The Cycle Times of Working Capital: Financial Value Chain Analysis Method

Interest towards working capital management increased among practitioners and researchers because the financial crisis of 2008 caused the deterioration of the general financial situation. The importance of managing working capital effectively increased dramatically during the financial crisis. On one hand, companies highlighted the importance of working capital management as part of short-term financial management to overcome funding difficulties. On the other hand, in academia, it has been highlighted the need to analyze working capital management from a wider perspective namely from the value chain perspective. Previously, academic articles mostly discussed working capital management from a company-centered perspective. The objective of this thesis was to put working capital management in a wider and more academic perspective and present case studies of the value chains of industries as instrumental in theoretical contributions and practical contributions as complementary to theoretical contributions and conclusions. The principal assumption of this thesis is that selffinancing of value chains can be established through effective working capital management. Thus, the thesis introduces the financial value chain analysis method which is employed in the empirical studies. The effectiveness of working capital management of the value chains is studied through the cycle time of working capital. The financial value chain analysis method employed in this study is designed for considering value chain level phenomena. This method provides a holistic picture of the value chain through financial figures. It extends the value chain analysis to the industry level. Working capital management is studied by the cash conversion cycle that measures the length (days) of time a company has funds tied up in working capital, starting from the payment of purchases to the supplier and ending when remittance of sales is received from the customers. The working capital management practices employed in the automotive, pulp and paper and information and communication technology industries have been studied in this research project. Additionally, the Finnish pharmaceutical industry is studied to obtain a deeper understanding of the working capital management of the value chain. The results indicate that the cycle time of working capital is constant in the value chain context over time. The cash conversion cycle of automotive, pulp and paper, and ICT industries are on average 70, 60 and 40 days, respectively. The difference is mainly a consequence of the different cycle time of inventories. The financial crisis of 2008 affected the working capital management of the industries similarly. Both the cycle time of accounts receivable and accounts payable increased between 2008 and 2009. The results suggest that the companies of the automotive, pulp and paper and ICT value chains were not able to self-finance. Results do not indicate the improvement of value chains position in regard to working capital management either. The findings suggest that companies operating in the Finnish pharmaceutical industry are interested in developing their own working capital management, but collaboration with the value chain partners is not considered interesting. Competition no longer occurs between individual companies, but between value chains. Therefore the financial value chain analysis method introduced in this thesis has the potential to support value chains in improving their competitiveness.

Supply chain costs of a small board lot: sheet cutting and logistics

Succeeding in small board lot (0-20 tons) deliveries, is not always prosperous and failures as well as extra costs compared to standard costs arise. Failure deliveries from converting plants to customer locations tie a lot of unwanted and unexpected costs. Extra costs are handled as quality costs and more precise, internal failure costs. These costs revolve from unsuccessful truck payloads, redundant warehousing or unfavorable routing as examples. Quality costs are becoming more and more important factor in company’s financial decision making. Actual, realized truck payload correlates with the extra costs occurring, so filling the truck payload all get-out well is a key to lower the extra costs. Case company in this study is Corporation A, business segment Boards. Boards have outsourced half of their converting in order to gain better customer service via flexibility, lead time reductions and logistics efficiency improvements. Examination period of the study is first two quarters of year 2008 and deliveries examined are from converters to the customer locations. In Corporation A’s case, the total loss in failure deliveries is hundreds of thousands of Euros during the examination period. So, the logistics goal of getting the right product to the right place and right time for the least cost, does not completely realize.

Benefits and challenges of supply chain finance business process automation : A case study in ING Bank

Supply chain finance, a financial product provided by the bank, has gained increasing attention and popularity over the last few years. Supply chain finance helps the corporate clients to optimize their financial flows along the supply chain. One characteristic of supply chain finance is that it aims to provide automated solutions. Therefore, the business process automation of supply chain finance is a very interesting and important topic for study. In this study, the business process automation of supply chain finance within the case organization, ING, is analysed. The purpose is to: (1) Identify the benefits to understand the importance to automate supply chain finance business process; (2) Find out the existing automation degree in the supply chain finance business process within the case bank to see what’s the situation now and how to improve in the future; (3) Discover the challenges in the further automation of supply chain finance business process. Firstly, the study finds out that supply chain finance business process automation can bring many benefits to the bank. Automation can improve productivity by using less time and human labour in the business process, and by providing scalable solutions. Automation can also improve quality of the service by reducing the human errors. Last but not least, automation can improve internal governance by providing enhanced visibility of the business process. Because of these potential benefits, many banks are actively seeking solutions to automate their supply chain finance business process. Then, the current automation situation with the case bank is analysed with the help of business process modelling. The supply chain finance business process within the case bank can be further divided into several sub processes: daily transaction, buyer sales and setup, supplier onboarding, contract management, customer services and supports, and contract termination. The study finds out that the daily transaction process is already a highly automated, which is carried out through the web-based trading platform. However, for other business the automation degree is relatively low. Among these business processes, supplier onboarding is most needed for further automation. Then, some solutions are also suggested to automate the supplier onboarding business process. In the end, the study also foresees some challenges during the further automation of supply chain finance business process in the case bank. Some suggestions are also given to deal with these challenges.

Green supply chain management practices and firm performance: evidence from Finland

In order to address the increasing stakeholder requirements for environmentally sustainable products and processes, firms often need the participation of their supply chain partners. Green supply chain management has emerged as a set of managerial practices that integrate environmental issues into supply chain management. If implemented successfully, green supply chain management can be a way to achieve competitive advantage while enhancing the environmental sustainability of the firm. The overall purpose of this dissertation is to contribute to the discussion on green supply chain management practices from the perspective of their drivers and performance implications. The theoretical background arises from the literature on competitive strategy, firm performance and green supply chain management. The research questions are addressed by analysing firm-level data from manufacturing, trading and logistics firms operating in Finland. The empirical data comes from two consecutive Finland State of Logistics surveys in 2012 and 2014, combined with financial reporting data from external databases. The data is analysed with multiple statistical methods. First, the thesis contributes to the discussion of the drivers of GSCM practices. To enhance the understanding of the relationship between competitive strategy and GSCM practices, a conceptual tool to describe generic competitive strategy approaches was developed. The findings suggest that firms pursuing marketing differentiation are more likely to be able to compete by having only small environmental effects and by adopting a more advanced form of external green supply chain management, such as a combination of strong environmental collaboration and the increased environmental monitoring of suppliers. Furthermore, customer requirements for environmental sustainability are found to be an important driver in the implementation of internal GSCM practices. Firms can respond to this customer pressure by passing environmental requirements on to their suppliers, either through environmental collaboration or environmental monitoring. Second, this thesis adds value to the existing literature on the effects of green supply chain management practices on firm performance. The thesis provides support for the idea that there is a positive relationship between GSCM practices and firm performance and enhances the understanding of how different types of GSCM practices are related to 1) financial, 2) operational and 3) environmental performance in manufacturing and logistics. The empirical results suggest that while internal GSCM practices have the strongest effect on environmentalperformance, environmental collaboration with customers seems to be the most effective way to improve financial performance. In terms of operational performance, the findings were more mixed, suggesting that the operational performance of firms is more likely to be affected by firm characteristics than by the choices they make regarding their environmental collaboration. This thesis is also one of the first attempts to empirically analyse the relationship between GSCM practices and performance among logistics service providers. The findings also have managerial relevance. Management, especially in manufacturing and logistics industries, may benefit by gaining knowledge about which types of GSCM practice could provide the largest benefits in terms of different performance dimensions. This thesis also has implications for policy-makers and regulators regarding how to promote environmentally friendly activities among 1) manufacturing; 2) trading; and 3) logistics firms.

Optimizing the supply chain strategy of a multi-unit Finnish nursery company

Abstract

Item master management in the engineer-to-order supply chain

Diplomityöntavoitteena on tutkia, kuinka nimiketiedon hallinnalla voidaan parantaa kustannustehokkuutta projektiohjautuvassa toimitusketjussa. Työn kohdeyritys on Konecranes Oyj:n tytäryhtiö Konecranes Heavy Lifting Oy. Nimiketiedon hallinta liittyy läheisesti tuotetiedon hallintaan. Teoriaosassa käsitellään toimitusketjuympäristön tekijöitä, modulaarisuuden ja asiakaskohtaisuuden ongelmallisuutta sekä informaatiovirran vaikutuksia eri toiminnoissa. Yritysosassa vertaillaan konsernitason kahta liiketoiminta-aluetta strategiavalintojen, tuotteiden modulaarisuuden sekä tilaus-toimitusprosessissa liikkuvan nimikeinformaation perusteella. Diplomityön tuloksena annetaan suuntaviivat; nimikemassan eheytykseen, strategisten nimikkeiden tunnistamiseen ja määrittämiseen, nimikkeiden hallintaan sekä master-datan sijoittamiseen tietojärjestelmäympäristöön.

Developing Service Promise Concept Based on Supply Chain

Diplomityön tavoitteena on analysoida ja kehittää palvelulupauskonseptia toimitusketjuun perustuen Halton Oy:ssä. Työ toteutettiin, koska asiakaslähtöinen liiketoimintatapa on voimakkaasti valtaamassa alaa tuote- ja tuotantopainotteiselta toimintatavalta. Tuotteiden erinomaisuus koetaan markkinoilla yhä useammin itsestään selvyytenä. Prosessien tehokas hallitseminen ja asiakkaan kokeman lisäarvon muodostaminen ovat muodostuneet ratkaisevimmaksi kilpailuedun luojaksi. Toimitusketjun hallinnalla ja sähköisellä kaupankäynnillä on tärkeä rooli tämän kilpailuedun muodostumisessa.Diplomityö käsittelee uuden palvelulupauskonseptin tarjoamia etuja Halton Oy:lle. Työssä pureudutaan toimitusketjun ja sähköisen kaupankäynnin integraatiomahdollisuuksiin. Tarkoituksena on selvittää parhaat mahdolliset kriteerit Haltonin palvelulupauskonseptilleja luoda menetelmät yrityksen materiaalivirtojen sekä uuden konseptin analysoinnille ja kehittämiselle jatkossa.

Supply chain integration: studies on linking customer responsiveness and operational efficiency in logistics policy planning

Abstract The research problem in the thesis deals with improving the responsiveness and efficiency of logistics service processes between a supplier and its customers. The improvement can be sought by customizing the services and increasing the coordination of activities between the different parties in the supply chain. It is argued that to achieve coordination the parties have to have connections on several levels. In the framework employed in this research, three contexts are conceptualized at which the linkages can be planned: 1) the service policy context, 2) the process coordination context, and 3) the relationship management context. The service policy context consists of the planning methods by which a supplier analyzes its customers' logistics requirements and matches them with its own operational environment and efficiency requirements. The main conclusion related to the service policy context is that it is important to have a balanced selection of both customer-related and supplier-related factors in the analysis. This way, while the operational efficiency is planned a sufficient level of service for the most important customers is assured. This kind of policy planning involves taking multiple variables into the analysis, and there is a need to develop better tools for this purpose. Some new approaches to deal with this are presented in the thesis.The process coordination context and the relationship management context deal with the issues of how the implementation of the planned service policies can be facilitated in an inter-organizational environment. Process coordination includes typically such mechanisms as control rules, standard procedures and programs, but inhighly demanding circumstances more integrative coordination mechanisms may be necessary. In the thesis the coordination problems in third-party logistics relationship are used as an example of such an environment. Relationship management deals with issues of how separate companies organize their relationships to improve the coordination of their common processes. The main implication related to logistics planning is that by integrating further at the relationship level, companies can facilitate the use of the most efficient coordination mechanisms and thereby improve the implementation of the selected logistics service policies. In the thesis, a case of a logistics outsourcing relationship is used to demonstrate the need to address the relationship issues between the service provider andthe service buyer before the outsourcing can be done.The dissertation consists of eight research articles and a summarizing report. The principal emphasis in the articles is on the service policy planning context, which is the main theme of six articles. Coordination and relationship issues are specifically addressed in two of the papers.

Collaborative Relationships in Supply Chain

Nykyään asiakkaat odottavat lyhyempiä toimitusaikoja, joustavia toimituksia, parempaa laatua ja alhaisempaa hintatasoa. Toimittajan ja ostajan välinen yhteistyösuhde on yksi tärkeimmistä toiminnoista, joka mahdollistaa menestyksekkään liiketoiminnan nopeasti kasvavassa telekommunikaatioympäristössä.Tämä tutkimus käsittelee ydinasioita toimittajien ja ostajien välisen yhteistyön kehittymisen ympärillä. Tämä tarkoittaa hankintojen suunnittelua yhteistyössä toimittajien kanssa, selvittää mitä asioita voidaan ja pitäisi parantaa toimittaja/ostaja-suhteisiin ostotoiminnassa, ja mitä asioita pitää ottaa huomioon suunniteltaessa yhteistyösuhteita toimittajien kanssa. Tämä tutkimus myös lisää yleistä tietämystä strategisesta hankintatoiminnasta ja erilaisista olosuhteista toimittaja/ostaja-suhteissa, jotta menestyksellisiä suhteita toimittajien ja ostajien välillä voidaan saavuttaa, ylläpitää ja perustaa. Empiirinen osa analysoi kuinka tehokkaammat ja integroidummat suhteet saavutetaan hankintaketjussa telekommunikaationyrityksen valittujen toimittajien kanssa. Lisäksi paino-pistealueena on esittää ja selittää kuinka toimittajat ja ostajat käsittävät yhteistyösuhteensa. Empiirisen osan tulokset antavat ostajille parempaa ymmärrystä avaintoimittajiensa tilasta ja työkalut suorittaa menestyksekkäämpää liiketoimintaa yhteistyösuhteiden avulla.

Electronic Commerce - Advantages and Requirements through Supply Chain

Työ käsittelee Metso Paper Servicen varaosa- ja kulutusosatuotelinjojen mahdollisuuksia sähköiseen liiketoimintaan ulkoisten asiakkaiden kanssa sekä sähköisten transaktioiden vaikutuksia, etuja ja edellytyksiä. Työssä selvitetään Metson ja sen kymmenen kotimaisen asiakastehtaan myynti- ja ostoprosessin toiminta. Prosessimallin avulla arvioidaan valmiuksia sähköisiin transaktioihin nykyisessä myynti- ja ostotoiminnassa. Tarkastelu painottuu toimintoihin tarjontaketjun eri vaiheissa. Teknisiä näkökohtia käsitellään kokonaiskuvan luomiseksi. Lisäksi työssä arvioidaan muutoksia, joita sähköinen liiketoiminta aiheuttaisi. Haastatteluin tehdyssä tutkimuksessa kartoitetaan näkemyksiä sähköiseen liiketoimintaan erilaisilla organisaation tasoilla. Kokonaisnäkemys syntyy erilaisista näkökulmista sähköiseen kauppaan. Sähköiseen liiketoimintaan suhtaudutaan myönteisesti. Kokemuksia on kuitenkin vielä vähän. Vaikka hankkeita sähköisen liiketoiminnan lisäämiseksi on vireillä, yhtä tärkeää on parantaa valmiuksia tehostamalla paitsi informaatiovirtaa, myös materiaalivirtaa.

Managing material flows and improving performance in a component supplier’s internal supply chain

Tämä diplomityö tehtiin osana Componenta Cast Componentsin kolmivuotista toimitusketjujen kehitysprojektia. Työn tavoitteena oli kuvata tyypillinen yrityksen sisäinen toimitusketjuprosessi ja tehdä alustava suorituskykyanalyysi valimon ja konepajan väliseen logistiseen prosessiin liittyen. Tarkoituksena oli myös löytää kehityskohteita materiaali- ja tietovirtojen hallinnassa näiden tuotantoyksiköiden välillä. Logistiikkaan, toimitusketjujen hallintaan ja toimitusketjun suorituskyvyn mittaamiseen liittyvän kirjallisuustutkimuksen sekä käytännön perusteella valittiin sopivat analyysimenetelmät. Näitä menetelmiä hyödynnettiin tilaustoimitus – prosessin kuvaamisessa sekä suorituskyvyn analysoinnissa yrityksen sisäisessä toimitusketjussa. Luonnollisena jatkona kehitettiin ja pantiin käytäntöön toimitusketjua synkronoiva imutyyppinen tuotannon- ja materiaalinohjausmenetelmä. Diplomityöprojektin aikana kehitettiin myös apuvälineet käyttöönotetun menetelmän asianmukaista hyödyntämistä varten. Diplomityöprojektissa otettiin ensimmäiset askeleet kohti integroitua sisäistä toimitusketjua. Uuden tuotannon- ja materiaalinohjausmenetelmän standardisointi muihin menetelmiin yhdistettynä, sekä toimitusketjun avainmittarien jatkokehitys on jo alkanut. Läpimenoaikoja lyhentämällä ja synkronoidun, läpinäkyvän kysyntä-tarjontaketjun avulla integroitumisen astetta voidaan nostaa edelleen. Poikkiorganisatorinen kehitys ja johtaminen toimitusketjussa on avainedellytys menestykseen.

Defining supply chain service level priorities in an international polyolefin company

Tutkimuksen tarkoituksena oli selvittää, ovatko asiakkaiden kanssa sovitut kaupintavarastojärjestelyt liiketoiminnallisesti oikeutettuja vai ovatko ne pääasiassa vain asiakkaan palvelua. Tavoitteiksi asetettiin tutkia logististen palveluiden tärkeyttä, etsiä eri näkökohtia asiakaskohtaisten varastojen ja varastopalveluiden tarjoamiselle, löytää mahdollisia korvaavia tai vastaavia palveluita, sekä esitellä menetelmä toimitusketjun palvelutason priorisoimiseksi ja hallitsemiseksi. Työhön tarvittu kaupallinen aineisto koskien tuotteita ja asiakaita saatiin yrityksen tietojärjestelmästä. Muut taustatiedot kerättiin yrityksen toimintaohjeista, keskustelemalla ja haastattelemalla henkilöstöä, sekä seuraamalla yrityksen toimintaa työnteon ohessa. Tutkimus on jaettu kirjallisuus- ja case-osuuteen. Työn case-tulokset osoittavat, että nykyiset kaupintavarastoasiakkaat pääosin ansaitsevat lisäarvoa tuottavan varastopalvelun. Tutkimuksesta saadut kokemukset ja tiedot auttavat tekemään lisäarviointeja, koskien myös yrityksen muita tuotantolaitoksia. Työstä saatuja kokonaishyötyjä on vielä tässä vaiheessa vaikea arvioida.

Developing supply chain performance measurement metrics, case Halton Oy

Tämä tutkimus pyrkii selvittämään, miten toimitusketjun suorituskykyä voidaan mitata kohdeyrityksessä. Supply Chain Council (SCC) on vuonna 1996 kehittänyt Supply Chain Operations Reference (SCOR) – mallin, joka mahdollistaa myös suorituskyvyn mittaamisen. Tämän tutkimuksen tarkoituksena on soveltaa SCOR-mallin suorituskyvyn mittausmallia kohdeyrityksessä. Työ on kvalitatiivinen tapaustutkimus. Työn teoriaosassa on pääasiallisesti käsitelty toimitusketjua ja suorituskyvyn mittaamista koskevaa kirjallisuutta. Mittausjärjestelmän luominen alkaa kohdeyrityksen esittelyllä. SCOR – mallin mittarit on kohdeyrityksessä rakennettu SCC:n ehdotusten mukaisesti, jotta mittareiden tulokset olisivat käyttökelpoisia myös benchmarkkausta varten. Malli sisältää 10 SCOR – mittaria, sekä muutamia muita Haltonin omia mittareita. Lopputuloksena voidaan nähdä, että SCOR – malli antaa hyvän yleiskuvan toimitusketjun suorituskyvystä, mutta kohdeyrityksessä on silti tarvetta kehittää edelleen informatiivisempia mittareita, jotka antaisivat yksityiskohtaisempaa tietoa kohdeyrityksen johdolle.

Improving the effectiveness of supply chain development work – an expert role perspective

This study focuses to the intersection of three sets of activities in a company: expert work, development work and supply chain management, SCM. Experts and expert work represent a set of individuals whose efficiency and impact this study is intended to improve, while development work defines the set of organizational activities to focus on. SCM as an expertise area acts as the platform on which this study is built. The study has two aims. Firstly, it aims to derive a model helping an SCM expert to increase the effectiveness of expert work in development tasks by understanding the encountered organizational situations and processes better, reflecting his/her past and future actions to organizational processes and selecting and adjusting the processes and contents of his/her work accordingly. Secondly, it aims to develop applicable approaches and methods to understand, evaluate and manage the organizational processes and situations in development work. The integrative model on approaches and methods to improve the effectiveness of development processes is split to two aggregate dimensions: technical performance of the developed solution and consumption of resources of the development process. Six potential approaches and methods aiming at helping in the management of organizational dimensions are presented in enclosed publications. The approaches focus on three subtasks of development work: decision making, implementation and change, and knowledge accumulation. The approaches and methods have been tested in case studies representing typical development processes in the area of supply chain management. As a result, four suggestions are presented. Firstly, SCM experts are advised to consider the SCM development work to be consisting of development processes. Secondly, inside these processes they should identify and evaluate the risk of difficult decision-making related to organizational factors. Thirdly, they are prompted for an active role in implementation and change, supporting the implementation through whole process. Finally, the development should be seen in a holistic view, taking into account the stage of knowledge and organizational issues related to it, and adopt a knowledge development strategy.