A model for financial supply chain management with two different financial Approaches

The more common approaches used in the SCM consider only the physical logistic operations and ignore the financial aspects of the supply chain. The main objective to incorporate financial aspects in supply chain management is to strengthen managerial decisions concerning financial flows in supply chains, while empirical knowledge about financial supply chain management (FSCM) is in its early stages. This paper presents a model for FSCM which financial planning in addition to operation planning is decided in it. The main contribution of this paper is to define two approaches for Financial Supply Chain Management and to compare them. This financial approaches are: Traditional financial approach and new financial approach. Traditional financial approach integrates physical goods flows and financial flows. New financial approach considers in making decisions other financial indicators such as market to book value, liquidity ratios, capital structure ratios, and return on equity, sales margin, turnover ratios and stock security ratios, among others. Moreover, the new approach applies the change in equity instead of the traditional approach measures of profit as the objective function to be maximized in the presented model. To show the attributes of the presented approaches, the results of the new approach and the traditional approach is compared. The findings indicate that the traditional approach leads to lower change in equity compared to the financial approach. Also the results clearly reveal the better improvement of using the new approach over the traditional approach, and convince the decision makers to take advantage of the new approach.