Final answer:
The scenario described is an example of a lack of integration between supply chain management and financial management. The company's decision to accept net 7 payment terms without aligning it with their financial capabilities resulted in cash flow problems, highlighting the importance of interdepartmental coordination.
Step-by-step explanation:
Lack of Integration in Supply Chain and Financial Management
The procurement group for a small company decides to concede net 7 payment terms to a supplier in order to get a good price on a component. However, this concession has led to the company experiencing cash flow issues almost immediate.
This situation exemplifies a lack of integration between supply chain management and financial management or financial planning. Decisions made by procurement without considering the financial implications and planning can lead to disruptions in the company's operations.
Most supply chain issues can be mitigated through advancements in technology, efficient transportation methods, and proper policies, especially during national emergencies.
To improve supply chains and protect labor rights, companies must change their labor policies and invest more in their workforce. Also, considering the impact of just-in-time delivery on labor and the broader supply chain is crucial for stability.
Coordination challenges often arise in decision-making groups, leading to transaction and conformity costs. When procurement decisions disregard the company's overall financial health, it can result in negative outcomes, such as cash flow problems.
Therefore, it's essential to have an integrated approach between procurement strategies and the financial department to ensure business continuity and prevent disruptions like those experienced during the COVID-19 pandemic.