Why every stakeholder should care about supply chain financial management

The key to turning business uncertainty into opportunity could be innovative supply chain finance strategies. But how do you make sure you create a strong basis for growth in unstable times?

Manufacturer and producer businesses in all sectors are facing uncertainty, from demanding customers to fluctuating currency rates – not to mention the impact of the COVID-19 pandemic and international trade wars. But rather than simply reacting to instability, how do you find opportunity within the uncertainty?

You’ve probably already introduced initiatives to help the company balance sheet – such as negotiating better payment terms, staged payments or discounts for early payment of supplies and services. Or you might be looking to new technologies to make your businesses work more efficiently.

But it can be easier said than done. Because while you understand the benefits of adopting stringent, forward-thinking supply chain finance strategies, they can sometimes feel at odds with what other stakeholders and business divisions want to achieve. And it can be hard to convince senior business leaders to invest in your ideas – especially if they’re focused on innovation or investing in other areas. So, how can you get everyone on board with your objectives?

We asked a number of financial decision-makers in manufacturer and producer businesses like yours how they collaborate with various stakeholders. We asked them to share their experiences of making their voices heard, and how it helped them improve their supply chain finance management.

Are your business and supply chain strategies working together?

Improving the financial management of your supply chain can offer significant business benefits. The trouble is, many businesses think of it as a backroom function. So, they neglect it – instead focusing their attention on growth at any cost. But this can have a detrimental effect. As one CFO of a mid-market clothing manufacturer told us: “Despite the desire from other senior stakeholders to pursue growth, we have to balance our stock commitments and supply chain capacity with demand. With visibility into the state of health of our supply chain’s finances, I’m in a better position to advise other company leaders on when it’s safe to push for growth.”

Similarly, many companies want to keep cash in the business, in order to make finances appear healthy. But this can also cause problems. A group treasurer at a global corporate in the construction industry says: "My CFO stresses the importance of meeting our cash flow target – he sees it from the perspective of investors who look at net income flow... The need to keep cash in the business to make our balance sheet look good… makes my job difficult."

There will always be competing objectives from different areas of the business. The Sales team, for example, may see payment terms as a bargaining chip to secure a better deal. Treasury, however, see it as an addition to the cost of sales. Similarly, where Procurement might want to foster good relationships with suppliers, Treasury might want to use supplier finance programmes to improve payment strategies.

Is everybody on the same page?

Many businesses still work in silos, with each area focusing on their own objectives – often to the detriment of others. Without good communication, you won’t know what each other is doing. And you won’t be working towards the same goals. Procurement, for example, might not think that supply chain finance is relevant to them. But a carefully managed supply chain can create healthy working capital in the business, meaning there’s cash to invest in resources. In fact, it’s an invaluable tool for many different areas of the company – helping your business to be flexible and innovative and reduce risk.

Also, although you might own financial management for the business, you won’t always have total control overpaying suppliers. Operations and production teams might want a say in the process – for example when offering payment terms to get a better deal or investing in suppliers to help fuel their product innovation.

So, it’s essential to bring together different areas of the business. By engaging with internal stakeholders, and working closely together, you can help them better understand your objectives. That way you can give them a more informed view of supply chain management and how it can help to enhance supplier relationships and strategies – driving revenue, profit and improved business performance.

It also helps build trust with other teams, enabling you to sell in new strategies more easily. According to a group treasurer at a global corporate in the construction industry: "Technology helps with better cost forecasting and control – using data for modelling helps us predict the cost of fulfilling certain projects, and that helps me manage my stakeholders and also helps the company stay competitive on project pricing."

Are you taking a wide enough view outside of your own business?

Good collaboration is not only important within your business – you also need to communicate effectively with external parties. This can give you additional insights, which will aid your planning and decision-making. For example, by working closely with customers, you’ll have a better understanding of demand and market trends. You can then work with suppliers to produce the right products at the right time – meaning you can meet spikes in demand and be prepared for disruption. And you’ll only produce what’s needed – avoiding warehouses full of extra stock.

Is your technology giving you the most useful business insights?

Many producer and manufacturer businesses are turning to technology to help them strengthen their supply chains. By investing in digital tools, you can enhance data handling, improve visibility of all elements of your chain, and automate processes to increase efficiency.

With these digital tools in place, you can refine your accounts payable processes, helping you forecast cash flow more effectively. This is particularly important. By analysing this data together, you get a better understanding of how your business is working, and how cash is flowing through every part of it. So, you can look beyond supplier commitments and instead see how the whole financial chain is performing.

As one group treasurer at a large global hospitality corporation says, "It’s not only important to have good cash management and visibility – you also must clearly define the purpose of cash forecasting for the business, both short and long term. You need to explain to all levels why it’s important and how insight helps with decision-making."

Are you ready for the future of supply chain finance?

Technology, such as treasury management system (TMS) software, can be useful in helping you automate processes and gain greater visibility into your financial management. As a treasury systems manager for a large corporate technology manufacturer tells us, "I’m implementing a treasury management system. Previously we had no centralised global account to track all payments to suppliers. My goal is to spread the ability to track all supplier payments through all our business groups."

Indeed, technology is going to play a bigger, more crucial part in finance management. The next generation of businesses will readily use integrated automated systems, with intelligent tools that perform tasks more efficiently. This will help teams work in real-time – able to react to changing circumstances, plan more effectively, improve decision-making and increase supply chain efficiency.

One thing that will really help to change the game is introducing digital ledger technology (DLT). By adopting DLT, you can create faster, even more collaborative supply chains. When combined with supply chain finance and the right supplier management platform, it lets you view and fine tune your supply chain in near real time. So, you’ll be able to see the impact of spending as it happens. And you can make tweaks as you go, to encourage different behaviours and create successful outcomes.

Despite this, some businesses are still finding it hard to convince senior leaders to invest in treasury management systems. Again, communication and collaboration are key. By working closely with all your stakeholders, you can demonstrate how the business as a whole will benefit from such investments. Then you’ll find it easier to get the right people to buy in to your innovations.

Are you doing enough to get your business working together for greater success?

In any business, there will always be competing priorities. Sales will want to use payment terms to secure deals. Procurement will want to maintain supplier relationships above all. And senior leaders might be pre-occupied with growth. So, it’s important to establish open lines of communication, work closely with other teams, and align your various objectives to work for everyone’s benefit.

And you need to make sure you have the answers to some key questions. Is your supply chain finance strategy built to help your business grow and succeed? Are you using the right technology to help you make informed decisions? And are you doing enough to make sure your supply chain objectives are beneficial for all your stakeholders?

Need more answers and insights? Learn more about how other business people like you are collaborating to improve supply chain management and enhance business performance. Talk to one of our advisors.