As supply chain challenges become increasingly prevalent, the value of a financial controller or accounting professional capable of steering a company through potential pitfalls is perhaps greater than ever. After several long years of snarls, setbacks, and black swan events, almost no aspect of supply chain management is being taken for granted. Companies are looking to hire the unicorn in possession of the right combination of experience, analytical abilities, and relationship management skills. During these times of uncertainty and re-evaluation, getting supply chain management right is key to a company’s very viability.
Supply Chain Challenges
Logistics and supply chains have been in the headlines for a couple of years now and seldom has the news been of the feel-good variety. Pandemic-related delays to manufacturing and shipping provide the obvious example of challenging circumstances, but weather events, blocked canals, and geopolitical disruptions have contributed as well.
“Supply Chain Planning teams are operating in a world where disruptions are happening more frequently and they have become predictably unpredictable, and bigger in impact,” reads an article in Supply Chain Brain. “The organization structures, processes and technologies of the past have a hard time keeping up with today’s challenges.”1
“Now, more than ever before, supply chain leaders need to think bigger and bolder,” writes Christy Pettey for Gartner.2
Assessing Supply Chain Risk
The microchip shortage serves as a stark example of the calamity that can await manufacturers who find themselves unable to source core inputs, but the lesson can be applied more broadly.
Companies must prioritize risk assessment when considering critical vendors, and low cost is not always the law. How likely is a particular supplier to suffer a disruption? What’s their capacity to recover from disruption? How easily could the materials be sourced elsewhere? Such questions are cause for soul searching in the C-suite.
“Businesses are zeroing in on those specifically advantageous geographies that bring together multiple transport options: namely, planes, trains, and automobiles,” says the website of Canadian Alliance, a Vancouver-based third-party logistics company.3
Many have arrived at the conclusion that the heyday of global sourcing and just-in-time inventory may be in the rear view mirror. Cost management continues to be, and will remain, a concern, but must be weighed against the risk of supply shortages. Long term agreements and multiple vendors are being favoured, even at the risk of price premiums and extra work.
Inflation, too, has thrown a ripple into cost analysis. Those who entered into long-term fixed-price agreements before the recent dramatic increase in inflation find themselves grateful for having done so. For those currently negotiating new deals, predicting the future presents a challenge on both sides of the table.
Supply Chain Standardization and Technology
The challenge facing companies is one of dualities: to manage costs while reducing risk and to standardize logistical processes while remaining nimble in the face of complications.
“Standardization has become one of the most effective methods to optimize the supply chain,” according to Redwood Logistics, who believe that departments, managers, and partners benefit from systemized procedures and tools. “This sort of full-chain standardization enables seamless integration between partners in a way that can reduce costs, enhance transparency, and provide the highest customer service to clients.”4
AI and data collection technology offer tools to those seeking to maximize transparency throughout their supply chain.
“Data yielded by AI models and real time connectivity down to the container level will play a central role in supply chain organization, informing every aspect of supply chain design,” says Canadian Alliance. “The ability to master AI technology will be a necessity for supply chain professionals in the coming years.”3
Holistic Approach to Supply Chain Management
“I think what Chief financial officers today are looking at is how do you make sure that you have fluidity in your supply chain, while still maintaining cost efficiency” says Canadian Alliance President William McKinnon. “You need people on staff to do that.”5
He believes that a holistic approach to supply chain management has its benefits.
“We’ve got a relatively large customer that has operated their supply chain sort of at the beck and call, the drayage guy, you look after this, the 3PL you look after this, the ocean guy you look after this, and because everybody has a different agenda, it’s not working particularly well.”5
ESG and Supply Chain Visibility
Increased visibility and transparency not only helps companies avoid supply shortages, but also decreases the risk associated with bad actors. It’s no longer enough to eliminate problematic environmental and social practices within your company, organizations must ensure that their entire supply chain is in compliance with good policy. Not only is this the right thing to do, but it’s being demanded by a public that is ever more aware of the details of what their dollar supports.
“The archetypal selfish, demanding consumer does still exist, says Canadian Alliance, “but increasingly, consumers are choosing to support sustainable companies even at greater cost and inconvenience to themselves. The result? Those companies that don’t adapt may starve.”6
Just as the risk of supply shortages must be factored into sourcing decisions, so too must the financial danger associated with reputational damage. Emphasizing supply chain visibility and strict sourcing guidelines comes at a cost, but so too does the loss of goodwill that can result from environmental or social irresponsibility at any point in your company’s supply chain. Accounting for greenhouse gas emission is an imperfect practice, but efforts to standardize it are gaining steam. Navigating this complex environment requires a financial controller with a holistic understanding of the big picture.
Finding a Unicorn
Supply chain volatility serves to remind us of the importance of talented executives, including financial controllers. The individual who succeeds in such an environment is organized and analytical, while also being in possession of keen instincts. Strong insights into technology, finance, process, and company strategies are also necessary. Companies with such individuals in their ranks should hold on tightly; those looking to recruit them, should do so carefully.
