Small-to-medium size enterprises (SMEs), including many startup firms, need to manage interrelated flows of cash and inventories of goods. In this paper, we model a firm that can finance its inventory (ordered or manufactured) with loans in order to meet random demand which in general may not be time stationary. The firm earns interest on its cash on hand and pays interest on its debt. The objective is to maximize the expected value of the firm's capital at the end of a finite planning horizon. Our study shows that the optimal ordering policy is characterized by a pair of threshold variables for each period as function of the initial state of the period. Further, upper and lower bounds for the threshold values are developed using two simple-to-compute ordering policies. Based on these bounds, we provide an efficient algorithm to compute the two threshold values. Since the underlying state space is two-dimensional which leads to high computational complexity of the optimization algorithm, we also derive upper bounds for the optimal value function by reducing the optimization problem to one dimension. Subsequently, it is shown that policies of similar structure are optimal when the loan and deposit interest rates are piecewise linear functions, when there is a maximal loan limit and when unsatisfied demand is backordered. Finally, further managerial insights are provided with numerical studies.
Risk management has become an essential issue in supply chain management, from the modeling of the decision maker's risk preference, and the studies on uncertain elements such as demand, supply, price, lead time, etc., to the consideration of more practical background including cash flow constraints, inventory financing and delayed cash payment. In this new volume, the authors provide a framework to study the interaction of various factors related to risk and their influence on supply chain management. The scope of areas covered includes operations management, decision analysis, and business administration. This book focuses on several key issues of risk management in supply chains. Specifically, an analysis framework is presented for studying the supplier selection problem and identifying the optimal sourcing strategy in a one-retailer two-suppliers supply chain with random yields. The optimal sourcing strategy of a retailer and the pricing strategies of two suppliers under an environment of supply disruption are investigated. Besides, the authors study the dynamic inventory control problems with cash flow constraints, financing decisions as well as delayed cash payment. In addition, originating from the annual international iron ore price negotiation, the authors model the bargaining process to deal with the risk of wholesale price in the game analysis context. Within the three perspectives of risk management in supply chains, the modeling of decision maker's risk preference has been extensively studied and many results have been obtained to guide the practice. However, the analysis on the other two kinds of topics is still in its infancy, and needs more efforts from academia. It is thus the ambition and innovation for this book to contribute on risk management in supply chains in the following ways: (1) characterizing the explicit sourcing strategy (i.e., single sourcing or dual sourcing) to deal with supply disruption risk; (2) introducing the concepts of financial risk measurement by incorporating cash flow constraints, inventory financing and delayed cash payment into inventory management models; and (3) providing insights for the iron ore price negotiation to help steel manufacturers handle the risk of price increase.
Globalization and increased product variety have impacted the uncertainty in demand and supply. The recent financial instability adds another layer of uncertainty regarding financing and investment. The changes, while gradual, have accumulated over time and posed enormous difficulties in planning procurement. This thesis focuses on inventory procurement strategies that help firms tackle challenges due to uncertainties in the demand/supply and financial concerns. The first part is on employing dynamic inventory procurement strategies to achieve cost efficiency and tackle the uncertainties in demand and supply. The second and third parts focus on the interaction between Finance and Operations in both its analytic aspects and empirical aspects. A synopsis of the three parts of the thesis follows. Part 1: "Inventory Management and Stochastic Lead Time" This chapter analyzes a continuous time back-ordered inventory system with stochastic demand and stochastic delivery lags for placed orders. This problem in general has an infinite dimensional state space and is hence intractable. We first obtain the set of minimal conditions for reducing such a system's state space to one-dimension and show how this reduction is done. Next, by modeling demand as a diffusion process, we reformulate the inventory control problem as an impulse control problem. We simplify the impulse control problem to a Quasi-Variation Inequality (QVI). Based on the QVI formulation, we obtain the optimality of the (s, S) policy and the limiting distribution of the inventory level. We also obtain the long run average cost of such an inventory system. Finally, we provide a method to solve the QVI formulation. Using a set of computational experiments, we show that significant losses are incurred in approximating a stochastic lead time system with a fixed lead time system, thereby highlighting the need for such stochastic lead time models. We also provide insights into the dependence of this value loss on various problem parameters. Part 2: "Inventory Financing and Trade Credit" In this chapter, we study the inventory performance of publicly listed retailers between 1980 and 2010 based on a panel dataset from COMPUSTAT, CRSP, I/B/E/S and a hand-collected dataset on bankruptcy. We quantify the effect of a carefully-defined financial holding cost on inventory decisions, after controlling for operational factors and considering access to trade credit. This finding provides empirical evidence of the failure of the Modigliani-Miller Theorem in the inventory management context. We are also able to infer several unobservable costs based on historical inventory decisions. For example, the average cost of trade credit is estimated to be about 20% per year, which matches the typical trade credit terms in the United States. We find that the cost of trade credit computed has a strong connection to inventory per- formance. Our findings are robust to alternative econometric specifications, alternative measures of variables and model estimates for subsets of data. Part 3: "Joint Inventory and Cash Management Decisions" In this chapter, we address this question by considering a general continuous time model of a dynamic inventory system that incurs costs in both managing the inventory and managing the cash flow. To support its inventory and operational cost, this system has access to both the financial market and trade credit from suppliers. We show how the inventory procurement decision and financing decision are made jointly. Specifically, we show that, with friction of financing, not only does the Modigliani-Miller Theorem not hold but also the two decisions interact in a dynamic and complex manner. We are also able to show how the value of the inventory system can be improved by using trade credit.
The integration of product recovery into regular production processes enables new opportunities for cost savings. In case of a dynamic planning situation, for instance when dealing with seasonality or the product life cycle, new motives for keeping stock arise. The work aims to identify those motives and to describe their effects by using methods of optimal control theory.
This book contains the proceedings of the 10th International Conference on Logistics, Informatics and Service Sciences (LISS 2020), which is co-organized by Beijing Jiaotong University, Budapest University of Technology and Economics, in July 25–28 2020. This book focuses on the “AI and data-driven technical and management innovation in logistics, informatics and services” and aims to provide new research methods, theories and applications from various areas of management and engineering. In detail the included scientific papers analyse and describe communication processes in the fields of logistics, informatics, service sciences and other related areas. The variety of papers delivers added value for both scholars and practitioners. Information and communication technologies have been providing an effective network infrastructure and development platform for logistics and service operations.
A groundbreaking, up-to-date look at the Best Practice in Inventory Management "This book is aimed to show how good inventory control can be used in practice. It is a result of working continuously on inventory control with a large number of companies over many years. It contains the distilled techniques which have been tried out and proved to work. . . . [It] is a driver's manual of inventory controllers. It will cover the working of the engine (how inventory control techniques work), how to use the controls (what the techniques do and how to manage them), and how to get the best out of the vehicle (how to optimize inventory). Understand the text and it will show the way to guaranteed improved inventory control, reduced stock levels, and higher availability."—from the Preface "The development of inventory management is a dynamic activity, with new approaches being made, techniques being refined, and new challenges being met. . . . It is imperative that [these] challenges are met, since continuing competitiveness is based on ever-improving customer service and ever-reducing inventory costs."—from the text As a vital function of an organization's operational structure, effective inventory management is key to improving a company's customer service, cash flow, and ultimately, its profitability margin. While it may sound simple, it is, in fact, far more complex than most managers perceive, requiring very specific knowledge and understanding. It is based upon a framework of unique tools and techniques essential to achieving complete success. Best Practice in Inventory Management gives you these essentials, with in-depth coverage of the latest practices in the field. The book delivers a wealth of solid solutions for lowering inventory overhead, bettering customer relations, and increasing productivity and performance. An ideal reference for APICS certification candidates, as well as participants in training programs, this authoritative resource outlines basic techniques, describes how and where to apply them, and explains how to ensure their effective implementation. The techniques are placed within the context of stores operations, which can be applied in a variety of situations, from manufacturing and distribution to warehousing, consumable stores, and spares and service. Best Practice in Inventory Management follows a logical progression, beginning with targets and moving forward through inventory structuring, individual item control, and coordination. In the process, it probes cutting-edge strategies, including Pareto analysis, Just in Time (JIT), and Material Requirements Planning (MRP), and offers a rational approach to the risks of stockouts. Aided by a host of new applications, practical methods, and real-world examples, you'll learn to implement a variety of processes vital to inventory structure and control. From effective stock monitoring to forecasting, setting, and assessing stock level guidelines, this book outlines the crucial steps in having suitable product available at an acceptable price and within a reasonable timescale.
Good management of inventory enables companies to improve their customer service, cash flow and profitability. 'Best Practice in Inventory Management' outlines the basic techniques, how and where to apply them, and provides advice to ensure they work to produce the desired effect in practice. The book shows how inventory management techniques can be used in a wide variety of situations, particularly in stores where the inventory can be anything from fast moving products to slow moving spares. The discussion extends across distribution warehousing and manufacturers' operations. The text is based on best theory and practice, which has been gradually developed by the inventory management profession over the years. It covers the inventory control aspects included in the courses for the DPIM, COM, DLM, CPIM and other professional and academic qualifications. Readers develop their understanding of stock control by seeing the techniques explained logically and learn how inventory structuring, individual item control, forecasting and co-ordination provide the base for logistics management. This new edition has been up-dated throughout and the final chapter, The Future - Inventory and Logistics, has been re-written to reflect the developing applications of technology and changes in focus.
Welcome to the world of treasury management—a dynamic and critical aspect of financial stewardship that underpins the success and stability of organizations across industries. This book is crafted as compendium guide to equip finance professionals, executives, and students with the knowledge and strategies necessary for effective treasury management. In today's rapidly evolving business landscape, the role of treasury management has never been more crucial. From optimizing cash flows and mitigating financial risks to navigating the intricacies of capital markets, treasury professionals are tasked with multifaceted responsibilities. This book aims to demystify the complexities of treasury management, offering practical insights, examples, and strategic approaches to empower readers in mastering this intricate field. Key Features: 1. Foundational Concepts: Delve into the fundamental principles of treasury management, providing a solid understanding of cash management, liquidity, and financial risk. 2. Strategic Planning: Explore strategic approaches to treasury management, including techniques for optimizing working capital, managing foreign exchange exposure, and navigating interest rate risks. 3. Technological Advancements: Examine the impact of technology on treasury operations, discussing the latest trends, tools, and digital solutions reshaping the landscape. 4. Case Studies: Gain valuable insights from case studies that illustrate successful treasury management practices and the lessons learned from challenges faced by organizations. 5. Regulatory Landscape: Navigate the complex regulatory environment governing treasury activities, ensuring compliance with international standards and best practices. As you embark on this journey through the pages of this book, I encourage you to engage with the content, reflect on the practical applications, and consider the strategic implications for your own professional or academic pursuits. Treasury management is not just a function; it's a strategic imperative, and this book is designed to be your companion on the path to mastery. This comprehensive book on treasury management aims to provide financial professionals, business leaders, and students with a thorough understanding of the principles, strategies, and technologies involved in effectively managing a company's treasury functions. Thank you for choosing this resource. May it serve as a valuable reference and guide on your journey to becoming a proficient and strategic treasury professional. Anand Vinaykumar Kaku Chartered Accountant Manager Treasury at National Credit Guarantee Trustee Company Ltd. (NCGTC)
Boost your accounting and financial skills with Microsoft Dynamics 365 Key Features Make real-time data-driven decisions for your enterprise with Microsoft Dynamics 365 Enterprise edition Configure and set up the Microsoft Dynamics 365 financial module via highly useful tips and tricks Administer customer relations and plan enterprise resources with this systematic guide Book Description Microsoft Dynamics 365 for finance and operations is a rapidly growing application and is widely used in enterprise organizations. Because of its ability to maximize business productivity, it is a fast-growing business application package in the ERP market. We will start by looking into ERP concepts, implementation needs, and interface design, giving you basic knowledge of financial management aspects and explaining key concepts along the way. To begin with, you'll be taken through the general ledger and financial dimension functions. You'll later learn about the sales tax mechanism and multi-currency in Microsoft Dynamics 365. We tackle each topic with focused examples and explanations on topics such as payable/receivable accounts, forecasting, cash and bank management, budgeting planning/control, and fixed assets. Finally, we walk you through intercompany, consolidation, costing basics, and financial reporting. By the end of this book, your finance team will have a much richer understanding of Microsoft Dynamics 365 for finance and operations and its powerful capabilities. What you will learn Examine the business logic behind the financial functionalities of Microsoft Dynamics 365 FFO Set up and configure the core modules of financial management Grasp the key control points of financial management Explore intercompany and consolidation in Microsoft Dynamics 365 FFO Understand multi-currency sales, tax mechanisms, and budgeting capabilities in Microsoft Dynamics 365 FFO Get to grips with month/year-end period close functionality Understand the account payable and receivable module Use Microsoft Dynamics 365 to create financial reports Who this book is for This book is for application consultants, solution architects, controllers, CFOs, pre-sales and other professionals who are involved in a Microsoft Dynamics 365 for finance and operation implementation. Basic knowledge of financial terms, concepts, and terminologies is required.
Welcome to the forefront of knowledge with Cybellium, your trusted partner in mastering the cutting-edge fields of IT, Artificial Intelligence, Cyber Security, Business, Economics and Science. Designed for professionals, students, and enthusiasts alike, our comprehensive books empower you to stay ahead in a rapidly evolving digital world. * Expert Insights: Our books provide deep, actionable insights that bridge the gap between theory and practical application. * Up-to-Date Content: Stay current with the latest advancements, trends, and best practices in IT, Al, Cybersecurity, Business, Economics and Science. Each guide is regularly updated to reflect the newest developments and challenges. * Comprehensive Coverage: Whether you're a beginner or an advanced learner, Cybellium books cover a wide range of topics, from foundational principles to specialized knowledge, tailored to your level of expertise. Become part of a global network of learners and professionals who trust Cybellium to guide their educational journey. www.cybellium.com
