Modeling of financial supply chain

The research work on supply-chain management has primarily focused on the study of materials flow and very little work has been done on the study of upstream flow of money. In this paper we study the flow of money in a supply chain from the viewpoint of a supply chain partner who receives money from the downstream partners and makes payments to the upstream partners. The objective is to schedule all payments within the constraints of the receipt of the money. A penalty is to be paid if payments are not made within the specified time. Any unused money in a given period can be invested to earn an interest. The problem is computationally complex and non-intuitive because of its dynamic nature. The incoming and outgoing monetary flows never stop and are sometimes unpredictable. For tractability purposes we first develop an integer programming model to represent the static problem, where monetary in-flows and out-flows are known before hand. We demonstrate that even the static problem is NP-Complete. First we develop a heuristic to solve this static problem. Next, the insights derived from the static problem analysis are used to develop two heuristics to solve the various level of dynamism of the problem. The performances of all these heuristics are measured and presented.