In this Task 1-B-5 the supply manager is being challenged to think creatively about strategy relating to financing and leveraging for B2B purchases. In other words, the leader-supply manager will not simply expect the finance folks to come up with the money to pay for purchases but will be alert for ways to help the buyer's organization without harming the seller’s interest. This section lays out 16 methods of trying to apply financing and leveraging strategies. The first five of these sixteen are:
- Cash flow of the buying organization should be something the supply manager should keep in mind before placing large orders. So just before placing a large order with an existing supplier the supply manager can check with finance and find a solution of splitting the order or discussing extended payment terms with the supplier. Doing so helps with keeping orders on track, keeping payment promises and the supplier committed.
- Interest rates impact supply managers because if money is expensive large orders that stay as inventory becomes expensive. Becoming more alert to JIT (Just in Time) supply possibilities is an option to consider. Also financially weaker suppliers become more vulnerable as interest rates rise and the supply manager needs to carefully monitor these "at risk" suppliers.
- Payment Terms to suppliers is one of the most direct ways that supply managers can help with their organization's cash flow challenges. This does not mean that a "one size fits all" approach is taken. Thus while Finance folks may want 180 days the supply manager must carefully ensure that their payment terms are in line with the supply industry. For example where the supply industry is used to 30 days payment a suggestion of 180 days payment will result in poor reputation or even panic in the supplier community.
- Depreciation is something that happens in the books. But it gives cues to Supply managers to plan for replacements or leases ahead of time as depreciation and obsolescence sets in for plant and equipment.
- Market conditions include the stage of the product life cycle for which the supply manager is buying. Thus at the introduction phase the supply manager should not buy too much raw material but be able to calibrate supplies to reduce the risk of lower than expected sales. On the other hand in the growth phase, having production stop due to supply shortages is avoidable. Also important is the Risk-Value nature of the category being purchased as was discussed in the earlier post on this topic.