Financial performance, supply chain impact

The goal of many companies has been to shorten C2C, but in this paper, the relationship between C2C and financial performances is tested industry by industry (Fawcett et al. 2007). The C2C is a critical performance measure and was also selected as the measure which has the greatest impact on supply chain practice as it showed the direct financial benefits of SCM (Banomyong 2005 Christopher and Gattoma 2005 Farris et al. 2005 Fawcett et al. 2007). 

All of the above performance measures are at one level of the supply chain, be it first, second, third tier supplier of materials, manufacturer, processor, distributor, warehousing, or retailer. Obviously, the immediate upstream provider and the immediate downstream customer will have an impact on the performance of a supply chain component and in turn each member will be judging the performance of its immediate upstream suppliers. However, the purpose of all the measures listed above, be they financial, operational, marketing or by investors is to achieve internal efficiency and ultimately to achieve an acceptable ROI. 

Any tactical decision in the supply chain (five are shown) influences these ratios either positively or negatively. As a result, we can predict the impact of tactical supply chain decisions on financial performance. Equally, we can use the model to predict the impact of top down decisions (for example cut working capital, or increase sales through promotions ) on supply chain positives and negatives. 

In this chapter, our goal is to link key financial measures of firm performance to supply chain performance. We introduce the three logistical drivers—facilities, inventory, and transportation—and the three cross-functional drivers—information, sourcing, and pricing—that determine the performance of any supply chain. We discuss how these drivers are used in the design, planning, and operation of the supply chain. We define several metrics that can be used to gauge the performance of each driver and its impact on financial performance. 

We devote the next six sections to a detailed discussion of each of the three logistical and three cross-functional drivers, their roles in the supply chain, and their impact on financial performance. 

FACILITY-RELATED METRICS Facility-related decisions affect both the financial performance of the firm and the supply chain s responsiveness to customers. On the financial side, faciUties decisions have an impact on the cost of goods sold, assets in PP E (if facilities are owned), and... 

Another important area impacting financial performance is conflict minerals, which has been a topic of discussion for quite some time. These are minerals mined from areas of the world where armed conflict and human rights abuses occur. Recently, this topic has gained special attention. Section 1502 of the Dodd-Frank Act requires certain companies using conflict minerals in their products to disclose the source of these minerals. Even though an estimated 6,000 companies will be directly impacted by this rule, many private companies within the supply chains of those companies will also be affected. The U.S. Securities and Exchange Commission expects the cost of compliance to be substantial for all involved. For primary companies and their suppliers, initial estimates for cost of compliance are between US 3 billion and US 4 billion, with annual costs thereafter of between US 207 million and US 609 million. ... 

Companies and management are evaluated on many outcomes and operations functions can directly impact a company s financial performance. Companies are evaluated on their ability to pay current bills, profitability, management of assets and debts, and the valuation of the company. Operations and supply chain managers have a significant impact on a company s cash flow, profitability, debt burden, utilization of assets, and its ability to remain in business. Operational decisions and actions will be reflected on a company s financial statements and subsequent performance ratios. Table 4.5 provides a summary of the performance ratios that were introduced in this chapter. 

Supply chain and operations departments have the distinct capability of impacting a corporations financial performance from several vantage points. Moreover, they are in a position to carry out the corporation s mission and business strategies, enabling the company to compete in the marketplace. It has also been demonstrated that revenue streams, material cost, use of assets, and resultant cash flows are greatly affected by supply chain and operations activities. This chapter summarizes and connects many of the ideas presented in this book and where supply chain and operations managers can make substantive improvements within their companies. 

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