Operations-Finance Interface Models: A Literature Review and Framework
European Journal of Operations Research, 244 (3), 905 - 917.
Posted: 8 Jan 2013 Last revised: 28 Apr 2015
Date Written: September 9, 2014
Operations management aims to match the supply with demand of material flows, whereas corporate finance seeks to match the supply with demand of monetary flows. These two supply-demand matching processes are connected by real investment and revenue management in a "closed-loop" of resources. We propose a risk management framework for multidimensional integration of operations -- finance interface models. Ten aspects are examined to specify conditions under which firms should integrate operations and finance. We present categorizations of operational hedging and financial flexibility. By linking relationship analysis (complements or substitutes) and approach choice (centralization or decentralization) of integrated risk management, we find that: (i) Zero interaction effects between operations and finance lead to decentralization. (ii) Operations and finance should be centralized even if they are partial substitutes.
Keywords: Operations-finance interface, supply chain management, operational hedging, finance, risk management
Suggested Citation: Suggested Citation