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

See all articles by Lima Zhao

Lima Zhao

WHU - Otto Beisheim School of Management

Arnd Huchzermeier

WHU - Otto Beisheim School of Management

Date Written: September 9, 2014

Abstract

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

Zhao, Lima and Huchzermeier, Arnd, Operations-Finance Interface Models: A Literature Review and Framework (September 9, 2014). European Journal of Operations Research, 244 (3), 905 - 917., Available at SSRN: https://ssrn.com/abstract=2197439 or http://dx.doi.org/10.2139/ssrn.2197439

Lima Zhao (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Arnd Huchzermeier

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
+49-261-6509380 (Phone)
+49-261-6509389 (Fax)

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