Supply Chain Diagnostic Concepts

Transcription

1 Inventory/Raw Materials Objective: To control inventory levels while satisfying both internal and external customer requirements in a timely manner. To correctly meet any regulatory, industry and technical requirements affecting stock levels. 1. What is the type of business; manufacturing, distribution, sales, or service? Manufacturing companies typically have the most complicated inventory management issues. 2. What are the specific characteristics of the industry and customer base that will impact supply chain management? For example pharmaceutical or chemical companies may have controlled substance or regulatory requirements that directly influence inventory levels. 3. Have critical commodities and raw materials been identified and classified? Has any type of spend analysis been conducted on the various classifications? 4. Are raw materials sourced domestically or are they imported? Imported items are subject to currency fluctuations and other risks. 5. Is manufacturing domestic or overseas? What is the ownership/tax structure of foreign operations? If separate overseas operations are subsidiaries, does the subsidiary have responsibility for inventory levels? 6. What is the nature of the distribution channel; retail, wholesale or through distributors? If distributors are used is there consignment stock or is it a direct sale? Are there any special return issues? 7. How are costs of inventory components such as raw materials, work-inprocess, and finished product determined? Is the costing by product line or by presentation, e.g. package size or type? 8. How are DOS (Days of Stock) calculations made and what is the rationale? 9. What are average annual inventory turns? How is this calculated? 10.What is the definition of safety stock? How is excess inventory defined? Is there a corporate policy on out of stock situations. 11.How is inventory valued (LIFO/FIFO)? What is the frequency of physical inventory checks and how is the standard costing system adjusted for production and other variances? 12.What categories of products and their presentation are the principal causes of inventory discrepancies? Are there consistent patterns of over/under estimates? Copyright 2005 Treasury Alliance Group LLC All Rights Reserved - Page 1

2 13.If the company is a manufacturer, are JIT (just in time) procedures in place with key suppliers? 14.What statistical methods have been and are being used to evaluate inventory levels, safety stocks and risk of out of stock situations? 15.To what extent are inventory levels affected by government or industry labeling and packaging requirements, e.g. delays in shipments caused by the need for official approvals or government imposed mandatory inventory levels for critical supplies? 16.Is an ERP system used? If so, which one and is it used throughout the enterprise? Sales/Accounts Receivable/Collections Objective: To meet competitively meet customer demand and fill orders efficiently. To reduce A/R levels given competitive credit term requirements and commercial realities of the business by industry or country. To collect money quickly without reliance on cumbersome manual collection processes. 1. What is the breakdown of sales volumes: domestic third party, export third party, and inter-company? Break this down by currency where relevant applicable. 2. Are there material differences between products in terms of margins, allocation to customer groups, or government controls? 3. What is the total value of annual sales made on credit? What is the total number of sales transactions associated with this value? 4. How is the customer s credit line determined and monitored? Who has the authority to remove a stop ship notice? 5. What is the average level of accounts receivable? What portion of this has been outstanding for less than 120 days? 6. How much leverage is there with the customer base? Is the company a price setter or a price taker? 7. What are the typical terms of sale e.g. net 15, net 30? How are the terms of sale determined? 8. Are discounts offered on sales? Who is authorized to approve discounted terms? Copyright 2005 Treasury Alliance Group LLC All Rights Reserved - Page 2

3 9. How do customers order e.g., salesman initiated, mail, phone, fax, internet, or B2B? If ordering is a manual process (phone, mail, or fax), are there initiatives in place to move to a more automated, web-enabled process? 10.How are customer orders entered into the system? Can this process be mapped? 11.What is the length of time from order/order entry until product/service shipment? Is there a target time frame? Is that target consistently met? 12.If there are delays in order shipment is this due to systems entry problems or stock shortages/outages? 13.Is there a common DSO calculation methodology within the company? What is the calculation? Does this provide adequate information to the Credit Control area? 14.Can DSOs be reduced further? Are there specific customer categories that present particular problems, e.g. government? 15.What is the method of customer billing (invoicing), e.g. EDI, Internet, manual, statement? What is the billing interval, e.g. daily, weekly, or monthly? 16.What is the number of billing centers? Can they be listed in order of transaction volume? 17.Is any aspect of the accounts receivable process outsourced? Examples include billing or collections. 18.What types of payment instruments are accepted in the collection process? Examples: checks, transfers, ACH, drafts, credit card, cash, and direct debit. 19.Has there been a trend by customer type, geography, or some other class to move from manual payments such as checks to electronic payments such as ACH or Fedwire? Are there incentives such as discounts offered to customers who pay electronically? 20.Are any specialized bank systems or services used? Examples include including automated lockbox and imaging. 21.Are export collections handled on open account, documentary credit, or Letter of Credit? 22.What is the average DSO for export collections? 23.How are exports collections received: wire, check, draft, or credit card? Copyright 2005 Treasury Alliance Group LLC All Rights Reserved - Page 3

4 24.Is there a special process for handling inter-company receivables? Are there common sales terms or is multilateral netting used for settlement purposes. 25.Are receivables factored, discounted or is there a securitization program in effect? 26.Is the financial module of an ERP system used for A/R? If so, which one? If not, what A/R package is used? Purchasing/Accounts Payables Objectives: To meet the supply requirements of the business expeditiously while obtaining the best pricing and terms. To handle the execution of payables transactions efficiently while maximizing supplier credit. 1. Have third party purchases and payables been categorized into productive materials including raw material purchases (domestic and imported), packaging materials, production equipment and capital expenditure items as opposed to non-productive materials including office supplies, uniforms, and advertising? 2. Is there centralized purchasing or is purchasing on a departmental/business division basis? 3. How does purchasing interface with manufacturing and other key user departments such as finance? Is there a treasury representative associated with purchasing initiatives? 4. How are supplies ordered; phone, mail, fax, internet, B2B? If ordering is manual (phone, mail, or fax) are there initiatives in place to move to an automated or web-enabled basis? 5. Is there a centralized AP department/center or is there a number of Accounts Payable centers and locations? 6. What are the number of transactions per month and average value of each transaction? 7. What portion of payments are to international suppliers? Are these payments issued in foreign currencies? How is that process handled? 8. What is the frequency of payment runs for various classes of payments; daily, weekly, monthly, or some other period? Copyright 2005 Treasury Alliance Group LLC All Rights Reserved - Page 4

5 9. Is payment processing handled in-house or outsourced? If it is outsourced, what components are outsourced, e.g. transaction issuance, stuffing and mailing, and reconcilement? 10.Have key types of suppliers been identified e.g. office supplies, gasoline, computers, communications, packaging, and uniforms? Has this information be used to streamline, purchasing processes, obtain preferred customer pricing and discounts? 11.Are purchasing cards used? If so, for what types of purchases? If not, are there any internal initiatives to move to the use of purchasing cards? 12.How are payment terms determined, e.g. invoice date, receipt of goods or service, or receipt of invoice? 13.What are average payment terms? 14.What are the types of payment instruments use, e.g. credit cards, wires, ACH, checks, and cash? Are the most suitable instruments used to ensure maximum control of cash outflows while also minimizing administrative costs? 15.Has there been a trend or initiative internally to move to a more electronic payment environment such as batch ACH or wire? 16.Are discounts for early payment offered and if so are they taken? Which types of suppliers offer these discounts? Are discounts based on web-based ordering/payment or some other criterion? 17.Can suppliers be stratified by gross purchases and outstanding accounts payable including payment terms and any discounts if offered? 18.How are average days to pay (DP) calculated? What was the average for the last three years? 19.How are inter-company payables handled? Is a settlement or netting system used? 20.Are there opportunities to offer financing to suppliers in return for better terms? 21.Is a financial module of an ERP system used for A/P, if so, which one? If not, what A/P package is used? Copyright 2005 Treasury Alliance Group LLC All Rights Reserved - Page 5