Impacts of supply chain management on company value: benchmarking companies from the fast moving consumer goods industry

Abstract

The research question addressed is to which extent supply chain management (SCM) creates value from cost and working capital. The paper provides an empirical evaluation including insights on important criteria for value creation. In a secondary data analysis, 10 leading fast moving consumer goods (FMCG) companies are benchmarked regarding the value created from cost of goods sold (COGS) and working capital within the time horizon 2003-2008. The study applies benchmarking methodology and a discounted cash flow (DCF) based model for quantifying value contributions. It is shown that SCM is realized in a value-adding way with different emphasis on COGS or working capital. Monetarily working capital components (trade payables, trade receivables) have a high relevance for value creation. Continuous improvements and long lasting developments of value drivers are more appropriate for value creation than alternating improvements and deteriorations. Timing aspects of value driver developments have to be considered for value creation. The value of the paper stems from empirical comparison of value created by working capital and COGS and from evidence of important criteria for value creation. Further analysis based on cost components as well as benchmarking with different or extended content, such as fixed asset performance or cross-industry benchmarking, leave room for future research.

Supply chain efficiency, value creation and the economic crisis – An empirical assessment of the European automotive industry 2002–2010

“…One reason is the circumstance that conventional accounting systems do not inform about the true cost of customer service and thus, many firms do not know their SC cost (Pettersson and Segerstedt, 2013). In an analysis of secondary data from published annual reports, Brandenburg and Seuring (2011) compare COGS efficiency, working capital performance and resulting value impacts at ten fast-moving consumer goods manufacturers between 2003 and 2008. The authors observe a positive correlation between an efficient management of cost or working capital and resulting impacts on company value.…”

“…Value impacts resulting from changes of working capital or COGS within a time horizon P are determined by metrics V W and V C which are based on DCF (Brandenburg and Seuring, 2011;Brandenburg, 2013). Value impacts V W+C of both value drivers are defined as the sum of V W and V C .…”

“…The metrics V W and V C are directly derived from DCF (see Brandenburg, 2013) and can be employed for secondary data analyses to assess SCM-related value impacts as illustrated by Brandenburg andSeuring (2010, 2011). The metrics V W and V C measure the amount of change in DCF that is caused by developments of cost efficiency and of working capital performance, respectively.…”

“…Traditionally, the flows of goods and information were in focus of SCM (Cooper et al, 1998;Mentzer et al, 2001), but nowadays financial SCM, i. e. the consideration of financial flows in a supply chain (SC), is on the research agenda (Wuttke et al, 2013). Conceptual frameworks for financial SCM link operational activities and SC processes to financial performance and ultimately to shareholder value (Brandenburg, 2013;Rostami et al, 2013).…”

“…Deloof, 2003;Johnson and Templar, 2011;Kolias et al, 2011;Koumanakos, 2008;Losbichler et al, 2012) while only few studies take into account other aspects of value creation (e.g. Brandenburg and Seuring, 2011;Kieschnick et al, 2008), macroeconomic influences (e.g. Garcia-Teruel and Martinez-Sonalo, 2007) or particularities of specific industry sectors.…”