Procurement and supply chain management have much to learn from dealing with finance departments
While visiting organizations across North America I’ve noticed a trend. There is an increasing tendency for procurement and supply chain management functions to report into finance. Historically, the majority of supply chain roles reported into production or operations, with the minority guided by finance.
Earlier in my career, I was involved in both structures and found pros and cons for each. I’ve seen more pros for the later. If you’re in this reporting structure or transitioning to it, you may have some biases. Here are a few that come to mind:
When I was 25, I cancelled my first supplier agreement. It was an agreement set over a decade before I arrived at the organization, and with little documentation to support the terms exiting it was a bit dicey. So I drove several hours to the supplier site to meet and discuss my company’s desire to exercise it’s right to provide 30 days written notice of cancellation of the agreement. In hindsight, that was a rookie move that didn’t consider the significant risk I was taking. Finance is extremely risk averse, which can seem like a barrier to innovation, however this can offer a broader perspective on the severity and impact of a project’s risk, component or contractor relationship. Tapping finance can provide new ideas, tools and perspectives on how to make better decisions that incorporate risk.
Early in my career I worked with a colleague named Terry, a great guy who had been my company’s acting CFO for over a decade. If I could demonstrate a cost savings, Terry supported my decisions—from buying raw materials to resourcing janitorial supplies. I realized early on that Terry was trusted, retaining significant respect from the company’s president. He was privy to financial information and, as such, was a trusted advisor to the president. If Terry supported an initiative, the president supported the initiative and anyone who had doubts was cast aside. Forming a close relationship with finance can help to boost reputation and lead to increased acceptance of—and adaptability to—change.
I presume you’ve got an spreadsheet on which you track cost savings and cost avoidance. Have you ever been challenged on the impact changes have on total cost? Do you know what EBIDA is? Can you demonstrate annualized savings? Are you connecting ROI with supply or service contracts? It can often seem that finance speaks a different language, and they do. It’s the language of business. Outside of our often-sheltered world there are terms and considerations that C-suite executives use daily in supporting decision-making.
By spending time learning about finance (and there is no faster way than interacting with and being mentored by a finance executive) we can expand our business knowledge. By doing so we can incorporate this language and approach into our daily activities, thereby increasing our credibility and the attention we gain from other senior executives. If you have a desire to move to the C-suite, you need to expand your knowledge and vocabulary. There is no better place to start than by learning more about finance.
Finally, finance professionals are strategic. They’re trained to be so. Their decisions must be long-term and strategic if the business is going to survive. By aligning with and understanding more about finance the supply chain profession will become more strategic—a significant challenge when chasing every widget and supplier issue.
If you’re reporting structure has changed to align you under a financial group, consider the points above and how they can improve your credibility, recognition and knowledge. If you want to progress in your career, this reporting structure is another rung in the ladder to your goal.
Shawn Casemore has nearly two decades experience in supply chain management leadership roles and operates the consulting firm Casemore and Co. Reach him at email@example.com or (519) 470-7697.