Unlocking Supply Chain Agility: A finance-led conversation
Much has been said about agility in global supply chains over the past few years. More specifically, the adverse outcomes when you suffer from a lack of it.
While it’s hard to argue that agility is incredibly important – after all, who doesn’t want to be responsive and resilient in the face of ongoing disruption? – it’s still a very hard principle to properly define and understand, let alone introduce to the enterprise in a meaningful way.
In the end, agility is a nebulous concept – it means different things in different contexts. If you’re starting from a low level of operational maturity, you’re not going to become wondrously agile overnight – even if you bring in the best people, processes and tools you can afford. However, the good news is that agility can be unlocked in stages, and it’s possible to find a level of maturity that is “good enough” rather than “best in breed”.
Linking agility to financial outcomes
Even more importantly, agility can be delivered with an eye on the headline financial drivers that define your overall success or failure as an organisation. A Finance-led conversation, backed with data from your IBP process and robust scenario modelling of various “what ifs”, will help to link high-level performance drivers and financial KPIs, whatever they happen to be for your enterprise.
Importantly, this will also help minimise or eliminate entirely the dreaded “knee jerk” (reactionary) activity – where your company finds itself scrambling to manage the latest unforeseen change in the market.
In our experience, once a company introduces a robust IBP process, leaders are usually surprised to find that the most obvious solution to an immediate challenge is not necessarily the one that will bring the greatest benefit to your business in the longer term.
However, without access to the right data to model those outcomes, there’s simply no way of knowing that for sure. As the old saying goes, plan the work, then work the plan.
To get the conversation started, here are three questions that can help inform a Finance-led discussion about Supply Chain agility and responsiveness.
Who are our strategic customers, and where do we want to increase our market share?
Rather than taking a “first come, first served” approach to allocating constrained inventory, there are benefits to adopting a more strategic approach to customer segmentation – particularly in cases where there is likely to be limited supply of a particular product in the future.
For example, while you may be able to sell more of a particular product to Company A in the short-term; there may be longer-term benefits to diverting some of that supply to Company B (such as reputation building in a priority market, or receiving a higher price and margin).
With the right processes and tools in place, it’s even possible to establish different strategies for various customer segments, with tailored service levels based on the importance and profitability of each channel to market.
How will we respond to unexpected competitor activity?
Supply-chain enterprises are frequently faced with unforeseen challenges at a very granular level. One example of this might be a direct competitor launching an aggressive marketing campaign targeted at a particular state, city or even more localised than that.
On one hand, the Supply Chain department finds itself battling yet another fire, seemingly without warning. On the other hand, Finance is getting frustrated because there’s an immediate impact on performance.
While both perspectives are valid, the answer to this common scenario lies in adequate Finance and Supply Chain collaboration. Rather than reacting with some short-term maneuvers to plug the gap in that particular market, organisations with IBP in place will be able to respond by working through the longer-term impacts of a range of scenarios, for example:
If you’ve already received pre-approval for your scenarios at a company leadership level, or if you can quickly model the current scenarios and options, it’s possible to pivot and respond to competitor activity in a matter of days, rather than weeks.
How will we manage long-term socioeconomic trends?
Sometimes socioeconomic or demographic shifts can be relatively quick, such as in the case of the Covid-driven work-from-home (WFH) movement. In just a few short years, purchasing power that was previously heavily concentrated in metropolitan areas during working hours has become ever more decentralised.
More commonly, these shifts are far more gradual; and can be driven by a range of factors such as government policy, infrastructure and building investment and living standards. Increasingly, climate-related drivers will also come into play.
By bringing data from external sources into your IBP mix, you’ll be far better placed to respond to these longer-term trends with better investment decisions. A great example of this is large retail organisations that incorporate development and demographic data to make decisions around where to purchase land, and then build new shopfronts to service planned residential developments.
However, with the right data it’s also possible to be agile and responsive to macro trends in the shorter term – for example, by reworking the product and pricing strategy in an existing location; or by pivoting to online distribution through an on-demand provider such as Uber to service a large geographically dispersed WFH population.
A Finance-led conversation can help unlock supply chain agility in stages. With the right people, processes and tools (the all-important PPT framework), agility can be more than just a buzzword. It can become a way-of-life in your organisation, and the competitive advantage required to take you to the head of the pack.
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.
