Finance executives must contend with a wide range of economic headwinds, including high inflation, pressure to pursue growth, the need to integrate ESG practices and persistent labor shortages. 

Until recently, many organizations have focused on breaking down silos and digitizing their operations in response to those challenges. But they often overlook their supply chain, which includes opportunities for organizations to become more innovative and stronger through smarter collaboration with partners.

How can the finance department help the enterprise reconsider the role of external operations and the supply chain in supporting their bottom line?

Why it makes sense to invest in the supply chain now

While revisiting how the supply chain operates can deliver many benefits, some executives may find it challenging to overcome internal resistance to the idea. Despite the modest investment required, companies that embrace innovation can transform their supply chains.

Finance and supply chain experts emphasize the need to be proactive during a downturn. “When the economy slows, companies pull back. As a result, market prices for goods and services often fall,” says Nathan Moon, Global Head of SAP Business Network for Finance. “Resilient companies can take advantage of the drop in prevailing prices, invest in their infrastructure and emerge far stronger than those businesses that were unwilling or unable to spend during a downturn.”

While investing in a down economy can prove highly beneficial, which benefits can a business expect to unlock when improving its supply chain? 

Unlocking value: The advantages of enhancing the supply chain

“It is a challenging environment with a great deal of uncertainty,” says Valerie Blatt, Global Head for SAP Business Network Customer Success & Go-to-Market. “Three years ago, it was COVID-19 causing supply chain issues, then the geopolitical environment and that still looms. With ongoing inflation, we have consumer spending starting to wane and questioning if we’re in a recession. But one thing that remains consistent is that all of these factors affect supply chains, and companies can — and should — strengthen and create more robust supply chains.”

Streamlining supply chain-related processes has several advantages for businesses, including:

• Visibility into the sources of supply, including n-tier, that support your business.
• Ability to proactively adjust to supply chain disruptions to avoid stock-out situations.
• Automation of demand planning processes.
• Tighter management of your inventory levels to improve COGS.
• Technology that bridges the gap of an aging workforce and younger digital natives.

Error reduction in your supply chain can benefit the enterprise, its suppliers and, ultimately, customers. Furthermore, unlocking funds tied up in inventory can fund business expansion and fuel innovation.

During turbulent economic times, resiliency is also critical. Revisiting how the supply chain operates provides an opportunity to adopt agile financial management, which makes it easier to adapt to inevitable market changes and economic pressures. Instead of struggling to respond to revenue declines and cost increases, businesses can anticipate and mitigate the impact on the bottom line.

Focusing attention on the supply chain also provides an opportunity to embed environmentally conscious practices that can support sustainable growth. This makes it easier for businesses to meet sustainability goals and encourages suppliers to adopt environmentally sound business practices. 

“Since more than 70% of carbon emissions come from the supply chain, the more we collaborate with and incentivize our trading partners to adopt greener business practices, the more meaningful our sustainability impact will be,” Blatt says.

Greater emphasis on the supply chain sets the stage for collaborative partnerships. More closely aligning with suppliers creates stronger networks that, in turn, foster productivity and innovation. Simply put, when the enterprise and its suppliers increase their collaboration, both entities can improve their performance. For example, with 300 strategic suppliers onboarded to SAP Business Network, Grupo Nutresa SA, a Colombian food processing company, achieved savings of up to 50% using digital tools. 

SAP Business Network can significantly optimize supply chains, with recent benchmark analysis revealing that the platform can:

• Help improve order fulfillment lead time by 5% to50%.
• Contribute to 37% fewer late shipments.
• Reduce revenue loss due to stockouts by 8% to 23%.

Modernizing the supply chain: Navigating the generational talent gap

While these multifaceted benefits create a compelling case for action, the impending retirement of executive leadership offers means now is the time to start rethinking your organization’s approach to its supply chain.

“As our supply chain leaders start to retire, we risk losing a lot of institutional knowledge,” says Blatt. “What’s more, their replacements are often digital natives who simply work differently. Strategically investing in modernizing your supply chain technology and infrastructure will significantly help your organization navigate this transition.”

While many of those challenges result from an unsettled global economy, which executives cannot influence directly, they can do a great deal to streamline their operations and position their organizations to weather challenges. And when the economy improves, those companies that invested in their supply chains will reap the benefits.

Discover how SAP Business Network is empowering organizations worldwide to collaborate on strategic initiatives, ensuring adaptability, future-proofing and sustainability for your business. To learn more about the benefits of utilizing a multi-enterprise business network visit sap.com.