'Power partnerships'

IN the past year we’ve witnessed everything from border closures to staffing shortages push supply chains to breaking point – patterns of demand have changed, container costs have increased and backlogs developed.

While the pandemic has created much of the disruption, ongoing environmental changes, economic volatility, political uncertainty and now the crisis in Ukraine means that, like COVID-19, supply chain volatility is something societies need to adapt to as its impact will be felt for the foreseeable future.

As we look ahead to increased inflation and ongoing disruption, we recently asked finance and supply chain professionals around the world* about the biggest challenges this volatility presented to the organisations they worked with, and how best to tackle them.

The networks of suppliers and customers are the lifeblood of any organisation and disruption to this flow has an adverse impact on financial health, intrinsically linking procurement and supply functions to the finance department. Ensuring liquidity in the supply chain during these turbulent times is a shared and critical challenge for both disciplines.

Hand in hand with uncertainty comes increased reliance on timely financial information and accurate and insightful non-financial reporting. These functions need to come together to address not just the profitability concerns, but also the challenge of demonstrating ethical standards throughout the supply chain, as well as achieving the organisations, and society’s sustainability goals.

Risk of weak links

The ethical standing of any business is only as strong as the weakest link in its supply chain. With risks ranging from modern-day slavery to climate change, organisations need to make informed decisions about who they trade with, while regulators and stakeholders need to be assured of the due diligence processes in place.

Supply chain and finance professionals have a shared duty in applying ethical standards, and meeting these obligations, and this starts with having a shared vision. It is only from this common viewpoint that information can be assessed for accuracy and relevance so that insightful business decisions can be made. Together finance and supply chain teams can create the ethical framework, procurement policies and supplier codes of conduct to both mitigate risk and add value.

Climate change governance

While financial fraud and human working conditions are key ethical concerns, around 80 per cent of an organisation’s sustainability impact sits in its supply chain making governance around climate change a top priority. Knowing who lies along the supply chain is a challenge, with that knowledge deteriorating from Tier 1 to Tier 3 where it can become more complicated. A great deal of trust is needed across these tiers, and this is where the greatest environment, social and governance (ESG) risks are present for organisations large and small.

In meeting environmental targets, there’s naturally an increasing demand for evidence of emission reduction and other elements of the ESG agenda by regulators, governments, investors and other stakeholders. The sustainability standard, ISO 20400, published in 2017, provides guidance in integrating sustainability within procurement policy, strategy and process. While the standard is non-certifiable, organisations can – and should – use it as a basis for assessment.

In this ‘decade of action’ to reach the UN Sustainable Development Goals by 2030, finance and supply chain professionals have the power to drive positive change together and make a tangible impact on achieving the world’s carbon emission targets. Using new technology to provide data-driven insights will play a key part in achieving this.

Advancing technology and predictive analytics

While the challenges of navigating supply chain volatility may be increasing, so too is both the amount of data available and the advances in technology to make sense of it. Investment in technologies at all levels of the supply chain can ensure data flows in both directions.

Cloud-based technologies can now be used to manage, collate and analyse this vast amount of data generated to provide a holistic, real time, view up and down the chain.

Being able to harness this data for insight-driven positive change doesn’t just offer competitive advantage and opportunity for increased profitability, Internet of things technology and AI can play an important role in bringing sustainability benefits by enabling ‘contactless’ supply routes, as well as creating greater energy efficiency and cost savings.

Whether it’s analysing customer patterns or product trends, real-time information – and even predictive analytics -can provide the insights needed in a fast-changing environment to inform rapid decision making. Successful supply change management will be increasingly dependent on the quality of data available and the ability of people in the organisation to interpret it.

‘Power partnerships’ for an ethical and sustainable future

With business models shifting at a rapid pace, supply chain experts and finance teams need to work very closely together in the planning process, management of working capital and assessing enterprise risks. Each discipline not only has a unique set of skills the other can benefit from, they also share a consistent view of ethics and trust. By coming together, these professionals have a huge opportunity to help create the sustainable and ethical future our society is striving for.

As a result of our research, where we’ve captured the views of both professions, we’ve developed a ‘Charter for Collaboration’. The Charter sets out 10 areas of activity where these disciplines can combine efforts to create a framework stronger than the sum of its parts to deliver ethical value far beyond profitability.

True collaboration between disciplines benefits all – from improving organisational capability, managing business and consumer disruption by reducing uncertainty, and therefore ultimately benefiting society. Supply chain turbulence is here to stay and it’s these professional partnerships, combining expertise with data-driven insights, that will make it a far less bumpy ride.

• The report was developed from a series of interviews and roundtables with finance and supply chain professionals, conducted by ACCA, The Institute of Management Accountants (IMA ®) and The Chartered Institute of Procurement and Supply (CIPS).

Author: Shelly Ann Mohammed, head of ACCA Caribbean

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