The financial supply chain provides the cash flow needed to ensure the doors are kept open, the lights are kept on, the employees are being paid and products are being made and shipped.
Traditional Roles Will Have to Change
Carlos Alvarenga, global lead for operations finance and risk for consulting firm Accenture, has proposed a financial supply chain management framework for companies to consider, which begins with the creation of an integrated team that combines both finance and supply chain management expertise. Such a team should first study advanced operations research, real option, risk management, and financial optimization tools and techniques. The goal is a transformation "from a function focused only on real product flows and facilities to one that is concerned with corporate-level risk, financial performance and shareholder risk and returns."
As an example, he cites aerospace manufacturer Boeing Co. (IW 500/16), which employs numerous financial techniques when making product development and strategic sourcing decisions, such as: investment and risk modeling, demand (price and quantity) modeling, spreadsheet modeling and portfolio analysis. While Boeing is celebrated for its ability to design and engineer aircraft, less well known is how the company includes financial design considerations into its decisions as well. For example: Can unit costs be lower if the company spends more on automating production? Are new design features a good investment, or would Boeing actually sell more planes if they kept the price lower? Thinking about design and production from the perspective of risk and probability has helped Boeing make more strategic decisions, Alvarenga asserts.
He admits that for manufacturers to evolve to a point where finance and supply chain converge, "traditional roles will have to change, as will power over supply chain management decisions." As he sees it, the CFO will evolve into a chief supply chain officer as well, which raises a number of implications for those currently in supply chain roles. He suggests that supply chain strategists will "need to rethink their training and expand their view and knowledge of finance and risk management in the coming years."
For more on Supply Chain Finance, see "Quicker Access to Cash...at a Price."
