supply chain alignment

BI, Analytics & Reporting

- 3 min read

Understanding financial and operational alignment in turbulent times

Most companies now operate several different Supply Chains within their businesses, typically due to growth acquisition or product proliferation. Variety and variation have resulted in a long tail of products and a complex network of production processes. Naturally, businesses are looking to manage this variety of speed and cadence through various tools or spreadsheets, which results in siloed thinking and islands of optimization. On top of this are the significant changes in demand, supply, and fulfillment – meaning many businesses have lost the ability to drive fresh initiatives. Spreadsheet-based planning remains a go-to process, doing little to help the need for Supply Chains to flex in ways previously unrequired.

Planning alignment ensures better decisions

Maximizing performance requires understanding the relationship between metrics and departmental drivers, with the ability to model, compare, and make the most from opportunities for improvement. At the sharp end, Supply Chain teams use spreadsheets, which are backward-looking and disintegrated from the business’s day-to-day operations. The propensity to use spreadsheets has only worsened the situation as planners have wrestled with the need to support decisions in these challenging times of uncertainty and change.

Making changes to planning sounds easy, but the planning processes typically drive to local optimums rather than global or regional initiatives. Managing complexity amid uncertainty with disparate and isolated tools results in unpredictable behavior and unreliable results, particularly in the frontier of profitable and feasible decisions.

Supply Chains are manageable with similar metrics, but the plan still needs to be achievable. Goals need to consider both financial and physical limitations. A common challenge is that unrealistic goals lead to reactive and misaligned performance.

A key area of misalignment is at the interface of finance and operations, where plans are becoming more siloed as both departments drive towards separate localized measures. Instead, they need to move towards a shared understanding of:

  • what a good plan might be
  • how to model variability
  • how to tackle risk and variability.

These areas are modeled in different systems, utilizing various measures to produce disconnected and sometimes conflicting plans. The complexity continues to increase, necessitating an even greater need for alignment. Most companies, however, are challenged by the assumption that an efficient supply chain is the most effective. Plans, therefore, are driven in specific ways.

The need for greater intelligence in Supply Chain planning

The profitability of a plan is built upon financial assumptions that elements like oil prices, container prices, and plan stability remain the same as experienced in previous years. The simple reality is that these key drivers and parameters are increasing.

Companies talk about end-to-end thinking while still working in regionally optimized areas. This creates hidden costs and often slows Supply Chains down. Inventory is pushed out of business and into the end-to-end Supply Chain itself, resulting in increased delays or significant write-offs, waste, and write-downs.

These tensions have led to a need for further research and better understanding to drive more intelligent planning processes that are more readily aligned and better synchronized to changing and adaptive business objectives.

Current planning processes are under pressure from so many different directions; the most critical objectives are first understanding where the disconnects are. Next is to identify the opportunities for improvement. Last is to demonstrate where new thinking in a unified view can be applied, allowing executives to make better, more informed decisions with intelligence and insight.

Learn more with Supply Chain experts

We all recognize the need for better and more holistic planning. This requires a consideration of the internal and external drivers, reviewing potentially outdated behaviors, and a better understanding of what is now possible with responsive, integrated planning tools to facilitate better and more responsive decisions.

We also understand the need for greater insight and the opportunity for improvement in understanding new practices and processes, so we are collaborating with Lora Cecere from Supply Chain Insights with further research and insight to drive successful, intelligent planning forward.

Be sure to download the webinar, where I discuss with Lora new research into:

  • The current disconnect between Finance and Supply Chain
  • Creating cohesion between Finance and Supply Chain
  • Planning for unexpected events
  • The foundations of an executable and profitable plan

Watch the on-demand webinar.

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Improving Financial and Supply Chain Alignment webinar

Eliminating bottlenecks in cross-functional processes to improve outcomes