In an interesting article, McKinsey Quarterly provides a nice overview of the resource scarcity problem. Driven by 3 billion new middle class consumers in the next 20 years, huge shortages are expected of many natural resources. Interestingly, their data also shows that price volatility has not only increased, but also that the correlation of prices of different commodities has substantially increased.

The article’s Exhibit 2 lists a whole series of measures that can be taken to increase resource efficiency. Then, they list a series of technologies to help these get realized. Oddly enough, the two opportunities that contribute the most in efficiency gains in this Exhibit are not discussed explicitly. However, both of them are cost efficient; and both of them are at the core of TU/e’s smart mobility initiative: Road Transport Shift and Electrification and Hybridization of vehicles.

It has also become clear from earlier analyses of the European Commission that the growth in transport (particularly road and air, both for passengers and freight) is responsible for a much larger share in the growth of carbon emissions than they are in current emissions. Consequently, research on transportation energy efficiency is crucial to maintain livability on our planet.

Supply Chain Finance has received loads of attention ever since credit became scarce in late 2008. Interest in factoring, reverse factoring and purchase order financing has soared. A  supply chain manager of a major corporation recently summarized her company’s objective quite clearly: Reduce working capital. While this in itself might be a useful from some perspectives, true supply chain finance optimization should do much more than that. This is based on the premise that even in the finance literature there is increasing doubt on the empirical validity of the famous Modigliani-Miller theorem. Especially the existence of information asymmetry would argue for taking the operations characteristics into account when deciding on finance decisions. This explains to a large extent why banks are increasingly interested to better understand operations.

However, supply chain managers generally still disregard the potential operational benefits (and trade-offs for that matter) of supply chain finance. Let’s take the example of reverse factoring. Reverse factoring enables a (small) supplier to finance its working capital at the (lower) interest rates of its (large) customer. As a consequence, this buyer will decide – if optimizing its inventory decision – to increase its inventory. The buyer has a lower cost of capital, and hence inventory has become cheaper. This will increase the service level that the customer experiences. A clear operational benefit for the customer, which is usually the initiator of the reverse factoring arrangement – and driven by working capital reductions.

Supply chain managers need to better understand finance. This has been argued by many. I would however like to add something to this sentence: Supply chain managers need to better understand finance – to improve their operational performance. Any supply chain manager acting in this way will really add value to his company.