FINANCIAL SUPPLY CHAIN MANAGEMENT

Most of the time we attribute supply chain management to logistics, but what if supply chain management is used in the field of finance. Financial Supply Chain Management does exactly that. It is the expansion of techniques developed in the fields of finance and financial risk management into the field of supply chain management. Financial Supply Chain Management (FSCM) refers to a specific set of solutions and services to expedite the flows of money and data between trading partners - that is buyers and suppliers, along the supply chain.

RISE OF FINANCIAL SUPPLY CHAIN MANAGEMENT

Globalization and increased competition has had a profound impact on the supply chain of both the big and small companies. This has led companies to keep larger inventories to prevent shortfall, ensure just-in-time deliveries and accept longer payment terms from the buyers. This has resulted in working capital problems for both the suppliers and buyers, as suppliers need to wait for the buyers to sell the product so as to get back their money. FSCM helps the company to improve their working capital financing, accelerate the cash flow to suppliers and connect supply chain events to financing decisions. The ultimate aim is to optimize working capital throughout the supply chain, reduce total supply chain costs and increase supply chain resilience.

REVERSE LOGISTICS IN RETAIL – BEST PRACTICES IN THE INDUSTRY

Reverse logistics - “the forgotten child of the Supply Chain” is gaining prominence in the market today. Previously, the organizations were not making use of reverse logistics. But today, reverse logistics is a key tool for value addition and growth strategy. With increasing customer awareness, it is not only important to deliver the goods to them but also to make sure that a return channel also exists. Thus, reverse logistics helps an organization in not only getting the goods back but also for repairs and redistribution.

Reverse logistics is defined by the council of management as “The process of planning, implementing, and controlling the efficient, cost effective flow of raw materials, in-process inventory, finished goods and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal.”. In short the travel back from the customers end to the manufacturer is called as the reverse logistics- an invert of logistics. Reverse logistics includes return policy, product recall, repairs, repackaging, recycling, parts management, liquidation, disposition management and many more. It plays a very crucial role in the field of retail it helps in building brand loyalty and better customer experience.

At the time when the retail industry is facing losses to the tune of $40 billion due to sales returns, having reverse logistics can help build the profits as high as 15% with care. In addition to it (this) the reverse logistics also protects profits, gives customer loyalty, disposal benefits and maximize recovery rates.  

Source:UPS

BENCHMARKING

Benchmarking is “measuring our performance against that of best-in-class companies, determining how the best-in-class achieve those performance levels and using the information as a basis for our own company’s targets, strategies and implementation.” Simply, it is “search of industry best practices that lead to superior performance”. Whereas best practices refers to the approaches that produce exceptional results, are usually innovative in terms of the use of technology or human resources and recognized by customers or industry experts.

Benchmark  is a point of reference against which things are measured. In business, the reference points and standards can take many forms. They are measured by questions about the product or services.

The concept of benchmarking has been around for a long time. In 1800's, Francis Lowell, a New England colonist studied British textile mills and imported many ideas along with improvements he made for the burgeoning American textile mills.

It is believed that formally, benchmarking may have evolved in the 1950's when W. Edwards Deming taught the Japanese the idea of quality control. The method was rarely used in the United States until the early 1980's when IBM, Motorola and Xerox became the pioneers. Xerox is one of the best known examples of organizations that have implemented benchmarking.

Advantages of Benchmarking:

It promotes through understanding of the company's own processes i.e., the company current profile is well understood.

It involves limitation and adaptation of the practices of superior competitors, rather than invention thereby saving time and money for the company practicing benchmarking.

It enables comparison of performance measures in different dimensions, each with best practices for that particular measure.

It allows organisations to set realistic, rigorous new performance targets and this process helps convince people of the credibility of these targets.

E-COMMERCE AND LOGISTICS

One of the interesting definitions describes logistics as “having the right item at the right time at the right place in the right quantity to the right customer” (Susan Mallik, 2010). The all-inclusive definition talks about the holistic nature of the traditional business logistics – right from production, procurement, distribution, inventory management and of course delivery across the entire supply chain. Logistics industry used to rely heavily on individual skill and dexterity of the employees. Efficiency used to be thought as an outcome of practice. However, with advent of technology, especially with information technology, revolution is happening across the business sectors.

Logistics industry also has become equipped with new ways of doing things. In many instances, manual labour has been eliminated or has been reduced significantly. Skill requirement has enhanced as well, in terms of grasp and capability around the new methodology. The new skill set required includes efficiency in using new technologies; the faster one gets hold of the technology and starts using to its full potential, the stronger it makes its presence felt in the industry. IT- Operations integration paved the way for a faster and smoother logistics industry by reducing the frequent errors and glitches.

With the advent of e-commerce, nature of business is undergoing changes. Along with it, the conventional logistics problems are also changing. Earlier the process used to be supplier driven, whereas now the drive comes from the customer. It is more of order fulfillment rather than stocking.  The good old logistics is getting changed. Typically, in Indian e-commerce industry, the back-end operation is often outsourced to some logistics firm who would take care of the physical supply-chain process with the e-commerce sites providing the user-interface with the front end operations. However, there are a few players who do manage their own distribution network partially.
In a conventional supply chain, there are two distinct players in between the manufacturers and the customers.  In the e-commerce business, the middle two layers are becoming more and more overlapping.

FDI IN RETAIL IN INDIA

FDI (Foreign Direct Investment) is an investment in a foreign country with an intention to gain managerial interest in a company operating in that country. There are many foreign players who have invested and are investing in this way in India.

The government of the host country may limit the percentage of foreign stake in any company with the intention to avoid foreign control over its country’s economy and people. This percentage varies from industry to industry depending on how crucial the industry is for the country. Even India limits the percentage of foreign stake. The industry-wise limitations are 100% for tourism, hospitality, education, roads and highways, pharmaceuticals, petrochemicals; 51% for multi-brand retail; 49% for civil aviation, insurance, D2H, public sector banks; and 26% for print media, defence, etc to name a few.
Retail industry in India is on of the most developing industries and has a huge potential to grow further. It contributes about 15% to GDP and 8% to employment of the country. It can be classified into single-brand and multi-brand retail. Only 4% of the retail in India is organised. The FDI limit for single-brand retail and multi-brand retail in India was increased to 100% and 51% respectively in 2012.