Title: Cash flow management of early life cycle products: a supply chain management perspective

Authors: Hongze Ma, Olli-Pekka Hilmola

Addresses: Logistics, Turku School of Economics and Business Administration, Rehtorinpellonkatu 3, FIN-20500 Turku, Finland. ' Lappeenranta University of Technology, Kouvola Research Unit, Prikaatintie 9, FIN-45100 Kouvola, Finland

Abstract: New Product Introduction (NPI) activity has considerably increased due to ever shortening product life cycles. Therefore, cash flow management is a vital part of NPI, and is based on the cumbersome equation of customers, demand development, product margin, payment programmes, supply lead times and assembly duration. Until today cash flow management of this whole system has been completed with rather primitive methods (e.g., spreadsheets or |rule of thumb|). However, these alternatives have barely been able to show the most negative cash flow point, or sensitivity of it. In this paper we will introduce a system dynamics model incorporating all of the important elements, which will have an effect on cash flow management of early life cycle products. Based on this, methods to improve cash positions, and also manage cash flow as volumes grow and new investments are needed are being proposed. System dynamics simulation gives more support for e-finance based management, as opposed to inflexible spreadsheet models.

Keywords: supply chain management; SCM; cash flow management; early life cycle products; new product introduction; NPI; system dynamics models; e-finance; electronic finance.

DOI: 10.1504/IJEF.2007.011499

International Journal of Electronic Finance, 2007 Vol.1 No.3, pp.275 - 292

Published online: 01 Dec 2006 *

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