Dynamic Discounting and Flexible Invoices Payment Scheduling for Supply Chain Financial Performance Optimization

The financial supply chain involves the flow of cash through the physical network. These financial flows still function as they have done over the last thirty years. The management of financial flows is complex because the delivery or receipt of a product or service does not necessarily give rise to immediate collection or disbursement. This delay in synchronisation has a significant impact on working capital and forces companies to seek almost the same visibility in their financial flows as in their physical flows. Different supply chain strategies can be used to improve working capital. Companies can either manage their inventories more efficiently, reduce DSO (Days Sales Outstanding) and customer payment terms, or increase DPO (Days Sales Outstanding) by paying suppliers on later terms. In this paper we address the problem of scheduling invoice payments to improve working capital performance. We model the problem using a GA and develop a metaheuristic to solve it by conducting an experimental analysis.