From discord to cohesion: Enhancing collaboration between Finance and Supply Chain
“The Supply Chain department isn’t executing our financial strategy!”
“Finance doesn’t get what we’re dealing with over here – of course the forecast is off!”
If this sounds familiar, you’re not alone. We know of too many enterprises that are suffering from a fundamental disconnect between the Finance and Supply Chain departments. And that discord is bad news for business.
There are a few reasons for this. When it comes to culture and attitude, the average Finance department thrives on certainty. In larger enterprises in particular, there’s pressure from head office to get the numbers right – or as close to right as possible.
Meanwhile, Supply Chain departments are exposed to a high degree of uncertainty. External events, changing customer behaviour and competitor activities can (and do) throw a spanner in the works.
One day, you might be very confident you’re going to meet the targets that have been set by head office. Then something happens, and confidence in the numbers plummets. You’re forced back into reactionary mode, replanning the forecast and communicating the revisions back to all stakeholders.
But is it possible to move out of reactionary mode? The answer is a resounding yes.
Alignment + data + collaboration = better decisions
With better collaboration between Finance and Supply Chain – and in particular, better alignment between financial strategy and operational execution, supported by accurate data – companies can enhance decision-making, planning, forecasting, budgeting and reporting. At a tactical level, there can be better understanding of key financial metrics such as working capital efficiency, cash flow, inventory turnover and profitability of the company’s various products and services.
On the other hand, a lack of effective collaboration can have dire consequences. Functional silos are synonymous with an inefficient supply chain, and all that entails: production delays, increased costs and customer dissatisfaction.
Unfortunately, there is no “quick fix” for the Finance – Supply Chain collaboration issue; however there are strategies that will help drive improvement over time. Let’s take a look at three of those now.
1. Bridge the attitudinal gap between Finance and Supply Chain
While fluctuations in Supply Chain forecasts may be unavoidable, it’s also very frustrating for a Finance department that is relying on these numbers to make sound financial investment decisions and plan for a right-sized workforce. We’ve seen this tension playing out as an “us versus them” mentality in many cases – Finance v Supply Chain in a boxing match to the death.
This is dangerous territory to be in. Cultural gaps and tension between teams are likely to increase organisational silos rather than drive much-needed collaboration. A more productive focus is for Finance and Supply Chain teams to find ways to bridge the attitudinal gap.
For Finance, that might mean developing greater tolerance for some degree of uncertainty – whatever that means for your industry. Remember, there’s no such thing as a 100% accurate forecast. However, there are steps you can take to reduce the margin of error to a tolerable level.
For Supply Chain, shared KPIs based on the company’s financial performance – and a regular integrated business planning (IBP) process that drives alignment with those KPIs – will help to keep your head in the Finance game.
2. Get back to the PPT framework
Poor interdepartmental collaboration can almost always be attributed to weaknesses in the people process technology (PPT) framework. When all three are working in cohesion, supported by an IBP methodology that straddles both Finance and Operations, in theory you should find yourself agile enough to respond quickly to different scenarios, as soon as they arise. If you’ve got your responses to a range of scenarios pre-approved by executive leadership in your back pocket – even better.
However, if one or more elements of the PPT framework are out of balance, it’s hard to find collaborative nirvana. Thankfully, there are levers you can pull to get things back into balance – even if it’s just for the short term while you devote your time and energy to solving larger challenges.
For example, we know of many organisations that struggle with resourcing in the Supply Chain department, which has been exacerbated by broader headcount freezes and market conditions. However, some of these organisations have been able to mitigate resource issues by deploying planning solutions that have enhanced capabilities that mitigate the requirement for additional resources to support operational requirements. Meanwhile, this bought leadership some valuable time to introduce a basic IBP methodology with scenario planning built-in, which was strengthened and integrated with the new tool over time.
In recent years, numerous organisations have faced significant resourcing challenges in their Supply Chain departments, a situation worsened by headcount freezes and challenging market conditions. To address these issues, many companies have turned to advanced planning solutions, which can improve performance without increasing dependency on additional human resources.
Planning tools offer a range of capabilities designed to enhance efficiency and streamline supply chain processes, which in turn can help to ease resourcing challenges and maintain (or even improve) your service levels. With the right tools, you can both address your current challenges as well as start to prepare for future uncertainties and demands.
3. Hit the reset button with an external perspective
Sometimes life in a supply-chain department can start to feel a little like groundhog day – with the distinct feeling that something isn’t quite right, and you can’t quite put your finger on what it is. You may find yourself reacting rather than responding; fighting fires on a near-daily basis to solve whatever emergency has arisen. It can feel like there is no relief or support on the horizon.
Rest assured, you’re not alone in feeling this way. The old saying about having no time to work on the business when you’re too busy working in the business is valid here. There’s little scope to improve things when you’re always fixing things that are broken.
It can be incredibly helpful to get an external perspective to assess your environment, uncover any deficiencies in how Finance and Supply Chain are collaborating, and help devise a strategy for improvement. Even if you’re operating in a resource-constrained environment (whether people or funding), it’s still possible to drive staged improvement over the course of a few budget cycles.
Turning discord into cohesion
Building a bridge between Finance and Supply Chain isn’t easy, but it’s worth it. By fostering collaboration, optimising processes and seeking an external perspective, businesses can turn discord into cohesion. When Finance and Supply Chain dance to the same tune, everyone benefits.
We are enablers of change and transformation in Supply Chain, Information Management, Financial Planning & Analytics, Management Consulting, Project Management, and Managed Application Services. Contact us to find out more about how we work with your teams or call 1300 841 048.
