1. Presented by: S.M.Tabatabaee Nasab

2. Cost focus Successful supply chain organization is shifting from a single firm cost focus on inventories, facilities, and transportation to a multi-enterprise focus on cycle time compression, systemwide cost reduction, and improved value for end customers. (Langley & holocomb, 1992)

3. Three paths to economic success: the micro view Margin management Asset management Financial management

4. Margin management Margin management is concerned with the revenue streams from sales, less the cost of goods and services provided by suppliers and less the firm’s selling and other operating expenses. Margin management focuses on net profit divided by sales

5. Net profit margin Net profit margin% Net profit Gross profit Net sales Cost of goods sold Total expenses Net sales - - /

6. Asset management Asset management is concerned with the investment made to produce the revenues of the company. The productivity of these asset is an important managerial concern.

7. Asset turnover Net salesTotal assets Current assets inventory Accounts receivable Other current assets Fixed assets / + + +

8. Financial management Financial management is concerned with the source of funds used to conduct the business. Because the cost of capital and associated risks vary by source of funding, financial management is focused on achieving balance between debt and equity to provide an acceptable amount of financial risk and leverage to achieve targeted returns on equity.

9. Financial management Balance sheet liabilitiesassets equity Total liabilities & EquityTotal assets LEVERAGE Total Assets/ Equity

10. The du pont model F.Donaldson Brown created this useful model in 1914. The du pont model is a reliable tool to aid supply chain managers in determining the outcome of project ideas. (cavinato,1989)

11. The du pont model Return on investment Financial leverage Return on assets Net profit margin Asset turnover * *

12. ROE 15% F. Leverage 2.2 ROA 6.8% Net margin 3% Net profit 3$ Gross margin 40$ Net sales 100 Co gs 60& Total cost 34$ VC 12$ FC 18$ Inv. C 4$ Tax 3$ Sales 100$ Asset turnover 2.27 Net sales 100$ Total assets 44$ fixed assets 18$ current assets 26$ Inventory 16$ Acc. Rec. 8$ Other ca 2$ Total equity=20$ Inventory cost= 25% Base case

13. ROE 20.3% F. Leverage 2.2 ROA 9.2% Net margin 3.5% Net profit 3.5$ Gross margin 40$ Net sales 100 Co gs 60& Total cost 33$ VC 12$ FC 18$ Inv. C 3$ Tax 3.5$ Sales 100$ Asset turnover 2.63 Net sales 100$ Total assets 38$ Fixed assets 18$ Current assets 20$ Inventory 12$ Acc. Rec. 6$ Other CA 2$ Total equity=20$ Inventory cost= 25% new case

14. Financial focus of the supply chain executives Expense control Capital budgeting Cash flow generation

15. Q&A