Title: Interrelating operational and financial performance measurements in a multiproduct inventory system

Authors: Margarita Protopappa-Sieke, Ralf W. Seifert

Addresses: Supply Chain Management Institute, EBS Universitaet fuer Wirtschaft und Recht i. Gr., Soehnleinstrasse 8, 65201 Wiesbaden, Germany. ' College of Management of Technology, Ecole Polytechnique Federale de Lausanne (EPFL), EPFL, Odyssea 1.16 – Station 5, 1015 Lausanne, Switzerland; IMD International, Ch. de Bellerive 23, 1001 Lausanne, Switzerland

Abstract: Financial supply chain management and working capital management are increasingly under the spotlight as effective approaches to optimising working capital levels and directing cash flows. Especially in a multiproduct environment, efficient working capital allocation can boost company performance, achieve significant cost savings and demonstrate risk-pooling benefits. In this paper, we focus on the interrelation of working capital and stocking decisions for functional, innovative and heterogeneous product portfolios. We analyse the effect of demand correlation, lead time, payment delays, portfolio sizes, and service level constraints for multiproduct portfolios. Due to the dynamic nature of working capital, we resort to simulation in order to derive managerial insights. Our results attest the importance of payment delays on the profitability of a company. In addition, we demonstrate risk-pooling benefits from a financial perspective.

Keywords: financial SCM; supply chain management; inventory control; operations management; simulation; operational performance; financial performance; performance measurements; working capital; stocking decisions; payment delays; risk-pooling benefits.

DOI: 10.1504/IJSOM.2011.042925

International Journal of Services and Operations Management, 2011 Vol.10 No.3, pp.328 - 347

Published online: 11 Mar 2015 *

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