‘To fund’ as a new purpose of supply chain management: Making a case for supply chain financing

Abstract

The purpose of supply chain management has traditionally been to source, make, and deliver. Extant supply chain financing research has been primarily focused on the operational questions of how tools and instruments can be used more effectively. In this Notes and Debates paper, we argue that a new overarching purpose has emerged for the management of supply chains, which is to fund the organization. That happens through utilizing the cash flow between buyers and suppliers and other financial support. The emphasis is on optimizing that cash flow and securing liquidity as opposed to gaining short-term profitability. With such emphasis, firms will focus on utilizing their supply chains to not only manage raw materials, products, and components but also to fund activities relating to working capital (inventories, accounts receivable, and accounts payable). The critical part of this view is how the firm can simultaneously utilize and financially support the supply chain, including suppliers and customers, and vice versa. This shift from an operational to a strategic lens is profound because it provides a clear vision for the role of the supply chain management discipline as it interacts with the financial aspects of the organization.