FP&A is overtaking the supply chain as the pre-eminent function, but it’s good news for supply chain leaders. 

Historically supply chain effectiveness was the key driver for success and profitability across a wide range of international businesses, not to mention many mid-market ones too. Finance teams were in the back office providing a reporting and compliance function but generally providing little value-add.  

Supply chain excellence will always be absolutely vital, but in many organizations over the past five years the finance function has embraced financial planning and analysis (FP&A) to not just report performance, but to analyze data to deliver insights on pricing, demand planning, new product development, and profitability to help their business deliver its strategy.    

From back-office function to strategic partner 

It’s fair to say that in many businesses FP&A is overtaking the supply chain to become the preeminent business function. It’s a remarkable turnaround, bringing with it a new breed of commercially minded financial professionals focused on helping the business grow and achieve its strategic ambitions.  

This rise of FP&A functions is good news for supply chain professionals as it is empowering them with all sorts of data and analyses that previously finance functions were either unable, or simply unwilling, to provide.  

For example, most businesses of any size have a five-year growth strategy, and they are usually supported by a financial plan that states what the P&L looks like across that five-year window. Often missing from this is the ‘How, When, and by Who’ will those longer-term strategic plans be delivered, and they also often miss the ‘affordability’ of the required investments. This typically leads to the missed delivery of the longer-term objectives, and instead businesses enter a cycle of resetting strategy every year – and never achieving their ambitions.   

FP&A teams are helping to resolve some of this gap by creating more detailed bottom-up business plans across the five-year horizon, articulating which product families, innovation, geographies, supply chain, and operational improvements, are expected to hit these strategic priorities, as well as time-phasing the benefit case.   

This bottom-up financially viable build over the five-year horizon really helps to give far more credibility to the plans and also ensures there is appropriate ownership and accountability within the organization to actually deliver.   

New opportunities  

FP&A, by using integrated planning techniques like S&OP and Integrated Business Planning (IBP), is also able to assess the current trajectory and latest status of the initiatives, working with supply chain and other leaders in the business to identify any deviation to those plans or projects. They are also much more closely involved with creating options to help bridge any gap that arises, and with exploiting opportunities to get ahead of the curve where appropriate.   

It’s not just at the planning and strategy level that FP&A teams are becoming better partners with supply chain and operations; it’s also with day-to-day management. Despite the sophisticated IT infrastructure that many organizations have, not to mention the huge amount of data within it, many leaders still struggle to get timely information and often are basing decisions on management reports whose numbers are already out-of-date when they arrive.  

FP&A teams are getting involved here too, for example with supporting shorter-term decisions needed to optimize the business response to near-term volatility, and ensuring the responses that get made are optimized for both the business and the customer. This decision-making is supported by financial analysis and scenario planning, covering a range of options to be considered as part of the decision making, rather than the traditional finance approach of ‘standard costs are X and therefore the impact is Y.’   

Does the rise of FP&A spell trouble for supply chain leaders looking to become CEOs? FP&A is making the case for the Finance Director (FD) to become the CEO even stronger through their greater experience of delivering strategy… but supply chain leaders need not fear, as long as they too have a good grasp of the numbers.    

Redefining leadership 

Nowadays many FDs aren’t qualified accountants, they are instead switched-on leaders who know how to get the best from their team, understand the business strategy, and understand what it’s going to take to succeed. While the FD might be eyeing up the CEO’s job, supply chain leaders should consider eyeing up the FD’s role, especially where they have a finance function that is stuck in the past by providing reporting but not analysis, and they instead can bring a much-needed commercial approach.   

By Andy Walker  

www.OliverWight-EAME.com 

Andy Walker is a partner at Oliver Wight EAME with over 25 years of experience in finance, demand, and supply chain management. Oliver Wight EAME is a leading business improvement consultancy with more than 55 years of experience, specializing in empowering organizations to achieve performance excellence.