@ Supply Chain Management


ASDN Logistics Analysis Software

While surfing the web for logistics related software, I came across the site hosted by the International Centre for Innovation and Industrial Logistics (ICIIL).
ICIIL has some information about an open source logistics analysis software that is being developed University of Vaasa, Finland and ABB Corporate Research Center.

ASDN – “Agile Supply Demand Networks” is software for analyzing and developing logistics networks. This rapid modelling tool should help decision-making in network architecture design and performance management.

The project home page is located at http://asdn.sourceforge.net and the source codes (Java) are distributed via SourceForge: ASDN

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Managing the Financial Supply Chain – Part 1

Supply Chain Management Review has an article titled – Managing the Financial Supply Chain by Roland Hartley-Urquhart in a recent edition of their online magazine.

Understanding and managing all aspects of the financial supply chain is an essential ingredient for business success. While that statement has always been true, it takes on a new level of importance in today’s world of global sourcing and production outsourcing. The recommendations offered in this article can help supply chain professionals more effectively integrate the physical flow of goods with the financial flow.

As the previous series on Creating the Optimal Supply Chain amply demonstrated, there are three essential flows in a supply chain – Material, Information and Financial flow. While the first two are often frequently dissected and analyzed, the third is comparitively less so and thus I thought that I would do a piece on that.
Never have truer words been spoken:

Global sourcing and outsourcing have the added benefit of generating cash for many companies, as investments in plants, equipment, and working capital shift from the brand owners and original equipment manufacturers (OEMs) to their trading partners, who in many cases are overseas. While these benefits can’t be denied, business leaders need to assess the unintended consequences of their global sourcing and outsourcing strategies beyond direct cost and capital savings. In particular, they need to recognize that the labor cost advantage of moving these activities offshore masks hidden costs and risks within the financial supply chain.

And furthermore the implications for the supply chain are clearly:

While global sourcing and outsourcing may reduce the cost of the actual product—the “first cost”—they often decrease the capital efficiency of the value chain. Specifically, plants and equipment are often far more expensive to finance in emerging market countries. In addition, inventory tends to get pushed downstream to suppliers, which often have a higher cost of capital. Furthermore, global operations can add weeks to the value chain, tying up as much as 30 percent of product price in working capital.

There is no denying savings in direct costs and capital savings when it comes to decision making around offshoring or outsourcing – its simply ludicrous to do that. However, that is only one portion, the very visible portion, of the Total cost picture and that is what is frequently forgotten.
So what are some of the hidden costs that are implicitly present in offshoring or outsourcing?

Global sourcing and outsourcing also weaken control over the financial supply chain. This reduction in control can affect shareholder value, erode competitiveness, and introduce new business risks. Common challenges include the complexities around Sarbanes-Oxley compliance, complex chargeback management processes, and implicit foreign exchange risks.

Read the rest of this entry »

About me

I am Chris Jacob Abraham and I live, work and blog from Newburgh, New York. I work for IBM as a Senior consultant in the Fab PowerOps group that works around the issue of detailed Fab (semiconductor fab) level scheduling on a continual basis. My erstwhile company ILOG was recently acquired by IBM and I've joined the Industry Solutions Group there.

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November 2006