Big Data: The Latest Rage in Supply Chain Management

Early uses of big data were concentrated in two areas: customer segmentation/marketing effectiveness, and financial services, particularly in trading. Recently, supply chain has become the “next big thing.”

Why? A company’s supply chain is rich with data, and it’s also a large cost component. Combined, those facts mean that advanced analytics can become a strategic weapon for optimizing the supply chain.

However, many companies can’t see the forest for the trees. They are optimizing, but not strategically. When applying data to supply chain, it’s critical to step back and look at what truly drives business value.

“They’re Digging in the Wrong Place”

As every fan of “Raiders of the Lost Ark” knows, Indiana Jones found the Ark of the Covenant first. The Germans had far greater manpower and resources and they were more efficient, but they were competently digging a hole in the wrong place. The same goes for using big data in supply chain optimization. You could have the most efficient process in the world, but if you’re making the wrong amount of the wrong product, it will hurt your business.

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King Trade Capital Provides Supply Chain Finance Solution to Startup

King Trade Capital announced it has established a $1 million supply chain finance solution for a Texas based startup. KTC was contacted by a nationwide factor to help accelerate the startups sales growth in the apparel industry. The owners of the startup have extensive relationships with small to mid-size retailers and years of experience sourcing goods from overseas factories. Through their relationships in the apparel industry they were able to secure annual production programs to manufacture branded goods on behalf of several men’s and women’s brands.

Due to the fact the client was a newly established entity with no financial or operating history, they were unable to obtain funding through traditional financing sources. The client was in need of a financial partner capable of providing the capital and structure necessary to have fabric sourced and garments manufactured overseas.

Initially the client’s factories wanted cash deposits in order to purchase fabric that would then be cut and sewn into finished garments. Payment for the cut and sew operations would then be due upon shipment. The owners, knowledgeable of the risks associated with sending cash deposits overseas, were seeking a safer solution to finance their inventory purchases.

King Trade Capital evaluated the experience of the owner’s and their customer and factory relationships, ultimately gaining comfort in their ability to perform. After negotiating with the factories, King Trade Capital and the client were able to structure individualized solutions for each factory, utilizing letters of credit that allow them to purchase fabric, complete the cut and sew manufacturing process and get paid according to their terms with the Customers.

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Monitor Financial Distress in Your Supply Chain

While American manufacturing has experienced a resurgence in recent years, some manufacturers continue to face challenges. Witness for example the recent chapter 11 filings of Colt, Boomerang Tube, and Everyware Global. Sometimes, manufacturers struggle because a supply chain partner—a major supplier or customer—is struggling. In order to manage supply chain contracts, manufacturers need to watch for early signs of financial distress in their customer or supplier base. Then, they may quickly react to red flags and garner an advantageous position.

Trouble in the Supply Chain?

Manufacturers should watch for supplier requests to increase prices or accelerate payment terms. Similarly, cash-strapped customers may ask for financing support. In addition, a manufacturer’s deteriorating market position, failure to effectuate cost reductions, and changes in key management positions all may indicate financial distress. Manufacturers should employ tactics in order to secure continued supply when faced with a financially troubled supplier. By managing contracts after identifying a troubled supplier or customer, manufacturers can often mitigate risks, or even improve their positions.

Manufacturers should prioritize, understand, and address troubled supplier situations with advance awareness. That’s why companies should continually analyze their contracts to maximize leverage, and understand available legal options. To alleviate the pressures of financial distress, manufacturers should exercise common law and statutory remedies in order to purposefully tweak standard terms and conditions of new contracts (or negotiate changes to existing contracts). The terms of these contracts significantly impact the manufacturer’s ability to re-source production to a healthier supplier, recover tooling, and utilize certain remedies.

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Financing the Supply Chain with Big Data

To many, supply chain finance still leans primarily on approved invoices and credit. And yet, over the past 15 years, there’s been a complete transformation in the way financial processes are handled within the supply chain. Fifteen years ago, letters of credit predominated the payment interactions between buyers, suppliers and financial institutions. Financing was arduous and expensive. Today, online, cloud-based platforms are revolutionizing both payment and financing.

Data is the driver. Today, we have unprecedented visibility into all the transactions and interactions that take place in the supply chain. The cloud, as a central information hub, not only can host these interactions and provide a real-time picture of them, but it can also keep long-term records.

This gives financial institutions what they always wanted—a better way to assess risk.

Big Data Financing

Credit rating was historically the key factor for financial providers to assess risk. In many cases, it’s the buyer’s credit rating that counts most, even when the supplier is the one receiving the financing. The problem with credit rating, though, is that it depends on a lot of factors, not just on how reliable a supplier is in delivering goods or how reliable a buyer is in paying on time.

But as far as risk assessment goes, proven transaction history is what lenders prefer to set their decisions and rates upon. But for the longest time, financial providers didn’t have a good way to assess risk independently of credit rating. Now, thanks to big data, they do.

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7 Reasons to Merge Revenue Cycle and Supply Chain Management

Using technology to merge supply chain management and revenue cycle departments may help advance cost-to-charge transparency and increase accuracy in terms of managing reimbursement costs. “In most provider organizations[,] supply chain management (SCM) and revenue cycle operations function in silos, occasionally responding to anecdotal evidence to make improvements in the processes linking the two areas,” confirms HSRC-ASU. “Hospitals and health care systems that become proficient in managing the revenue environment achieve strategic advantage by reaching their financial goals and assuring a stream of revenues to support their clinical efforts,” the researchers explain.

According to HealthITAnalytics, supply chain management should be considered as a marathon endeavor, not a short-lived sprint. Successful supply chain involves connecting costs with analytics to enact substantial long term change. Additionally, hospital executives claim non-EHR health IT acquisitions strengthen the supply chain, states HealthITAnalytics.

Consistency is an essential key to ensuring accurate coding and pricing efforts. “Linking the traditional aspects of supply chain management (e.g., strategic sourcing, logistics, and inventory management) to margin management decreases the probability of lost charges occurring,” the researchers state. “Prices should be strategically set to optimize maximum allowable reimbursement. Charge capture processes should be incorporated in pricing strategies in each of the targeted areas,” they add.

HSRC-ACU confirms seven reasons to combine revenue cycle management and supply chain management:

  1. Increased and more accurate reimbursements
  2. Strengthened contract negotiations and enhanced contract compliance
  3. Improved transparency
  4. Streamlined cross-check utilization of supplies and ease of monitoring supply revenue
  5. Capturing cost-to-charge data visibility will be smoother
  6. Billing will be more accurate
  7. Labor will be wisely utilized and not wasted

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Sustainability Drives Supply Chain Professionals to Learn New Finance and Accounting Concepts

At JDA’s Focus event, Rich Beck, the Sr. Vice President of Global Operations at PepsiCo, gave the keynote on the second day of the conference. Rich said that their supply chain goals included “digitizing the value chain” (JDA was a key solution provider in this area) and “sustainability.”

I’ve been covering supply chain management for twenty years. Last year, I spent 20 percent of my time on the road. And I hear many, many supply chain speeches. I can count on a few fingers of one hand the number of supply chain executives I have heard say sustainability was one of their major goals.

That will change. 72% of the companies included in The S&P 500 Index® publish sustainability reports, up from just under 20% in 2011. Over time, companies’ sustainability efforts become more mature and corporate sustainability goals filter down and become key supply chain goals as well. And these are not incompatible goals. At PepsiCo supply chain sustainability includes “reducing their inputs while optimizing outputs;” but really, that has always have been a goal for supply chain organizations.

The CDP, formerly the Carbon Disclosure Project, is the best known of the organizations that are helping (or pressuring, depending on your point of view), companies to do better. Thousands of companies work with the CDP to measure, disclose, manage and share environmental information.

The CDP scores companies on their performance. “A high performance score signals that a company is measuring, verifying and managing its carbon footprint, for example by setting and meeting carbon reduction targets and implementing programs to reduce emissions in both its direct operations and (the extended) supply chain.” Companies score higher if they are focused not just on internal emissions, but the emissions caused in their extended value chain. This causes a ripple effect as big companies with sustainability goals request their suppliers to also reduce their emissions.

Read more at Sustainability Drives Supply Chain Professionals to Learn New Finance and Accounting Concepts

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Six trends changing the face of supply chain finance

Six trends changing the face of supply chain finance

Supply chain finance is revolutionising the way companies buy and sell, but its full potential has yet to be realised.

The amount of cross-border SCF conducted today is just a tenth of what could be done say European banks. One reason is the complexity of SCF. However innovations in both developed and emerging economies promise to change that modest uptake in the coming years.

Making SCF easier to use and understand is essential if it is to become the norm in financing global trade. Several trends should speed that process:

1. SCF is becoming widely accepted in cross border trade

Bankers expect the European and US crossborder markets to grow 10-20 per cent a year for the rest of this decade. Already some banks have seen annual growth of 30-40 per cent andin the UK and Germany that figure is closer to 70 per cent, according to Demica.

2. More buyers are financing their suppliers

SCF has traditionally focused more on the relationship between suppliers and their banks. This is changing. New technology is helping buyers use SCF to help their strategic suppliers at better rates than they might find elsewhere, thanks to often higher credit ratings.

3. Non-bank players are emerging as an alternative source of SCF

New entrants, including peer-to-peer lenders, dynamic discounters and early payment marketplaces help buyers and suppliers exchange purchase orders, invoices and accelerate cash transfers. Private investors, financial institutions or even buyers provide funding for these new solutions to invest in their own payables.

4. Providers unite to offer a global service

Fragmented banks are recognising the need to partner logistics companies, local banks, export credit agencies and other transaction banks to offer corporates solutions across the supply chain. That is a change from the more fragmented approach until now.

5. Technology is replacing the paperwork

Electronic documentation is playing an ever greater role in international trade business as corporates automate trade supply chains toimprove speed and efficiency. That means corporates who use a number of banks require them to deliver electronic solutions on a common platform.

6. Countries are getting involved

Governments around the globe are paying more attention to supply chain finance. The UK for instance has initiated an SCF programme with some of Britain’s leading companies and banks. In the US, the Treasury’s Invoice Processing Platform uses electronic invoicing to ensure that suppliers are paid on time or even early.

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Where are Investors Placing their Supply Chain Bets for the Next Five Years?

Where are Investors Placing their Supply Chain Bets for the Next Five Years?

When practitioners think of the advances that have been made in supply chain management, we tend to think about people, processes, and technology. We tend to forget how important the financial community is in terms of accelerating the development of new technologies and even the wider supply chain environment we inhabit.

The Council of Supply Chain Management Professionals (CSCMP) had a roundtable on this topic. The two financial panelists were Dave Anderson, the Managing Director at Supply Chain Ventures, and David Beatson, the CEO at Ascent Advisors. Both Supply Chain Ventures and Ascent Advisors are active players in the world of supply chain management venture capital. Supply Chain Ventures is an early stage investor, Ascent Advisors is late stage.

Early stage investors, known as angel investors, are looking for companies with $100 million is exit potential. Their investment horizon is one to ten years. Their due diligence involves looking for fatal flaws in a firm’s business model or weaknesses in the executive leadership. Only 10 to 20 percent of the investments make returns above what was invested in them. Making money in this game is about the small number of firms that are paying back ten times or more what was invested in them. The exit strategy involves an Initial Public Offering (IPO), the firm going bankrupt, or best case scenario an outside investor buys the company. Being an early stage investor takes strong nerves. In the event of bankruptcy, not all that uncommon in young companies, all assets get exposed, including the assets of investors.

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Balancing Financial Settlement and Inventory Levels Remain Key Concerns For Supply Chain Managers

Balancing Financial Settlement and Inventory Levels Remain Key Concerns For Supply Chain Managers

U.S. companies made only marginal improvements in their ability to collect from customers and pay suppliers in 2013, while showing no improvement in how well they managed inventory, according to the 16th annual working capital survey from REL a division of the Hackett Group, Inc.

“For inventory, the global marketplace has made issues like demand planning more important than ever before,” says Analisa DeHaro, Associate Principal for REL. “Companies need to factor in lead times that may not have been an issue when manufacturing was done closer to home. The best companies are becoming more savvy about this, and are more effectively balancing the various elements of inventory management.”

The amount tied up in excess working capital at nearly 1000 of the largest public companies in the U.S. is over a trillion dollars, according to the REL research.

The U.S. economy was slow but stable, with gross domestic product increasing by 3.2 percent in 2013. But at the same time, the REL research found that gross margins decreased by 0.3 percent, indicating that companies are spending more internally to generate revenue.

The researchers also found that companies are continuing to borrow, using low interest rates to improve their cash position, with cash on hand increasing by 12 percent, or $110 billion. At the same time, companies continued to ramp up capital expenditures, which have risen by 43 percent over the past three years.

The value of total net working capital rose by 3.2 percent in 2013, and days working capital improved by less than 1 percent. While days sales outstanding and days payable outstanding improved only slightly, days inventory on hand showed no change at all.

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Teaching the ins and outs of financial management

Teaching the ins and outs of financial management

Standard Chartered volunteers share know-how with children at 7 schools

Almost 450 employees from Standard Chartered Bank (Thai) recently put their skills to good use by going out into the community to help ensure that Thailand’s next generation does not fall into the painful trap of financial mismanagement.

They choose their holiday date, July 1, to conduct 35 sessions in seven schools in Bangkok, Ang Thong and Saraburi, reaching out to 1,380 students in total in just one day.

Standard Chartered’s staff members were truly able to bring the bank’s ideal to life by devoting the day to helping Thai children gain a better understanding of financial education.

Financial education and inclusion are important issues for Standard Chartered. The bank believes it is important to ensure that people have good financial education, so that they will be able to use financial services actively and responsibly.

Moreover, financial education is a crucial building block of economic citizenship and a means to protect Thais from overextending themselves financially, which in turn will promote stability in the Kingdom’s financial system.

This major exercise was organised by the bank to mark Standard Chartered’s 120th anniversary in Thailand.

Giving back to the community and supporting sustainable economic growth are the cornerstones of the bank’s approach to sustainability.

The lack of appropriate financial education limits economic opportunities for young people. Without such education, many youths are not prepared to take advantage of financial services that could help them save and plan for the future.

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