New supply chain tactics


President Joe Biden attends an event to support legislation that would encourage domestic manufacturing and strengthen supply chains for computer chips in the South Court Auditorium on the White House campus, Wednesday, March 9, 2022, in Washington. (AP Photo/Patrick Semansky)


You don’t have to think too far back to remember the significant problems many of us have had in getting hold of everyday household items – whether online or in store. Disruption due to the pandemic also extended to a wide variety of components and raw materials, threatening all types of businesses across the manufacturing industry.

And as if that wasn’t enough, a fully-stocked supertanker ran aground in the Suez Canal, delaying its own journey and that of the millions of tonnes of shipping freight that ground to a halt behind it. There was no doubt about it: the pandemic had wrought havoc on supply chains.

The chaos has meant that, almost two years later, many organisations are reevaluating their supply chains, and looking at where, how and when products are produced and delivered. Overhauling supply chains can be a massive exercise involving many parts of the business.

But finance professionals stand at the centre of the activity because of their unique understanding of how the business model works and how supply chain activities interact with financial objectives.

Collaborate for success

ACCA’s new report, Supply Chains: A Finance Professional’s P erspective, outlines the ways in which finance teams can collaborate across organisations to improve organisational capabilities, manage disruption and benefit society.

The nature of supply chains is changing. While the pandemic may have highlighted some of the fault lines in today’s highly globalised world, four key issues were emerging even before then: technology, visibility, risk, and environmental, social and governance (ESG) action. And finance professionals have a key role to play in each.

Emerging technology

New technologies are emerging that allow entities to more closely and nimbly manage their supply chains. For example, companies can now buy cloud-based supply-chain-as-a-service solutions that support all or part of their operations.

Even if companies don’t buy wholesale solutions, technology improvements exist that allow them to better plan and forecast within the supply chain. And intelligent data analytics tools help them to deliver predictive and prescriptive insights.

The finance professional’s role is to ensure that the platform has the right data feeds and the right governance, and that compliant and insightful reporting result from them. The finance leader’s role, meanwhile, is to use this information to make decisions within the context of the business model and the market.

Data visibility

Tied in with this is the importance of data visibility, spurred on by the increasing role of intelligent technologies. For example, enhanced data on end-consumers helps visibility and understanding of demand, while technology like blockchain allows for visibility over contracts and movement of goods.

Visibility is not only good for management; it also helps to build trust throughout the supply chain network and with customers, too. Companies can be more transparent about what their supply chain looks like, and what efforts they need to make to manage emerging issues. Visibility of data in this way also plays directly into risk management.

Risk management

Due diligence in a globalised world is increasingly hard, and relocating supply chains onshore or ‘near shore’ will not necessarily make this easier. But with the kinds of technology and visibility of data emerging now, due diligence and risk management – and consequently governance – can be much improved.

Finance professionals will play an essential role in managing risk throughout the supply chain, including by using technology to stress-test the strength of the organisation under key pressures. It will also be their job to conduct enhanced monitoring for increasing levels of fraud, and they will have to work hand-in-hand with supply teams to ensure that legislative frameworks are followed and disclosed appropriately.

ESG issues

Almost 80 per cent of an organisation’s sustainability impact sits in its supply chain. It’s clearly essential, then, that finance and supply chain teams collaborate over the ESG issues that arise there.

Since reporting on ESG – and, soon, actually accounting for sustainability using new standards – is the job of the finance team, having a strong understanding of issues such as carbon emissions and workforce conditions throughout the supply chain is non-negotiable.

Finance professionals will need to have a vision for sustainability, understand how to measure it and work out the true costs of supply – including how non-financial costs impact the success of the organisation. They will also have to drive data collection and due diligence across supply networks, and understand rapidly emerging legislation and reporting requirements.

New tactics for new times

This decade has heralded a new era of severe disruption and volatility that demands a new tactic: collaboration. Finance and supply chain teams have to work together to address problems and execute plans, while keeping sustainability and ethics squarely in their sights.

Each of these teams has unique skills and insights that can help preserve and improve the business model and deliver excellence in the midst of constant change.

Source: ACCA Accounting and Business magazine

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