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Sustainability 2017, 9(1), 139; doi:10.3390/su9010139

A Linkage Model of Supply Chain Operation and Financial Performance for Economic Sustainability of Firm

1
Department of Information and Industrial and Information Engineering, Yonsei University, 50 Yonsei-ro, Seodaemun-gu, Seoul 03722, Korea
2
Business School, Kwangwoon University, 20 Kwangwoon-ro, Nowon-gu, Seoul 01897, Korea
*
Authors to whom correspondence should be addressed.
Academic Editor: Ilkyeong Moon
Received: 1 November 2016 / Revised: 10 January 2017 / Accepted: 11 January 2017 / Published: 19 January 2017
(This article belongs to the Special Issue Sustainability in Supply Chain Management)
View Full-Text   |   Download PDF [2130 KB, uploaded 19 January 2017]   |  

Abstract

Although several studies have explored the relationship between the operation and performance of a supply chain (SC), a general SC model cannot deliver the expected financial results at a company-wide level. In this paper, we argue that this cannot guarantee the maximization of a firm’s overall value because short-term financial performance metrics do not reflect the risk to businesses and the invested capital. Owing to the varying natures of risk and the capital invested, firms with multiple divisions should assess each division separately, and the results can be compared for decisions concerning the allocation of the firm’s capital and resources to maximize the overall value of its businesses. We propose a linkage model to consider operational activities and financial performance simultaneously in a firm’s supply chain model. To exhibit the superiority of the proposed model that connects SC operation and financial indicators, we first compare the differences between models for maximizing profit and enterprise-wise economic value added (EVA) as objective functions. To examine uncertainty in the operational and financial parameters of the SC, the results of sensitivity analyses are then reported. Experimental results showed that our model, using the EVA approach, is more effective and superior in terms of maximizing the firm’s overall value from the long-term perspective while satisfying the target values for financial ratios set by the firm’s executives and shareholders for all periods, unlike the results of the general model. View Full-Text
Keywords: supply chain operation model; financial supply chain model; firm value maximization; economic sustainability supply chain operation model; financial supply chain model; firm value maximization; economic sustainability
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Jin, S.H.; Jeong, S.J.; Kim, K.S. A Linkage Model of Supply Chain Operation and Financial Performance for Economic Sustainability of Firm. Sustainability 2017, 9, 139.

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