustomreceiverdandAccounts

Receivableisissued.AccordingtothoseassumptionsInventoryConversionPerioddependsonthe

optimalorderingquantity.

Inthesensethat,CCCisembracingAccountPayable,AccountReceivableandInventory

ConversionPeriod;firsttwoarerelatedtotimingofcashinflowsandoutflowsandthethirdis

relatedtofirm’soperationspolicy,itisabridgingmeasurementbetweenoperationalandfinancial

planning.

Also,sinceCCCisthetimepassedfromcashoutflowtocashinflow,itmeasureshowlongthe

firmneedsoutsidefinancing.Thusmanyscholars（FarrisandHutchison（2002）,Soenen（1993）,BintiMohamadandBintiMohdSaad（2010））statedthattheshorterCCCthebetterthecompanyfinancesare.However,therearesomecomplicationsregardingtheCashConversionCyclemetricapproachinfinancialmanagementofsupplychains.Eventhoughsupplychainpartnersputconsiderableeffortstohavecontroloverthestreamofcashinflowbymanagingpaymentterms,

thesecashinflowsaremostlyprobabilisticduetounpredictableconditionsofthedownstreamplayers.Ontheotherhandcashoutflowstotheupperlayersofthechainisdeterministic;however

thisdependsonthecashavailableatthetime.Figure2depictsthe“downstream”and“upstream”supplychainpartners.

UpstreamPartnersDownstreamPartnersVendorManufacturerDistributorRetailerCustomer.

SupplyChainLevelsAsseenfromtheGuptaandDutta’sstudy（2011）,theearlypaymentofthe

debtsresultinthelowestcashoutflowatthecurrentperiod,yetitdoesnotnecessarilyresultinthelowestpresentvalueofthecashoutflow.Thusmanagingcashflowsinanefficientwayisnotaneasytasktakingintoaccounttheprobabilisticinflowsinadditiontothetradeoffsbetweenpromptpaymentofthedebt,whichreducestheamounttobepaid,andlatepayment,whichincreasesthe

interestearnedoncashdeposits.ThosefinancialconsiderationsbecomeevenmorecomplicatedforsupplychainswithlongLeadTimes.SoLeadTimereductionhasahugestrategicimportanceforsuccessfuloperationofthosechains.Nevertheless,managingLeadTime,whichismostlydeterministic,isnotaneasytaskeitherbecauseitaffectsthecashflowstreamindirectorindirectways.Indirectly,LeadTimereductionaffectsthecashflowsbyimprovingcustomerserviceandresponsivenesstodemandshifts.Firstofall,LeadTimecompressionisacostlyprocessincludinglaborcostandadditionaltransportationcost.Second,inventoryholdingcostcanbereducedduetolowerrequirementforsafetystock.Third,reducingLeadTimereducestheCashConversionCycle.

AstheCashConversionCyclemeasureshowlongthecompany

’scashistiedtoaccountspayables

andinventoriestillfulfillinganorder;shorteningtheLeadTimedecreasescostofborrowing,and

alsoitenablesthecompanyto

delivertheproducts

or

servicessooner;thusthereceivable

collection

periodstartsearlier.Although

manyscholarsworked

onLeadTime

compressioninsupply

chainssuchasBeesley（1996）andTowill（1996）theybothignoretheinvestmentcostsneededto

achieveareductioninLeadTime.AlsoneitherBeesleynorTowilltouchthecostofborrowing

issue,butrathertheyemphasizetheindirectfinancial

effectsoftime

reduction,suchasfast

responsetomarketandenabling

amoreaccuratedemandforecast.Whatismore,mostofthe

supplychainfinancialmodelingarticlesarenottakingintoaccountthetimeflexibilityfactor.Asknown,companiescanreduceLeadTimesinexchangeforacost.Sowhilestudyingthefinancialaspectsofthesupplychainthisflexibilityshouldbetakenintoaccount.WhereasBen-Dayaand

Raouf’（1994）s

studyfocusesontheLeadTime

flexibility

issuebystudyingthecostsofLead

Timereductionalongwiththeeffectsontheinventorypolicysuchasreorderpointandoptimal

orderquantity

whichaffectsorderingandinventoryholdingcosts,theirstudydoesn’modelta

wholesupplychainwherethetransactionswithupstreamplayersaretakenintoaccount.

Tosumup,inliterature

thereislack

of

acomprehensive

approachforthefinancial

managementofthesupplychains.Alsotoday’increasinglydynamiccompanies

cannotbe

managedwithstaticmodels.Thus,predictive

integratedmodelsthattakeintoaccountinstable

financialmarketsandalsocapableofensuring

required

liquidity

whileproviding

timelyand

efficientresponsetoordersiscrucial.So,withthepurposeofbuildingacomprehensiveapproach

thatembracestimeandmoneyconsiderations

simultaneously,our

studyusesCashConversion

Cycleasthedecisionvariable

withrespecttowhichweassesstheFinancialPerformance.By

usingproject-schedulingmethodsintimingoftheoperationsandpayments,ourstudyaimstofind

theoptimalCashConversionCyclethatgeneratesthehighestaccumulatedcashattheendofthe

one-yearperiod.

However,inourmodelcashinflowisprobabilisticthuswedon

’thavecontroloveritseffect

ontheoptimalCCC.Asaresultsomeofthevaluesthatarechangedinordertofindtheoptimal

CCCareorderquantity,reorderpointandtheLeadTimeandPayableterm.Soourstudystarts

withanalyzingtheissuesaffectingfinancialmanagementofsupplychainsandthencoverstherelatedpreviousworkthatthemodelisbuiltupon.InthenextissuesaffectingthefinancialmanagementinSCarediscussed.InsectionIIIreviewoftheliteratureispresentedandinSectionIVthemathematicalmodelispresentedwiththeobjectiveofmaximizingtheaccumulatednetcashattheendofaone-yearperiod.ThemodelconsiderstimingofthecashinflowandoutflowsandLeadTimecrashingcostssimultaneously.Finallyillustrativeexampleandsensitivityanalysisarepresentedfollowedbytheconclusionpartsummarizingfindingsofthestudy.

Bullwhipeffect:

Itisoneofmostsignificantreasonsofsupplychaininefficiency.Itistheamplificationofdemandvarianceasthedemandinformationpassesfromthelowerlevels

（customers）ofthesupplychaintotheupperlevels（manufacturerslevel）.Itmaybeseverelydestructiveforthefinancialmanagementofthesupplychainasawhole,particularlytheupperlevelsaretheonesmostaffected.Eachpartner,knowingthattheforecaststheyretrievefromthelowerpartnersarenotonehundredpercentaccurate,buildssafetystock.Thustheorderstothe

upperlevelsincreaseasmoreandmoresafetystockisbuiltinthesystem,whichleadstheuppertierstohaveanimpressionthatthedemandismorethanitsactuallevel.SolongerLeadTimesresultinhighersafetystocklevelswhichinturnleadsbiggeramplificationsintheupperlevelsas

knownastheBullwhipEffect.Demandforecast:

Formaketostockinventorysystemsdemand

forecastisthemostimportant

aspectofproduction

management.Ascycletimeincreases,

forecastshavetobemadeforfartherperiods,which

in

turnincreasestheforecasterrors.And

whentheaccuracyoftheforecastdecreases,firmsareforcedtokeepmoresafetyinventoryand

thusincurhigherinventory

holdingcost.Ontheflipsideofthecoin,evenifafirmdecidesto

keeplowinventorylevels,insuchablurryenvironmentthereishighprobabilitythatitfallsshort

inrespondingtocustomerorderswhichhurtstheprofitsasmuchastheinventoryholdingcosts.

Thus,byshorteningthesupplychaincycletimetheentirechainbenefitsfromaccuratedemand

forecast.

Costofborrowing/

investing:

Costof

borrowing

isanotherkeyaspectofthefinancial

managementofthesupply

chain.Sincemore

interestischargedwiththetimeelapsedoverthe

issuedateofthedebt,firmsshouldensurecollection

ofmoney

fromthecustomersasearlyas

possibleinordertopaythedebts.Apparently,collectionperiod

’sprimarydeterminantisthecy

timesincethecustomersusually

arenotwillingtopaybefore

theyreceivetheproductunless

someincentivessuchasdiscountsareofferedinadvance.

Inventoryholdingcost:

AccordingtoBen-Dayaand

Raouf’s（1994）economicorderquantity

（EOQ）model,asLeadTimeincreases,optimalorderquantityQ*increases;thereforetheaverage

inventoryheldbythefirmo