Reining In Financial Risk In Supply Chain Management

Milton Keynes, UK, December 1, 2009 — International headlines appear on a weekly basis declaring the consequences caused by inappropriately managing supplier risk throughout the supply chain management process, says Simon Clark, Business Development Manager-Europe, Middle East & Africa, for CargoWise® edi, a leading provider of integrated international supply chain logistics management systems. And, he says, during this still unpredictable business climate, the list of financial risks continues to grow.

"Logistics service providers (LSPs) in the air freight sector are often lax in administering the financial risk involved with managing their suppliers at a time when diligence is critical for business success," says Clark. "In business today it is vital to keep a tight rein on all finances, to keep expenditures under control and identify true ROI. From a credit management point of view it is essential to maintain control over the financial status of debtors to minimize the risk of building bad debt; and from a service cost perspective it is also important that LSPs ensure that their credit lines with vendors are adequate without causing unnecessary financial risk."

Clark points out that a clear and total view of all company finances is needed to ensure the overall well-being of a business. An accurate assessment of its complete monetary risk situation is necessary to ensure that its credit control team is monitoring all activity, chasing the right debt; and that its procurement team can carefully weigh the offers being made by suppliers. Similarly, he says, companies must not forget the significance of assessing revenue stream when reining in financial risk. From the moment an operator prices a job at entry point, the ideal situation is to have complete visibility of the entire job process through an accrued revenue method, he says. Once the job is correctly entered into the accounting system it is important to manage it closely to ensure it is invoiced to the correct person in the correct company for the correct value with the correct terms.