Many Chief Financial Officers (CFO) will agree that in today’s wider business landscape, a disconnect still exists between finance and the supply chain. There are a number of factors which combine to cause this, with some of the most common being the result of marketplace volatility, supply chain complexity and overwhelming volumes of data.
For many businesses, this disconnect is a result of internal factors and is often caused by disjointed pools of data. While CFOs collect, analyse and utilise financial data, so too do engineers do the same with production data, but only in the rarest of cases do these overlap. The result is a short sighted view of operations, which can lead to unnecessary supply chain complexion, unexploited resources and wasted costs.
In order to overcome this disconnect, businesses need to adopt an enterprise-wide collaborative approach to business strategy. By utilising integrated business planning, companies can bring internal functions together with external partners to successfully make decisions that balance supply and demand, manage assets, prioritise products and customers, and mitigate supply chain risks. This collaborative approach affords businesses overall perspective of the entire organisation and its supply chain, effectively leveraging all available information.
A collaborative approach to effective business planning should be underpinned by a robust ERP solution which analyses a company’s entire transactional data, relating to labour, materials and overheads. Within these individual functions, CFOs are often uncertain how transactional data can benefit their roles, mistakenly viewing ERP as a tool which solely manages jobs and resources. However, when gathered, extracted, and analysed together, these individual data lakes can provide a transparent view of the supply chain.
Beyond resource planning
Previously, CFOs have accessed the information they require from within designated ERP finance modules, generating reports such as ledgers, trail balance data, overall balance sheets and quarterly financial statements. Moving beyond this and exploring the ways in which information stored within other ERP modules is key to effectively leveraging business opportunities.
Since they first burst onto the scene some 60 years ago, ERP systems have significantly evolved and their capabilities now extend far beyond managing resources. Today they hold the capabilities to bring together planning and forecasting modules, inventory optimisation and warehouse management modules, with advanced quality management and increased business analytics and reporting functions. It makes sense that as the capabilities of ERP have increased over the years, the ways in which businesses can harness, analyse and use this data to greater effect have also increased.
A robust, integrated business plan must extend beyond the factory walls and instead, must cover the entire value chain. Data from external suppliers, third party systems, and customers must all be brought together to offer businesses a single version of the truth with regards to supply chain operations. Only when every department of a business is working from the same data, can cross functional departments, including finance, work to extrapolate data in order to identify and leverage new opportunities. This information is not only key to adding value at each stage of the supply chain, but it also provides the foundation for developing a strategic business plan; a plan which businesses can then move to execute.
It is with this in mind that ERP transcends from a resource planning solution into a solution which affords businesses valuable foresight into the future. But for such enterprise-wide planning to be truly effective, all stakeholders, including CFOs, need to fully understand fundamental cost and production structures, working together to collect and utilise the same data. Only when this is achieved are businesses truly able to both plan for current demand and for future growth.
Looking forwards, not back
Effective systems should enable all managers within the business access to financial information in real-time. Comparing financial forecasts and budgets with the actual results can highlight areas for attention, enabling CFOs to make decisions that will have a positive impact on financial performance. Not only does this integrated approach go beyond traditional sales and operations planning, but will utilise the data held within an ERP system to give CFOs an advantage when driving organisational agility.
A conscious move towards embracing integrated business planning strategies which are underpinned by information held within ERP systems will see companies move ever closer to cross functional collaboration, creating a cycle which sees finance, sales and purchasing, engineers, production, and senior management teams working alongside each other, and more importantly, from the same, accurate information. Each function within the business feeds into the next, integrating with key suppliers in order to gain complete business oversight, and deliver value throughout the supply chain.
By working to establish data relationships which fit into the wider organisation, CFOs are perfectly positioned to act as the catalyst to drive value throughout the supply chain. And it is this same value which will also see businesses go beyond typical sales and operations functions, instead accessing data which empowers CFOs to deliver exacting and repeatable actions across an entire organisation.
Of course while the benefits are clear, the stronger the workflow information, the more robust the data will be which is gathered, offering CFOs better reporting and analytics functions; it is also important that the success of integrated business planning, becomes the responsibility of everybody within the organisation, including, but not limited to, the CFO.
Responding to changing landscapes
With market forces changing daily, business response time becomes critical when balancing supply and demand decisions. The data held within ERP, when utilised in wider collaborative business planning, affords a unique opportunity to make better decisions, faster.
A truly collaborative approach will see CFOs presented with the ability to evaluate historic information while also analysing potential risks and opportunities currently presenting themselves. Modern businesses need to put finance personnel, together with other departments, in the position to confidently make the most educated supply and demand decisions, which leverage all available information.
And the role of the CFO must drive this collaborative ethos. No longer is the function of finance about looking backwards and analysing historic data, it’s now all about how they can best leverage data and apply it to future business processes. It is the unique position CFOs now find themselves in with regard to gaining an entire company overview, which best affords them the information to effectively manage supply chain data, holding the necessary skills to work together with all stakeholders so that the business can assemble, apply and analyse data to deliver value throughout the supply chain to improve business performance and growth.
ERP, when applied as part of an effective integrated business planning strategy, is key to standardisation, innovation, and efficiency. The potential it holds for CFOs together with regards to wider business objectives really is limitless.
Being proactive, rather than reactive
In order for collaboration to become embedded within a company’s culture, the use of ERP within an organisation should be high on the CFO’s agenda. No longer is ERP a reactive tool which focuses on reactive data, it is now being propelled into the future. From planning, engineering, manufacturing, sales, HR, finance and distribution, ERP holds the data many CFOs crave but often neglect. This data is key in not only improving the responsiveness of an organisation, but also in organising future plans, identifying opportunities and underpinning growth.
By adopting an integrated planning process, all business functions are able to work towards creating a supply chain cycle which can ensure a business delivers maximum value throughout its supply chain. And it is here where a collaborative approach delivers true value, affording all business departments access to the same data, which can then be leveraged to maximum effect, thus closing the divide between finance and the supply chain.
Cathie Hall is Managing Director of business solutions provider K3 Syspro, the leading supplier of SYSPRO Enterprise Resource Planning solutions to the UK and Europe. She brings to the company 10 years’ experience working in various technology businesses, including running her own consultancy. During this time Cathie worked closely with businesses in the manufacturing and distribution sectors to help them better leverage enterprise systems to servitize business models and deliver greater value to customers. During her time as MD of K3 Syspro, Cathie has already established the K3 Syspro skills academy and invested heavily in the company’s products and people.