Three ways to communicate the value of supply chain management to the board

Supply chains get products built and distributed into the hands of customers, which is how they contribute to the the bottom line. But in the past, the complexity of supply chains often led to executives overlooking or misunderstanding the field’s contributions.

Today, however, new supply chain solutions have allowed for the benefits to become much more tangible. And supply chain professionals are consistently getting more input into corporate decision-making, as well as a seat at the revenue table.

Now that the board is all ears, the challenge is communicating supply chain successes in a way that execs, shareholders, and directors can appreciate. To help supply chain professionals make the most of their growing status, here are three tips you can implement immediately:

1. Lead with the value proposition. Executives are judged on generating return on capital and increasing shareholder value. It’s key to align these broad goals with the day-to-day deliverables of a supply chain professional. You need to explain that what generates value in the supply chain is the cash-conversion cycle. This measures how quickly your organisation turns investment in materials into cash from the sale of end products.

An objective of any supply chain professional is to keep that cycle as brief as possible. Employing strategies like just-in-time manufacturing minimises the time that precious company assets are tied up in materials before becoming revenue. Similarly, dynamic discounting is a solution that incentivises clients with deep discounts to pay early, and therefore reduces the average time an account receivable is outstanding.

Lastly, decreasing the inventory conversion period – the time between when materials are acquired and sold - is also key for boosting a company’s cash flow. The result of all three strategies is something everyone in the boardroom will understand: larger, quicker profits.

2. Sales statistics aren’t just for sales and marketing any more. Supply chain strategy can have a profound impact on sales – this is something to advertise. Sales figures are an excellent metric to quantify your supply chain successes and illustrate what supply chain management can do for the organisation. For example, building quick and agile supplier networks will help your company respond better to customer needs by improving on-shelf availability. Demonstrate how improved on-shelf availability means higher sales with recent sales statistics.

3. Emphasise the most visible aspects of cost savings. Chief supply chain officers influence around 60-70 per cent of an organisation’s expenses, all of its inventory, and most areas of customer service. Cost savings will always interest shareholders, so showcase any supply chain improvements in these high-profile areas. For example, you might discuss efforts you’ve made to outsource, update or streamline technology, and collaborate with suppliers.

Supply chain management hasn’t been this in vogue since Henry Ford bought his own mines and mills to keep his new production lines ceaselessly turning, so don’t miss your seat at the table. Time proved that global sourcing and utilising comparative advantage was more effective than Ford’s model, but the need for top-notch supply chain management endures. The key for you is communicating all the value SCM adds.

☛ Vishal Patel is head of solutions marketing at Tradeshift

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