Margaret O’Donnell, executive education program manager at Rutgers Business School (RBS) noticed that participants in the Rutgers Mini-MBA: Supply Chain in a Digitized Network program took particular interest in the concept of Supply Chain Finance when it was touched on in their recent classes.
Enough so that she approached the person who brought it up about expanding the topic into a full module in the program. John Impellizzeri is a retired supply chain executive from Schindler Elevator Corporation who now serves in multiple capacities at Rutgers Business School. He is a professor of professional practice, director of RBS undergraduate programs on the Rutgers Newark Campus, and the co-director of the .
O’Donnell asked Impellizzeri about why he thought there was such a keen interest in this specific area – it’s unusual for a broad base of attendees in an open enrollment program to all hone in on what was seemingly such a niche within the market.
Highlights of their discussion follow:
John Impellizzeri: I can tell you why the participants were all so interested in this topic – they are living it! They know their scorecard metrics have changed in the last five years. Whereas the supply chain success used to be measured by predictability and responsiveness, there is now an entirely new aspect that is fundamentally aligned to the CFO’s office. New metrics include the supply chain’s impact on profit and loss, and on cash flow. And not in a passive way!
Margaret O’Donnell: So this is much more than organizations wanting hold of their money while an item is in transit?
Impellizzeri: Yes! For some time now there have been companies (banks, Fintechs etc.) willing to take on a buyer’s payable with a supplier and thereby extend the payment terms for the buying company and offer discounted early payments to the suppliers. The credit worthiness is measured by the larger company, usually the manufacturer, allowing the smaller company downstream access to financing at rates and terms that would normally be out of their reach.
O’Donnell: What are companies doing differently now?
Impellizzeri: There are additional pain points in finance. The supply chain is under scrutiny because they “own” so much of the balance sheet, as well as critical elements of the P&L. Doing the right thing for the supply chain has not always been the best thing for the finance big picture. What companies are doing differently now involves measuring the impact of supply chain decisions on free cash flow and the corporate bottom line.
O’Donnell: It sounds like a more proactive approach. How are they able to do it?
Impellizzeri: This breaks the traditional molds of both the finance and the supply chain roles. Even recent graduates aren’t quite prepared for this – very few degree programs are teaching this concept. At Rutgers Business School, we take a case approach and look at the process in this way:
- Recognize the financial needs of the business
- Focus on EXTERNAL benchmarking (best in class)
- With overall strategy in mind, look at the supply chain levers that can drive the desired financial result. Think through risks and mitigation plans.
- Map 3-5 years pro forma financial statements
- Pitch to management or the board
- Execute with measures in place
- Frequently revisit and adjust as necessary
O’Donnell: What makes it so challenging?
Impellizzeri: One of the biggest challenges is that lots of potential changes will be identified, but only a few things can be implemented at one time. Remember, this isn’t something that supply chain professionals are doing instead of what they used to do – it is in addition to what they’ve always done!
O’Donnell: Given this new paradigm, what are your recommendations for Supply Chain Professionals?
Impellizzeri: It is the new normal for supply chain professionals to be under increased pressure to deliver goods and services with enhanced customer experiences all the while staying especially mindful of the corporate financial implications of their actions. A critical element will be training. I hope to see the supply chain finance concept embedded in undergraduate and graduate level curriculum – and until it universally is, I recommend that supply chain majors seek out as many finance electives as possible. For current practitioners, I encourage an executive education program that addresses supply chain finance. Let’s embrace the increasingly important role of supply chain and rise to the occasion!