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Supply Chain and Finance: A Match Made for the Greater Good of the Business

Not all sectors of a business are going to seamlessly work together and cooperate with the requests of one another, especially when it comes to executives in supply chain management and finance. While these relationships don't always start off on the right foot, it is imperative the two aspects of the company are able to co-exist as they are trusted to maximize the working capital that firms have at their disposal.

Reduce the Potential for Inefficiency
CFOs and their teams are in charge of checking on spending within the business and making sure customers are paying on their invoices on time, as well as a number of other tasks. This is why Mark Gavoor, managing director at CR Supply Chain Consulting believes the finance organizations has interest in supply chain management. During his presentation of a recent webinar for Proformative, titled "Reduce the Friction: Learn How to Get Supply Chain and Finance on the Same Page," he explained that the success of the company rests in the supply chain.

"Most of the assets of the company are in the supply chain," he said. "Most of the people are involved in the supply chain. And that means the lion's share of the costs are there."

Due to the importance of running an efficient supply chain, financial executives must ensure client relationships are strong, contracts are negotiated to their firm's benefit and products and/or services meet the expectations of their company. If any of these things need improvement, the supply chain must be optimized, and for good reason.

"Supply chain management can have a massive impact on cost, profitability, cash flow, and risk," Jonathan Byrnes, senior lecturer for the MIT Center for Transportation and Logistics, told Inbound Logistics. "For many companies, it's the leading untapped factor in not only tightening costs, but in increasing financial performance."

Supply Chain Professionals Confident in Their Roles
Many executives in charge of running a supply chain are well-versed on what it takes to maintain high levels of efficiency, which explains why they are resistant to accept help from finance professionals. Gavoor, a supply chain expert himself, explained exactly how they feel about CFOs and their teams.

"We know they're necessary, but we don't really want them darkening our doors," he said.

Get Both Entities to Work in Unison
The key for CFOs is getting supply chain executives to understand that they need the finance organization for backup. The problem is professionals working in the supply chain see financial officers as an "Internal Affairs" team that notices variances and asks questions, ultimately serving as an irritant. However, what's important to remember is that key decision-makers at businesses have to funnel through many discussions before a plan is executed. The more cooperation between the finance and supply chain sectors, the better the chance to get things done more quickly.

Furthermore, there are simply some aspects of running an efficient business for which supply chain executives must rely on financial professionals and their expertise. According to a study from PricewaterhouseCoopers, identifying potential risks is key in supply chain management, as one detractor can set a firm back several months. For example, suppliers that are not able to hold up their end of the bargain can force businesses to scramble to look for a new link in their production, distribution or logistical chains.

Both Teams Need Each Other
An article for Inbound Logistics stated innovative supply chains can improve finances, while CFOs who are able to supply their supply chain managers with the funds they need will see better overall performance at their firms. With increased pressure in the business world for speed and efficiency, the finance and supply chain management teams have to understand which entity can handle a certain situation the best.

Throughout Gavoor's Presentation, he stressed the importance of utilizing people within the organization with the highest level of expertise to aid in decision-making during particular scenarios. When departments rely on each another, the company can minimize its losses, while operating at maximum levels of efficiency. Gavoor points out exactly what businesses need on hand during a certain interaction.

"You have to have a subject matter expert," Gavoor said when discussing the bidding process. "If you're outsourcing warehouse management, you have to have a warehousing expert kind of chairing the team. You also have to have finance people involved that can look at the numbers and evaluate things and represent finance so you have an ally on the bidding process and they know at every step what's going on. And we need purchasing people around because they are the best negotiators."

By converging the supply chain management professionals and members of the finance team, businesses will have the optimal level of inventory, as well as the reducing potential risks the company may encounter in the future.

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