One of the primary economic themes of the past couple of years has been a reckoning in terms of how global supply chains perform in the midst of turmoil. For most of our economic history, there has been a steady increase in globalization over time with key players specializing in various products and services – and then exporting those all over the world. Countries stopped a vast majority of their local production because they could get those goods cheaper and of better quality from elsewhere.
The thinking here was that these economies could then focus their attention and resources on the few areas where they had a competitive advantage and leverage the global supply chain to realize the gains from that specialization. And it worked great until we were hit with a once-in-a-generation pandemic that seriously disrupted the global supply chain and caused delays, costs, and frustrations to skyrocket.
For companies that relied on a complex chain of global suppliers, they were left high and dry – with no way to continue operating as they had been. Luckily things seem to have been restored for the most part, but what proactive companies must do is to plan for if this happens again – so they don’t find themselves behind the 8-ball.
How do they do that? Well, by leveraging the power of financial planning and analysis.
How can FP&A solutions help to mitigate supply chain challenges?
Let’s look at just 3 of the ways that a sophisticated FP&A solution can help you manage supply chain challenges in the future:
- Nuanced demand estimations. The key input into any supply chain decision is one of volume and timing. The closer you can match your purchasing cadence to your sales, the less inventory you’ll either be holding or waiting for and the lower the risk of supply chain obstacles hindering your performance. FP&A solutions like Apliqo offer sophisticated analytics that can dig through your sales data and produce high-quality predictions and insights about your sales demand across a wide variety of dimensions. When you apply this to your decision-making you make your operations more agile and thus more robust to change.
- Scenario stress-testing. To account for black swan events like a global pandemic, traditional forecasting is not going to cut it. It’s for this reason that scenario stress-testing can be so useful. By pushing some assumptions to their extremes and seeing how they impact your organization – you’re in a much better position to put a plan in place in case we see the supply chain disrupted again. A good FP&A solution can help you do this dynamically, and allow you to adjust each lever according to a specific scenario – and then give you insight on what will happen across your company.
- Detailed supplier analysis. Perhaps your supply chain challenges are only concentrated in one or two suppliers specifically – and if you could make adjustments there, you could solve most of your problems. The only way that you can identify such a decision lever is to have the right level of data analysis that makes it plain. FP&A tools are designed to allow for data analysis across numerous dimensions and when used appropriately – they can help to unearth these sorts of data-backed realizations.
The beauty of sophisticated FP&A is that these ideas just scratch the surface of what’s possible. There is a lot to be gained when you use these tools well and it can be the foundation of your fight against supply chain headaches and the compounding effects they bring.
If you’re looking for an FP&A solution to improve your supply chain, check out the Apliqo suite of products. Or contact our team today for a free demo to see the software live in action.
