Friday, November 30, 2007

Importance of Supply chain management to financial institutions

Supply chain integration is quite a popular topic these days. Clearly, this is not a recently discovered area of economic activity; nor has it been neglected over the years. Supply chain management — or "business value chain" management, to be more precise — has assumed a much broader importance in the commercial world, with corporate treasurers, government officials, technology providers, bankers and logistics professionals all sharing a critical interest in the many facets of the worldwide flow of goods and services.

Corporate treasurers need to keep a control on the drain on cash flow caused by inefficiencies in the handling of day-to-day businesses of producing, distributing and selling their core products. Cost reduction, process outsourcing and real-time management of financial information are all factors of critical importance to treasurers.

Although bankers have been involved in the financial aspects of supply chain management for a long time, they need to be engaged with the various physical aspects of global commerce. Major financial institutions serve the entire range of a corporate client's trade needs through the provision of a comprehensive commercial management program. Banks need not undertake the actual physical aspects of trade logistics, but they can increasingly play a crucial intermediary role between their customers and all of the numerous participants in the extended supply chain. For this role, banks are acquiring a broad range of knowledge and operational skills, not traditionally present with financial institutions. It also requires a commitment to understanding the specific needs of clients in different industries, particularly their various logistical and regulatory business requirements.

Logistics companies remain the most obvious players on the scene. These are the many firms that actually arrange, coordinate and execute the physical movement of raw materials, components and finished goods around the world. Much like bankers, logistics companies have been pushed by their customers to vertically integrate their services and adopt greater levels of interoperability among the whole range of industry participants. Some of the largest global operators have begun to combine the physical and financial streams of supply chain management through the acquisition of banking licenses, thereby giving themselves (and their customers) an entry into the full end-to-end range of trade services. While these ventures have not yet attained maturity, it is clear that the barriers to entry across the supply chain spectrum are falling rapidly and that these trends will only accelerate in the near future. Technology providers are facing rising market demand for solutions that improve supply chain functionality and flexibility. Also, governmental institutions find importance for supply chain management to address issues of national growth, to enhance customs and tax collection opportunities and to expand and enforce regulatory compliance and security requirements.

Thus in the present scenario, there may be some firms that are further down the track than others in terms of understanding and adapting to these new developments, but there are virtually no firms that are oblivious to the seismic shifts taking place in their traditional business models


Adapted from article by Bruce Proctor, head of global trade services at JPMorgan Chase

1 comment:

James said...

.This is true that Supply Chain Management Services are popular among almost all the companies. Every company needs to have a proper strategic supply chain if they want to improve their production and economic activities. If the company is not willing to hire Supply Chain Management they are big loosers in the business sectors at the present situation around the globe.

 
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