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"Supply Chain Management
Credit Terms",
presented by Dr. Darren Prokop,
Professor Emeritus of
Logistics, University
of Alaska Anchorage.
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What is supply chain management?
It is the linkage
of organizations
in order to meet
some strategic goal.
Linkages could be
achieved through
contractual
relationships or through
mergers and acquisitions.
Linkages could be more
informal and involve
a joint venture
or strategic alliance covering
a more limited
business activity.
In any case, the intent of
supply chain management
is to foster
trusting relationships
whereby the partners
are more valuable
together than apart.
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Why should a
customer purchase on
credit such things
as tangible items,
i.e. raw materials,
subassemblies and
final goods or intangible
items i.e. services.
Why should a vendor extend
credit to a customer?
A vendor may decide to
extend no credit at
all requiring either
cash on delivery,
COD or even cash
before delivery CBD
while CBD carries no credit risk
for the vendor, COD still might.
Suppose the vendor arranged for
transporting the item
to the customer,
but the customer
for whatever reason
refused to accept the delivery.
This leaves the vendor to
have to deal with the
for-hire carrier that was
contracted to transport the item.
The vendor may have to absorb
all shipping and handling costs
unless and until the vendor and
the customer can work
out their differences.
This talk concerns credit terms.
Suppose the customer
and the vendor
agree to the item being
purchased on credit.
But what if the customer
is also a vendor?
In other words, the vendor has
a customer and that customer
is a vendor to its own customer.
This is what happens as one
proceeds downstream
along a supply chain.
Value is added as the item
proceeds to a final customer.
A customer may want to extend
