All ContentConnecting supply chain planning to pro?tability
Connecting supply chain planning to pro?tability
Why does finance need visibility
into supply chain?
Finance’s responsibilities stretch
across multiple areas of supply
chain and include:
Business and market volatility are here to stay—and leading companies know that
managing the financial risks associated with that volatility requires the supply chain
strategy to stay in lockstep with their overall business and financial goals. The need
for alignment across the business gives supply chain leaders a front seat at the
executive table while their peers in finance saw a new purview emerge: Leading
finance executives today have moved beyond traditional transactional roles—they
now also assume responsibility for bolstering financial performance by uncovering
ineffiencies within the organization and championing effective business processes.
•
Directly supporting optimal sourcing
•
Partnering with retail teams in vendor negotiations
to drive incremental profitability through reduced
freight costs and increased freight revenues
•
Partnering with research scientists and economists
to build inventory valuation and optimization models
•
Supporting vendor selection programs that influence
nearly all buying decisions for the business, resulting
in multiple decisions daily and considerable monthly
revenue
•
Supporting new technology programs that use
inventory management to improve customer
experience and financial performance
•
Reviewing and validating economic models and
analytics to ensure that initiatives are traceable
to financial metrics and resource allocations are
justified
•
Developing financial metrics based on statistical
modeling and simulation techniques to audit
initiatives
•
Preparing financial updates, including
relevant analyses versus prior periods, providing
forecasts/budgets, and examining associated risk/
opportunities with respect to technology resources
As a result, supply chain and finance executives now have the opportunity to
collaborate on a level that surpasses traditional monitoring and reporting in four key
areas, according to EY‘s survey, including:
•
Creating consistency across the supply chain, business, and corporate strategy
•
Supporting and challenging investment choices
•
Monitoring and enhancing performance
•
Managing risk and business continuity
Companies that have connected their supply chain and finance planning reap the
rewards. The survey also found that 48 percent of companies with established
“business partnering” relationships between finance and supply chain reported
EBITDA growth of more than 5 percent during the prior year. In contrast, only 22
percent of companies in which finance leaders have a more traditional, detached
relationship with supply chain executives achieve similar results.
48% of companies with established
“business partnering” relationships
between finance and supply chain
reported EBITDA growth of more than
5% during the prior year. - Ernst & Young
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Align financial forecasts with
demand planning and S&OP
“We achieved a level of integration
among supply chain commercial and
finance planning workstreams at a
level not achievable before Anaplan.
We can now look at what drives the
profitability of a channel, a SKU, a
customer on a monthly basis. And
the data and information is available
to decision-makers so they can
quickly make decisions beneficial
to the company. It guides actions.”
- Director, Supply Chain Finance, Del Monte
Predicting the future has never been easy. But it was a lot simpler when past
events were the best indicator of future events. Today, only uncertainty is
guaranteed. Using last year’s events as a basis to plan for what will happen
in the current year can be a recipe for disaster as demand patterns can vary
wildly from week to week and month to month, year over year. To match the
pace of change, planning and forecasting processes that used to be done
annually or quarterly now must to be conducted monthly and weekly in
order to stay competitive.
But a faster-paced planning process becomes nearly irrelevant if visibility is
lacking and information is latent. In the traditional monthly S&OP process, it
can take three weeks to address events that took place the prior month. As
a result, demand planning based on that information is already obsolete—
demand has likely already shifted by the time planning is completed. In turn,
financial forecasting, which relies on the demand plan, becomes unreliable.
Without a real-time, connected, and single view of demand, responding
nimbly to disruptions when they occur—and accurately predicting revenue—
is impossible.
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