Financial Secrets That Make Your Supply Chain More Profitable

Published : September 9, 2015

Financial Secrets for Supply Chain Professionals

Years ago, the various departments of a business were once separate and distinct, almost like foreign countries that would send emissaries running back and forth between them. In the constantly moving, 24/7 world of today's operations, those borders have come crashing down in favor of cross-training initiatives and collaboration. Supply chain strategy is no stranger to borrowing ideas from other fields, and one of the richest harvest opportunities comes in the form of financial planning and implementation. What may be commonplace on balance sheets in an accounting department can revolutionize efficiency found in the supply chain.

Follow the Splashes

When anything disturbs the surface of a still pond, the resulting ripples can travel from shore to shore—a far-reaching result similar to the financial impact of your supply chain decisions. If you aren't completely aware of the holistic financial impact actions like switching boxes or package carriers will have, it's time to get more information.

Consider this: If an individual runs up their expense accounts beyond agreed limits, forgets to collect receipts, or fails to give adequate notice that an expenditure is on the horizon, an accounting department may expend a lot of time and effort trying to obtain justification and records after the fact. That effort means a higher cost (the "ripples"), which means any discount won by jumping the gun will end up nullified. If your logistics team is planning something big, make sure that you communicate and get feedback before proceeding, advise Jarrod Goentzel and James B. Rice Jr. of Supply Chain Quarterly.

Be a Financial Team Player

If you think invoices, net terms, and negotiation are solely the purview of your financial department and those of your suppliers, change your perspective and roll up your sleeves. As the individual or team that typically has the most contact with a supplier, you will need to make yourself available as a financial agent whenever possible. You have the power to affect everything from shipping speed to invoice terms, even if you are "just a logistics person." You already have an open line of communication, an essential tool to starting discussions. While you don't want to strain your vendor relationships, just like lowering a credit card APR or calling in an invoice to be paid, advantages are unlikely to be handed over without a little prompting. Dave Blanchard of Industry Week stresses that your own department's insider information, such as the tendency of a given vendor to under-fill orders, can impact accounts receivable and should be discussed openly during cross-proficiency team meetings. 

Get Comfortable with Metrics

Accountants and financial professionals rely on tools like spreadsheets and balance sheets to check the overall health of a company. In the warehouse and beyond, this "temperature taking" is done through metrics, which means you should have a healthy roster of your own ready to run at any given moment. Whether it's overall fill rate, shipping speed, damaged product or other categories, knowing these hard-and-fast numbers helps to drive smart decisions within the company, explains Jennifer Schiff of Enterprise Apps Today. In addition, they make excellent bullet points to present to C-suite members that might not be up-to-date on the nuances of supply chain strategy. Metrics go beyond best guesses and gut feelings, and turn the often-unpredictable outcomes of logistics operations into ones that can be measured and improved upon with a calculated method.

Your supply chain strategy depends on correct, timely information—a requirement shared by your financial department as well. Reach out to them and work together to ensure that the inevitable obstacles don't derail progress and every opportunity for dual-department growth is both identified and used. 

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Topics: Supply Chain Logistics

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