Supply Chain
Supply Chain Management:
Finance Resources (E)
What was the evolution history of supply chain management? What are the main components of supply chain? How big is the importance of supply chain integration?
Posted: Oct 2011
Financial resources also flow up and down the supply chain, align with product and information flow. The invoices are flowing down the supply chain, while payments are flowing up the supply chain. Invoices and payments flow up and down along the whole supply chain.
The manufacturers are getting paid, but are also paying their suppliers. The suppliers are paying their suppliers, while consumers are paying retailers, etc. The finance flow is endless in circular motion.
Order processing is the main supply chain management process that initiates the flow of payments. The ordering is directly related to customer credit limit, invoicing, and accounts receivable. Customers place orders and pay for products through order processing systems. Considering the fact that this process is multiplied to every single customer, the whole process needs to be automated.
Since we are speaking about tens of thousands documents for mid size company, we come to conclusion that there is marginal space for errors and corrections. Any mistake and related correction is draining resources in term of time, money and manpower. Therefore, the accurate invoicing is important, since it is directly influencing the DIFOTAI result
In order to accommodate the demands of automation, the companies use electronic data interchange (EDI) to allow for electronic funds transfer (EFT) in the payment process. Companies can order and pay for products without faxing or sending invoices through the mail. This technological functionality enables faster ordering, invoicing and payments, with less errors and corrections. Using EDI, manufacturers and their customers can transmit information about specific invoices back and forth. Customers can also receive electronic credit allowance for damaged goods that has been returned to the manufacturer.
Payment flows are affected by terms of trade between players in the supply chain, such as payment terms, credits, return policies, etc. By changing the terms of trade, the physical flows of products can also be changed as well. For effective supply chain management companies must design appropriate financial flow so that these three flows streams (product, information, and financial resources) are aligned.
Continue Reading:
Overview of Supply Chain Components
Historical Development of Supply Chain
Traditional and Modern View to Supply Chain
Supply Chain Activities
Procurement
Order Processing
Demand and Supply Planning
Inventory Management
Warehousing
Transportation
Customer Care
Integrated Supply Chain
Product
Information
Financial Resources
Integration vs. Non-Integration
