Roddy Martin, vice president of supply chain transformation thought leadership at Oracle, sat down with Supply & Demand Chain Executive (SDCE) to discuss his thoughts on the financial supply chain and how it impacts business operations. Martin has more than 35 years of operations and leadership experience in engineering, manufacturing, supply chain, technology, transformation change leadership, strategy operations, continuous improvement and consulting. He works closely with senior global leaders and executives from multiple industry verticals, and has detailed experience in the transformation of health care and consumer products value chains from the point of sale, market and patient outcomes into the supply network and manufacturing operations. His work experience and knowledge is in actual operations, also benchmarking manufacturing and supply chain performance, applied research, and consulting as part of a global research and analyst firm, and a global management consulting organization.
Martin has advised and coached leaders from global companies as a research-based advisor on business strategy, transformation, continuous improvement and technology best practices. He works closely with consumer products, life sciences, high-tech and chemical industries, formulating perspectives on market-driven end-to-end demand-driven capability transformation and change leadership. He has also been involved in performance benchmarking and diagnostics, as well as development and deployment of a production system for continuous improvement in the end-to-end demand-driven supply chain. He regularly presents at global speaking events, was recognized as a research fellow at Gartner/AMR Research and acknowledged for his transformation leadership role at SAB Miller.
SDCE: What is financial supply chain and how does it impact business operations?
Martin: There are a couple of ways to view the supply chain. You can look at the physical supply chain, which consists of the processes and assets involved in the movement of goods and associated services along the supply chain. These processes include the management of shipments, inventory and documents, spanning from suppliers to manufacturers to wholesalers to retailers to consumers.
On the other hand, you can look at the financial supply chain. Financial supply chain enhances an organization’s process flows because it follows the flow of money, and therefore, looks at the trade-offs that maximize profitability, while minimizing expenses across the end-to-end business operating model. Financial supply chain management involves analyzing the interrelated events and processes that impact working capital, payment terms, pricing and inventory, and uses an outside-in approach to understand how the end-to-end supply chain processes begin with the consumer and work backward to the supplier.
The financial supply chain is critical to an organization because it incorporates the cash flow from production to consumption and involves tracking cash-impacting events as they happen. This creates deeper process and business performance transparency, and provides a more comprehensive way to manage the supply chain and bolster the bottom line.
SDCE: What are the benefits of financial supply chain management?
Martin: With more end-to-end visibility into supply chain operations as a whole, organizations can better pinpoint what areas of the supply chain can be optimized and when is the best time to act. Financial supply chain management focuses on making optimum trade-offs across the end-to-end business. It also enables businesses to respond to consumer demands as they change, quickly adjust to fluctuating market conditions and forecast accurately with up-to-date data. With more transparency and insight, organizations can continuously improve business processes to build the agility needed for responsiveness to the changing market.
This may initially sound time-intensive and complex, but in reality, financial supply chain management helps to simplify processes and create efficiencies around financial transactions between trading partners, so businesses can focus on the right trade-offs for improved longer-term outcomes and building agile capabilities. Perhaps most importantly, financial supply chain management provides visibility to every financial process involved in the supply chain and reduces costs, freeing up working capital. This end-to-end process view leads to improved collaboration across all departments in the end-to-end supply chain.
SDCE: Is there anything holding back more organizations from implementing financial supply chain management?
Martin: Financial supply chain management tools have been around for some time now, but organizations have been slow to adopt. As companies try to cut costs, they traditionally tend to look first at the physical supply chain to achieve greater efficiencies. In doing so, they often overlook the financial supply chain as a place for organizational improvement. This is partially because of the difficulty of integrating financial flows and data across the end-to-end supply chain.
Since the supply chain is the lifeblood of a business, delivering products and services to the consumer, while simultaneously managing everything in between—it can be a daunting challenge to affect major changes. But financial supply chain tools are improving considerably, and it can be much simpler to implement changes and improve than organizations may think. The overarching cloud is changing install and upgrade cycles, and supports end-to-end processes. New cloud-based applications, combined with traditional on-premise software, are creating the opportunity for organizations to reap business benefits by focusing on their financial supply chains.
Pitfalls to implementing financial supply chain management solutions include placing too much emphasis on disconnected functional metrics, driving singular and fragmented metric strategies, focusing solely on transactional processes, and even leadership capabilities. Each of these affects how a business views and manages its overall integrated operations, and can prevent a holistic approach to metrics, costs and capital, which is avoided by looking at end-to-end financial supply chain flows.
SDCE: What advice do you have for companies looking to better manage their financial supply chains?
Martin: It’s time to start leveraging financial supply chain management in the cloud as an end-to-end supply chain capability. At the start, keep in mind the importance of collaboration and end-to-end process flows. This requires knowledge of the business, its finances and accurate sources of data. The finance team must work closely with the supply chain team to analyze and improve process performance. This means aligning on the data and reports that support day-to-day decision-making and budget planning. One component in this transformation that must not be underestimated is the need for leadership and management of the changes involved, which will often drive new ways of working, and will require new systems and capabilities.
SDCE: Are there any industries that are more suited for financial supply chain than others?
Martin: Industries in which product and service flow is discretely measurable are more suited than others in which long, complex processes often hide components and processes that are causing inefficiencies. Industries with defined and accurate process flows, integrated data, and defined unit and process costs are another characteristic of companies that are well-suited to financial supply chain re-engineering. Service industries such as banks and insurance companies are traditionally well-suited to financial supply chain management as well.
Companies that are in post-merger and acquisition stages are ideally suited, as they look for scale and process efficiency across the new business structure.
SDCE: Can you provide an example of a company that successfully implemented financial supply chain?
Martin: The massive stage of merger and acquisition activity, and pressure to reduce health care costs in the life sciences industry are driving integration and fundamental financial supply chain management priorities in the integration and go-to-market phase of company lifecycles.
