Financial flows are often treated in a fragmented and disconnected way from the physical product flow. Managers take decisions from an operational point of view concerning inventory, service level or capacity needs. The implementation of such decisions influences financial performance in terms of profit margin, working capital requirements and return on investment. However, the interdependency of operational and financial objectives is rarely well understood. Such practice has serious implications on the profitability of a company and its responsiveness to market needs. Therefore, companies increasingly acknowledge the importance of financial supply chain management as an effective approach to optimize working capital levels and to direct cash flows. Efficient working capital allocation and visibility of accounts payables and receivables can achieve significant cost savings, enhance cash flow predictability and boost company performance. In this dissertation, we weave together financial and operational decisions. We analyze the impact of working capital targets on the optimal ordering policy and the relationship between product flows and cash flows. We also investigate the impact of trade-credit on the operational and financial performance of a supply chain. In the first part of our dissertation, we develop and analyze a model that interrelates operational and financial aspects. We analyze how the optimal solution depends on the financial characteristics of the supply chain. We elaborate on the interrelation between operational and financial performance measurements, such as inventory level, service level, return on investment, cash flows and working capital requirements. Our results demonstrate the significance of payment delays on profit margin. We motivate a joint consideration of financial and operational objectives because a higher working capital employed in the system decreases the operational cost but increases the financial cost. In the second part of this dissertation, we extend our modeling framework to accommodate multi-product settings. We focus on the interrelation of working capital and stocking decisions for functional, innovative and heterogeneous product portfolios. We analyze the effect of demand correlation, lead time, payment delays, portfolio size and service level constraints for symmetric and asymmetric product portfolios of various sizes. Our results attest the importance of upstream and downstream payment delays on the profitability of the supply chain. Our analysis demonstrates significant risk-pooling benefits for functional and innovative portfolios under specific demand correlation scenarios. In the third part of this dissertation, we extend our modeling framework and investigate the impact of working capital allocation in a multi-echelon supply chain. We consider a joint working capital allocation, where all the members of the supply chain share a working capital pool and face working capital restrictions jointly. We compare our findings with a dedicated working capital allocation, where the members of the supply chain each have a separate working capital and face individual working capital restrictions. Our research demonstrates significant cost savings when the members of the supply chain share a joint pool of working capital. We investigate the impact of interest rate, payment delays and lead time on the profitability of the supply chain. We show that extending the payment delays to your supplier increases the cost in the supply chain. We finalize this dissertation with a conclusion and a discussion of potential avenues for future research.
EPFL2009
