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Supply chain financing: using cash‐to‐cash variables to strengthen the supply chain

Wesley S. Randall (Department of Aviation and Supply Chain Management, Auburn University, Auburn, Alabama, USA)
M. Theodore Farris II (Department of Marketing and Logistics, University of North Texas, Denton, Texas, USA)

International Journal of Physical Distribution & Logistics Management

ISSN: 0960-0035

Article publication date: 4 September 2009

11225

Abstract

Purpose

The purpose of this paper is to show how firm financial management techniques may be used to improve over all supply chain profitability and performance.

Design/methodology/approach

This paper uses a case‐based approach to demonstrate how supply chain financial management techniques, such as cash‐to‐cash and shared weighted average cost of capital (WACC), can reduce the financial costs experience by a supply chain.

Findings

This paper provides a methodology to identify and quantify the potential opportunities to increase profitability throughout the supply. Scenarios are offered that illuminate potential supply chain improvements gained by collaborative management of cash‐to‐cash cycles and sharing WACC with trading partners.

Research limitations/implications

These financial techniques are readily available for use in collaborative supply chain structures.

Practical implications

Coordinating financial management across the supply chain is a potential tool to align and improve the financial performance of collaborating firms. This method extends to the supply chain those historically firm‐centric financial management concepts such as return on capital and cash flow. The impact is reduced overall cost generated by leveraging the financial strength of the entire supply chain. During economic downturns and times of tight credit proactively managing financials across the supply chain may be the only way some suppliers remain afloat.

Originality/value

Two firm level financial management approaches are extended and they are adopted for use across the supply chain: cash‐to‐cash management; and leveraging a shared supply chain financing rate. This paper builds on the increasing body of research and practice that suggests trading firm‐optimized for supply chain optimized performance reduces overall cost and improves customer value.

Keywords

Citation

Randall, W.S. and Theodore Farris, M. (2009), "Supply chain financing: using cash‐to‐cash variables to strengthen the supply chain", International Journal of Physical Distribution & Logistics Management, Vol. 39 No. 8, pp. 669-689. https://doi.org/10.1108/09600030910996314

Publisher

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Emerald Group Publishing Limited

Copyright © 2009, Emerald Group Publishing Limited

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