Five ways of improving business outcomes by applying finance-forward approach to supply chain planning

Traditionally, supply chain planning and finance teams haven’t always spoken the same language or been the greatest of allies. Both of these customarily siloed teams contribute significantly to their company’s profitability but have done so independently of one another. What happens if we change that dynamic and the supply chain planning team aligns with finance? When we align the supply chain and its KPIs with the income statement and balance sheet, the entire enterprise can respond more quickly to disruptions, be more agile, and better meet

Let’s take a look at the top 5 benefits of a finance-forward approach to supply chain planning.

Finance and supply chain still maintain focus on supply chain KPIs

Data flows transparently through all systems, giving everyone more valuable information at their disposal.

Finance gets more visibility into overhead and allocates money more efficiently.

Supply chain planners can align customer orders and improve fill rates while ensuring the right inventory is available with higher accuracy. Their decisions are integrated into the financials, and they can see the financial impact that they have.

Better management of goods and inventory

Finance gains visibility into both supply and demand and can base its decisions on more acute data such as sales forecasts, procurement expenses, manufacturing costs, and cash flows.

Supply chain planners can better optimize inventory with more freedom to automate buying processes and support longer-term decision horizons.

If the supply chain needs more inventory for a promotion, everyone can see the balance sheet impact and understand the financial cost of that decision.

Improve resiliency and agility

A resilient solution connects demand and supply so forecasting changes on the demand side are automatically reflected on the supply side, as well as in the financials.

Users can run scenario analysis to get a range of probabilities from the minimum to the maximum forecast and planners can then make more sustainable decisions.

The better the model, the more effectively both the supply chain and finance can manage change and unforeseen variables.

In the end, reducing inventory surplus and forecasting low demand will improve the bottom line and reduce supply chain costs.

Consistent, accurate measurements of performance

Although finance and supply chain maintain different timelines, they are aligned on metrics and reports have input from both to provide an accurate view of the health of your company.

When systems are integrated, there is no lag time and information flows transparently to all stakeholders. The result is fewer surprises and better alignment across KPIs.

Adopting a finance-forward approach lets businesses gain a more complete view of their financial and operational health.

Improved risk management

When forecasts and demand signals are connected, you’re better positioned to assess and manage risk.

Eliminating the lag time between supply chain and finance time horizons allows you to see impacts and volatility more clearly. Decisions can be made quickly and confidently with near real-time visibility into critical KPIs.

A new finance-forward perspective allows you to put more reliable risk-management plans in place.