Inside Supply Management recently ran a surprisingly good article called Strengthen Your Financial Supply Chain that outlined the importance of a tightly integrated physical and financial supply chain. Although there wasn’t much that I haven’t already told you in my Finance posts and in the Supply Chain Finance Primer, it had an interesting case study about Sunfor and how it tackled the problem of unbalanced cash flows that was jeopardizing its manufacturing flows.
According to the case study, the primary reason that Sunfor had unbalanced cash-flows that were jeopardizing its manufacturing flow was slow payments – the age-old bane of suppliers in countries where credit is hard to come by and / or burdened with excessive interest rates. To address its problem, it started working with Xalles, an international business management consulting firm (with offices in the U.S., Canada, Ireland, Brazil, and Ghana as well as personnel on 5 continents) that specialize in the financial supply chain process life-cycle. Xalles helped the organization break into the government of Singapore, which is a credit-worthy client. Orders secured from the government can be presented to their bank, which is much more willing to finance orders from a local government than from an unknown business half-way around the world. The financing allows Sunfor to maintain steady production while waiting for the inevitable slow payments from its global customers.
Of course, this is just one of many ways you can improve your financial supply chain. The question of where to start is a difficult one, and precisely the area where you should consider bringing in outside help to guide you down the road. Xalles financial supply-chain process life-cycle covers demand management, strategic sourcing, contract management, supply management, order management, logistics management, receipt management, payment management, accounting, compliance, and data management. Furthermore, as per the Global Trade wiki-paper, both the import cycle and export cycle typically consist of 14 steps. This makes the question of where to start dizzying for a novice attacking her financial supply chain for the first time.
As the article points out, an experienced consultant will be able to quickly focus on your most significant problems that will yield a significant improvement when addressed. As the article notes it might be as simple as instituting basic process re-engineering with the proper people to implement a “people solution” quickly without having to build or integrate entirely new systems or it could mean a $50,000 automation solution using simple repository tools that allow users to access paper-based information through the web. A consultant will be able to help you break down the overall project into a series of mini-projects, each with its own business case, to help you identify the right time to pull the trigger on each step.
So if you think you’re inefficient on the financial side, and if you haven’t addressed your financial supply chain, you can bet that you are, a good place to start is to call in an expert consultant who will analyze your processes and systems, identify the inefficiencies and how much they are likely costing you, and layout a roadmap for moving forward. It’s better than standing still. Especially when consultants are cheap.