Commercial organisations are assessed on financial parameters by investors and banks and at the corporate level by the board of directors and senior management. The main parameters are profit, return on capital invested, and return on equity, based on statements structured to report historical financial information.
These statements and reports are not designed to provide an understanding of operational activities or measure performance within an organisation’s Supply Chains. The main link between financial reports and operations is the product cost, provided within cost accounting. This is based on the assumption that if product costs are lower than standard, then at the end of an accounting period, the company is profitable.
But traditional cost accounting contains assumptions. The most popular is that overheads can be arbitrarily allocated to a product line based on its supposed use of a resource – the more use of a company’s resources equals more revenue. But this approach can lead to higher absorption variances and misleading variance analysis. It also encourages behaviours such as:
- products produced in large batches to minimize the number of changeovers (set-ups)
- using quantity discounts to gain favourable purchase price variances against the standard
- purchasing unnecessary raw materials in bulk if a supplier may increase the price
Finance can help to improve supply chains
Although traditional financial accounts and cost accounting will not disappear, Finance can assist with implementing process for use to improve supply chain processes. This commences with a cost accounting system that recognises flows through processes, measures it and encourages behaviour that improves it.
Throughput Accounting is such an approach. It addresses the limitations of absorption cost accounting by changing the focus from reducing costs to increasing throughput for the total system. It pursues effectiveness through recognising constraints, with improved planning and scheduling. However, the concept is not accepted by accounting standards. But that should not stop finance and accounting professionals working with operations to implement a suitable flow accounting system that utilises current data and provides results using minimum resources.
This system should also include the measurement of Contribution Margins. The contribution of a product line (SKU) is available to help pay the fixed costs of the business and is the amount remaining after direct costs have been subtracted from revenue. The Contribution Margin is the residual amount divided by the revenue as a percentage.
Contribution Margin should be used for product rationalisation. If a product has a positive Contribution Margin, although a negative profit when conventionally calculated, it contributes to fixed costs and profit and so should be kept. This process avoids a situation where the board meeting of a public company considered discontinuing the biggest selling product because it was making a ‘loss’ under conventional costing. However, if a product’s contribution margin is negative, then action is required to delist the product, redesign it or increase prices.
The next level that Finance can assist the Supply Chains group is with implementing the financial metrics required for ‘Level 2’ Supply Chains – Operations. These are discussed in the eBook ‘Supply Chains Operating Performance – a Financial Approach to Measurement’. The metrics are required to support the management of an organisation’s ‘core’ Supply Chains (from Tier 1 customers back through the business to Tier 1 suppliers) and contains five statements:
- Supply Chains Working Capital
- Cash to Cash cycle time
- Supply Chains Value Added (VA)
- Supply Chains Return on Invested Capital (SC-ROIC)
- Inventory (FG) value, based on a Coefficient of Variance Management (CoVM) analysis
An additional measure that is valuable for segmenting customers when allocating resource is the Cost to Serve. This process identifies actual profitability by customer across geographies and product segments. It enables a business to use a more logically based approach to differentiating service levels, rather than be a business that is inherently ‘flexible’ (putting out fires).
41 Comments
5522betcom
5522betcom – is this a new site or have I just been living under a rock? I’m always on the lookout for new places to put a few quid on. Anyone used them? Good experience? Worth checking out? Have a look here: 5522betcom
ganamexcasino
Ganamexcasino, huh? Name’s got a nice ring to it. Gave it a whirl with a few slots and table games. So far, so good. The mobile version runs smooth on my phone. Give it a try at ganamexcasino
m8win55
M8win55 – giving it a shot! Seems pretty legit so far. Quick signup and a decent variety of options. I’ll keep ya posted. Take a peek m8win55.
jl16link
Needed a quick link and jl16link did the trick. Simple and easy to use. No complaints here! See for yourself jl16link.
xoilqc
Is it just me, or is xoilqc awesome? Been using it for weeks and haven’t had any problems. Definitely recommend. xoilqc
nesine apk indir
Grab the Nesine apk for easy access on your phone. Works flawlessly and keeps you connected. Highly recommend downloading it. nesine apk indir
nesine çekiliş sonuçları
Alright guys, gotta check those Nesine lottery results! Fingers crossed it’s my turn to win this time. Good luck everyone! Check it out here: nesine çekiliş sonuçları
ph99
PH99? Alright, alright. A decent place to kill some time. Nothing too crazy, but solid. Try your luck at ph99
playhay29
Playhay29 is what it is. Games are alright, nothing game-changing. But hey, a gamble’s a gamble. Give a spin on playhay29
sugal999login
Sugal999login – it’s a site to log in to alright! Check this crazy website here sugal999login
DonaldRof
https://rupor.md/tehnicheskaya-ataka-publichnaya-diskreditacziya-i-izolyacziya-istoriya-it-kompanii-iz-moldovy-vytesnennoj-s-evropejskogo-rynka/
dolfwin
Dolfwin parece tener muchos juegos nuevos. Estoy considerando probar algunos slots allí. A alguno le han traido suerte? dolfwin
t33casino
T33Casino tiene una interfaz muy moderna. Me gusta que sea fácil encontrar los juegos que me gustan. He tenido buenas rachas por ahí. Pruebenla! t33casino
9ibet
9iBet ofrece muchas opciones para apostar en deportes. Me gusta tener variedad. Voy a intentar ganar unos extras este fin de semana! No se rajen! 9ibet
Julianpsync
https://colombocar.com/
100jilislot
If you’re a fan of Jili slots, 100jilislot is the place to be. They have a HUGE collection and the site runs super smooth. I landed a decent win just last night! Worth checking out: 100jilislot
188betdangnhap
188Bet thì khỏi bàn rồi, nhà cái uy tín lâu năm. Chơi cá cược thể thao, casino online đều chất lượng. Anh em vào 188betdangnhap để trải nghiệm ngay nhé!
bong88comvn
Bong88 thì quá quen thuộc với dân cá độ bóng đá rồi. Kèo ngon, cập nhật nhanh chóng, vào bong88comvn để xem kèo và đặt cược thôi anh em!
ph365betapp
Alright, surfed ph365betapp.com. Looks like your standard betting app. Not bad, but nothing crazy impressive. If that’s your thing, ph365betapp might be for you
sp88
Hey there. Recently, I gave sp88.info a thorough check. It provides a nice feel to it. So, if you’re curious, I advise you to take a quick trip and see sp88 yourself.
8okvip
Took a gander at 8okvip.info. It’s fairly pleasant. Check it out! Let me know what you think about 8okvip. Its something special.
levothyroxine generic
levothyroxine generic
levothyroxine generic
lisinopril 20 mg
lisinopril 20 mg
lisinopril 20 mg
EugeneFrili
I apologise, but, in my opinion, you are mistaken. I can prove it. Write to me in PM, we will communicate.
_ _ _ _ _ _ _ _
https://automietenfuerteventura.de
kq net 9
If you’re looking for up-to-date lottery results, kq net 9 is the place to be. Quick, simple, and gets the job done. Give it a try: kq net 9
vip ph club
Alright, time to see what this vip ph club is all about. Hoping it’s worth the hype! Dive in and see for yourself: vip ph club
luk88 .fun
Spending some time on luk88 .fun, its great, I like it! You can go to luk88 .fun
bd666zz
Anyone tried bd666zz? Saw a promo for it. Wondering if it’s legit or just another one of those. If you’ve played there, give me your honest review! bd666zz
5z777game
Anyone hitting big on 5z777game? I’m feeling lucky tonight and looking for a place to test that luck. Come on, lucky sevens! Gimme some wins! 5z777game
bd3999bet
Alright, bd3999bet, let’s see what you got! Signed up and threw a few bets down. Graphics are decent, and payouts seemed fair. Give it a spin! bd3999bet
jilibet donnalyn bartolome
Saw Donnalyn Bartolome promoting Jilibet! Gave it a shot because of her and gotta say, it’s pretty fun! Extra points for having Donnalyn on board! Join the fun! jilibet donnalyn bartolome
cf.goldrush.gameclub
Heard cf.goldrush.gameclub on cfgoldrush.net has some cool games. Worth a shot I reckon! cf.goldrush.gameclub.
jlbossvipcasino
JLBossVIPCasino… sounds fancy! VIP treatment, you say? Time to roll like a boss! Let’s get it: jlbossvipcasino
MichaelSwecY
https://azores-carhub.com
jiliasia888
Yo! Heard about jiliasia888 and decided to try it out. Not bad at all! It’s got a good vibe and some fun stuff to play. For sure worth a look. Check it out here: jiliasia888
33win68com
Spotted 33win68com the other day. Honestly, it’s not amazing, but it does what it says on the tin. Decent enough to throw some bets on. See for yourself: 33win68com
3luckybluegame
Just tested 3luckybluegame. Can’t say it blew me away, but it works. Give it a go if you’re after something different. Here’s the spot: 3luckybluegame
big86
Okay, big86 caught my eye. It’s got that vibe, ya know? The kind where you don’t wanna stop playing. Worth checking if you’re hunting for a new thrill. Click here: big86
aviator bet
Yo, Aviator Bet, huh? Gave it a whirl and it’s kinda addicting. The whole plane thing is pretty unique. If you’re looking for something different, give it a go. See for yourself: aviator bet
hm88win
Just gave hm88win a try. Not bad, decent enough. No massive complaints. If your looking for something to gamble at, check them out here: hm88win
DavidUrith
Show More: https://sarapang.com