The past two years or so of the pandemic have highlighted the growing importance of companies’ supply chain networks and some of the key challenges they face as an industry.
A report by EY Canada says organizations that failed to plan agilely have faltered over the last two years due to supply chain breakdowns and logistical nightmares.
The report, co-authored by KB Brinkley, EY Canada Integrated Business Planning Leader, and Georgianna Ma, EY Canada Integrated Business Planning Leader, says IBP can bring finance, operations and supply chain closer, but requires organizations to dismantle functional silos to fully unleash it.
In an interview, Ma said the change in consumer behaviour has had a drastic impact on the operations of many companies.
“If you look across the supply chain, value chain, from beginning to end, there’s definitely disruption across the board,” she said. “More from an input perspective. We’re seeing a bunch of raw materials being short, there’s a lot of pressures on that front, the costs are rising, supply shortages, there’s unexpected demand across the board.”
Abrupt inflation, geopolitical tension, soaring energy costs. Empty shelves, delayed deliveries and supply chain shortages. The pandemic may be receding, but businesses continue to face a barrage of challenges and an urgent need to plan quickly across scenarios, said the EY report.
“From supply chain breakdowns to labour woes and logistical nightmares: organizations that failed to plan quickly or agilely enough have faltered over the last two years. As planning fell short, companies in all sectors lost out on key market opportunities, earnings and growth. As a result, CEOs around the world are now rethinking operations to tackle a post-pandemic market that’s nothing like the one we knew before. Labour, energy and raw material costs are all up. Freight rates have jumped more than 400 per cent since 2019. Nearly 90 per cent of global CEOs have seen a significant increase in input prices. And more than half say geopolitical challenges are forcing adjustments to strategic investments,” according to the report.
“Among those CEOs, 79 per cent say they have, or will, change their operations and supply chains to cope. IBP can play a pivotal part in that transformation. By aligning key business functions through a unified strategy, it can create a fundamentally sustainable, transparent and collaborative planning approach. This generates an integrated business plan that serves as a powerful source of truth the entire organization can pursue together. It connects functions and accelerates speed to impact by empowering leaders to react more quickly in light of external challenges, shocks and disruptions.
“In today’s reality, integrating finance to supply chain planning must become the central focus of running the business. Each step in the IBP process — including product review, demand review, supply review, reconciliation and management business review — brings unique insight that can then be integrated into stronger financial planning. Linking finance and supply chain planning in this way helps companies achieve financial forecasts two to five times more quickly. It also significantly decreases the need for data consolidation. We’ve seen these results play out in the market time and time again.”
Ma said organizations have a challenge of predicting demand and matching the supply to enable that. Many times companies don’t have a good grasp of how to marry the two together. And when companies do planning, many are actually doing them in silos.
“Rarely do you see organizations all talk in the same way and when they do the planning look at it in an integrated manner,” she said, adding where she’s seeing success is with companies that marry them together.