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To Really Move the Needle, You Must Move the Financial Needle First


To Really Move the Needle, You Must Move the Financial Needle First

Today’s supply chain management and manufacturing executives live in a finance-driven world, managing profit and loss sheets, dealing with working capital issues, and collaborating with CFOs. Furthermore, the ultimate measurement of a company’s performance is often the stock price or valuation, which is why you should start every day with the same mindset and look at your business’s financials.

When you examine financials, you should always have your specific goals in mind. The market is bursting with tools that promise to increase throughput, boost sales, and solve all kinds of issues, but it’s vital to focus on your own goals and objectives. What problem do you want to solve? How can your data help reorient the material flow to free up cash without jeopardizing the business?

Ultimately, most executives have three priorities: making more sales, managing variable costs to improve margins, and keeping customers happy. When I look at financial reports, I’m really interested in seeing the inventory and the cash flow statements, because the health of supply chain and manufacturing operations is often reflected in the cash positions and inventory of a company.

Measuring Financial Health in the Supply Chain

Instead of getting straight to the nitty-gritty and doing defect analysis on every production line in every factory, it’s critical to understand where the constraints are from a demand perspective. Look at historical data to determine best-case scenario demand and worst-case scenario demand, and apply data from the end-to-end supply chain to start mapping demand and identifying capacity constraints.

The farther upstream bottlenecks are, the more value they’ll create naturally because there’s always a bullwhip effect. By eliminating them, you can either sell more products or capture more market share.

If you want to increase your bottom line, that’s the process to use. Look at financials first to map out the value chain and see where inventory is most concentrated. Then, identify opportunities to free up cash and address immediate bottlenecks by investing in capital expenditures or reorienting the material flow. Both are quicker options than, say, getting injection molding machines installed on the production floor.

Supply chain management is a delicate balance of financial and operational processes, and business growth requires the right perspective. To move the needle at your organization, prioritize these strategies:

1. Remember that cost optimization doesn’t cause growth.

Anyone with a college degree can come in and cut costs. It’s not difficult, and engineers are constantly focused on making technologies that are cheaper and faster. The issue is that a lot of the people who generated growth before the cost-cutters arrived made a deliberate effort to create excess capacity that can support a certain environment.

Everything’s about pennies and dimes these days, but instead of trying to be as cost-centric and effective as possible, a growth mindset requires you to focus on what’s selling and find out how to make your supply chain faster. The more orders you can fulfill, the more money you can earn. If you want to grow, you can’t start by cutting costs. Instead, figure out what’s selling and reorient material flow to turn that product over faster and build up your cash reserves.

2. Step back and measure your efforts.

Supply chain and manufacturing executives are incredibly busy with day-to-day operations. However, it’s important to take a step back, look at your performance data for the last three to four years, and see if the effort you’re putting in is actually leading to sales.

We live in a world where IT is integral to everything, including connecting downstream sales data with operations. This data can help generate forecastsmitigate risk, and even produce crisis management plans for all the different scenarios that could play out. When you can look at performance data on a global scale, it can build resilience, reduce the waste in your supply chain in the form of buffers, and ultimately preserve your cash flow for growth.

3. Work more closely with the C-suite.

Don’t position yourself as a cost-centric value add. Today’s procurement and supply chain executives are all about getting the best deal, but that doesn’t really matter. It’s great if you can get the best deal, but it’s far more important if you can get customers buying more and logistics providers and suppliers moving the next products into place with the fastest turnaround times.

Executives in supply chain and manufacturing need to have the ear of the CEO and CFO and have an idea of all the levers in the business. With a holistic, end-to-end view, supply chain manufacturing executives can come up with operational improvements and confidently tell sales, “This is what we can realistically make.”

Supply chain and manufacturing executives need to quit the penny-pinching and recognize that cost-cutting measures can’t achieve the groundbreaking growth they want. Once supply chains are accelerated and product is moving off the shelves, you can start looking at the challenges that emerge on a global scale and identify different resources that could help overcome those challenges and demonstrate proven ROI.


Ali Hasan R. is co-founder and CEO of ThroughPut Inc., the AI supply chain pioneer enabling companies to detect, prioritize, and alleviate dynamic operational bottlenecks. Ali has unique experience in onshore and offshore supply chain management in the U.S., Russia, United Arab Emirates, Saudi Arabia, Pakistan, Bahrain, and Yemen.

How to Avoid Bottlenecks in Your Global Operations

You can’t just turn around a giant cargo ship. Even at some of the world’s best supply chains, redirecting chemicals and other products is a Herculean effort. And when shipping to volatile countries, it becomes even harder. For U.S. companies with global operations, one of the most effective ways to mitigate risk is to ship smarter.

In the current political climate, U.S. companies should be looking to partner with more stable countries where tariff changes aren’t expected. Take the Netherlands, for example. In 2017, the U.S. had a trade surplus of $24.5 billion.

I’ve been in supply chain management for more than a decade now. Supply chain flow has a lot of one-way check valves. Once cargo has shipped, there are no “backsies.” This is why supply chain managers are always stressing over demand forecasts — something that tops the list of most critical inventory management practices. And considering that our international tariff laws have been more dynamic in the past three years, shipping U.S. goods is more complex than it used to be.

Shipping Overseas

Anyone who has shipped freight by air or sea can attest to the fact that international shipping is complex — in no small part because of the rules and regulations around certain goods. Hazardous materials, obviously, can pose some problems. So can live cultures, a number of metals, and even telecommunication devices.

But it isn’t just international law that complicates matters. Everything from custom duties to cargo inspections can create bottlenecks within the supply chain. If even one item in a container is flagged, it could stop an entire ship’s worth of containers from making it past the terminal gates. It could then be held until a more thorough inspection can be made, which can come with an additional expense.

Complicating matters further, some countries will hold U.S. shipments for the sole reason that they’re coming from America. And in countries like Saudi Arabia, every container must go through inspection. Needless to say, these situations can add a significant amount of time to your shipment, creating inefficiencies in the supply chain that can sometimes be the equivalent of an additional tariff on your goods.

Being a former geo-marketing manager, I can tell you that a global view of operations can help you appreciate the people and logistics necessary to get goods from one location to another. It takes a great deal of coordination — and a great number of trucks, ships, and planes — to keep a supply chain running smoothly.

That’s why it’s so important to have some level of global operations knowledge as a U.S. supply chain professional. It can help you identify the potential “watering holes” of many products you need to buy for your operations. After all, the more you know about an item’s origin — and what it takes to get it to your warehouse — the easier it becomes to identify any middlemen that might be artificially elevating the price of goods.

This isn’t to say you should avoid international sources for goods. On the contrary, you should be exploring all your procurement options globally, nationally, and locally. Maybe you wouldn’t need to consider upheaving your operations and relocating your warehouse as a result of shifting trade patterns, like 48% of supply chain and transportation executives are doing now.

Getting a Global Perspective

The question then remains: What should U.S. manufacturers do to better understand global supply chain operations when exporting goods abroad? The following strategies should get you started:

Travel. To find the best prices for raw materials and the cheapest places to manufacture goods, the most logical answer is to travel. Knowing the origins of your raw materials can provide you with greater appreciation for the effort necessary to get an item to the production line. It also helps put the importance of quality in perspective. You understand why everything can’t be scrapped and reworked on a whim.

Study the local competition. Business is extremely competitive. The more you understand about local competitors, the easier it is to respond to changes. The U.S. e-commerce market has grown to $561 billion, making it the second-largest in the world. It didn’t take my first boss long to realize the value consumers place on U.S. brands, as they are willing to pay a premium for these goods — even over local ones.

Ask about tax reassessment and international ‘doing business as’ discounts.Many countries offer incentives for U.S. companies to do business in their lands. Free Trade Agreementsmake it much easier and cheaper to export goods to myriad foreign markets. The only problem: Most U.S. manufacturers never inquire about discounts on port duties or refunds for certain sales. Look at national government incentives for doing business in other countries.

Secure backup buyers. Regime changes, political turmoil, and bankruptcy are just a few events that can affect sales. In case your first buyer cannot purchase your goods, you need a backup buyer. Even at a price reduction, you salvage quarterly net income. To avoid tariffs on Chinese goods, companies bought all sorts of goods towards the end of last year. By February, all that changed. U.S. ocean imports fell 4.5%, and overall U.S. imports from China dropped 9.9%.

Chances are that the supply chain will become more central — and more global — to everything. In fact, activities associated with transportation and logistics account for anywhere between 10% and 12% of global GDP. As imports and exports ebb, it could disrupt not only the U.S. economy, but also the global one. But if you get to know the local competition, leverage business incentives from other countries, and take the time to formulate contingency plans for fluctuating demands, you’re more likely to weather the next storm.


Ali Hasan R. is the co-founder and CEO of ThroughPut Inc., the artificial intelligence supply chain pioneer that enables companies to detect, prioritize, and alleviate dynamic operational bottlenecks. Ali’s unique experiences in onshore and offshore supply chain management in the United States, Russia, United Arab Emirates, Saudi Arabia, Pakistan, Bahrain, and Yemen have produced results for customers’ ongoing work, which is now featured at some of the world’s most recognized brands.