A model for financial supply chain management with two different financial approaches

Purpose: The more common approaches used in supply chain management (SCM) consider only the physical logistic operations and ignore the financial aspects of the supply chain (SC). The main objective to incorporate financial aspects in SCM is to strengthen managerial decisions concerning financial flows in SCs. This paper aims to present a model for financial supply chain management (FSCM) in which financial planning in addition to operation planning is decided. Design/methodology/approach: Approaches for FSCM are traditional financial approach and new financial approach. The traditional financial approach integrates physical goods flows and financial flows. The new financial approach considers in making decisions other financial indicators such as market to book value, liquidity ratios, capital structure ratios, stock security ratios, sales margin and return on equity. Moreover, the new approach applies the change in equity instead of the traditional approach measures of profit as the objective function to be maximized in the presented model. To show the attributes of the presented approaches, the results of the new approach and the traditional approach are compared. Findings: The findings of this paper indicate that the traditional approach leads to a lower change in equity compared to the new approach. Also, the results reveal the better improvement of using the new approach over the traditional approach and convince the decision-makers to take advantage of the new approach. Research limitations/implications: Empirical knowledge about FSCM is in its early stages. Originality/value: The main contribution of this paper is to define two approaches for FSCM and to compare them.