Financial executives should have a role in supply chain operations, as cross-functional collaboration yields better results in wholesale distribution.
An article on CFO.com discusses how financial executives and supply chain managers can work together to develop realistic financial forecasts. Often, sales forecasting is conducted in silos, and the forecast is not reflective of a company’s capabilities.
CFOs “can provide a balance between the often more aggressive push by sales departments to hit targets and the more deliberate pace of operations in providing products the sales team wants to sell,” the article says.
The sales department’s forecast should be tempered by information gathered from supply chain leaders about their ability to fulfill sales projections.
One option not mentioned in the article is performance of an analysis of the profitability of multiple alternative sales and production plans that involve collaboration among stakeholders from all functional areas of the business.
However, to make this collaboration efficient and effective, a robust budgeting and forecasting tool should be implemented that allows for collaborative input from stakeholders in sales, production and finance. The plan should allow for purpose-built input templates where the interdependencies between the departments can be modeled.
For example, sales forecasts for a certain quantity of specific items might exceed production or storage capacity. Always remember that, at some point, money must come into play.
At too many organizations, all that’s forecasted is sales. But what if the organization must ramp up production and add another warehouse to meet the more aggressive sales forecast? Those investments need to be financed. That’s why collaboration is crucial to ensure profitability.
Executives from all areas of the business should collaborate, but the tools should also be in place to make this an efficient and effective exercise. That’s the value of a robust ERP application and having the capability to have the software look at the whole continuum of your business.
Source: CFO.com, October 2013