4 Data Sources CFOs Must Analyze for Value Chain Insight
Businesses are paid to take raw materials and to add value to them by turning them into something worthy of payment from the public. This process is easy to see in manufacturing industries, internally. Manufacturers see exactly how value is added to raw materials by watching the process of turning raw material into a product first-hand. The idea is just as important in service industries where time, intelligence, internal systems, and facilities are used to create a service of value to the customer.
But a priority for CFOs is to highlight risk and value analytics in the supply chain. It isn’t just about cutting costs. It’s about maximizing value. The best way to evaluate the risk and value of your current strategy is by analyzing the right data values. According to Forbes, an overwhelming majority of supply chain leaders find that data analytics are critically important to their operations, but only 44 percent have a plan to implement strategic analytics. Use these data sources to better track your organization’s processes and make it more efficient:
Are you using what you have to your advantage? There are immense benefits to inventory optimization. Even in today’s ever-growing digital age, getting the right inventory in accurate quantities to meet the supply and demand of your organization can be a challenge. But the inventory you hold is essentially just cash that is packaged and sitting on your shelves or in your warehouse. Reducing inventory of a product frees that cash, and can also reduce carrying costs. But too little inventory increases risk of being out-of-stock. Depending on the size of your company, you will want to analyze your inventory at either the division level or by looking at the entirety of the business.
If you are a retailer or distributor, your products are likely sold as complete entities. In this case, examine ordering patterns for each product over the past several years in order to determine which products might be trending upward, are high volume, or are seasonal. Consistently reviewing this information along with an analysis of the profitability of each will enable you to look at the bottom line for each product in order to make the right executive decisions moving forward.
Invoices and Accounts Payable
Monitoring and tracking invoices in accounts payable can be a daunting task. There are a boundless number of KPIs that can be used to track and measure Accounts Payable performance. Start with looking at how much it takes to process a single invoice. The costs can be expensive when taking in to account what is associated with routing, copying, follow-up staff salaries, and managerial overhead with IT support. And of course, time is money.
So, how long does it take to process a single invoice? Take those two numbers as a means by which to calculate staff productivity. This can also be a great way to pinpoint exactly which suppliers are underperforming or creating issue not worth the cost.
Invoice validation is also an essential part of the Accounts Payable process, and can often cause delays, costing you both time and money. Find out how many invoices are attached to a specific purchase order. Most of the time, the higher the percentage of invoices linked to a PO, the quicker and less costly the process will be.
You may have your tried and true buyers, but be careful not to get stuck in a rut. If you are a manufacturer, look closely at where you are buying from and be wary of possible bottlenecks. Every buyer and seller wants their relationship to be a win-win situation, and every buyer has the potential for great impact on your organization’s profitability. Take a look at the number of buyers in each category. Does a buyer offer you the ability to choose from multiple offerings? Look at their availability of substitute products so that there isn’t a need to rely on their own inventory of one product, and then closely examine what drives price in that particular product category.
Project and Process Management
Start at the beginning and look at your manufacturing process. It is likely your business has grown since its birth, and is hopefully continuing to grow. With that growth, it is important to take another look at structural reorganization. Some projects might be slowing down delivery more than you might have thought, so using analytics to determine bottlenecks in your projects could be the answer.
Make an outline of the manufacturing process and how long it would ideally take, and then go back and see what the reality is. If the two don’t match up, you will know exactly where the issue is, and it might be time to make some changes to streamline the manufacturing process.
Using these analytics to provide yourself and your organization with operation and performance data will not only help to reassess the value chain quality of your organization, but will provide up-to-date performance data, and can help to improve the quality of data you are receiving and processing. Integrating that data in to your daily operations is even better to ensure each takeaway point is being acted on effectively and efficiently.
Neha Tandon is a writer for TechnologyAdvice. She has a Masters of Arts in Journalism from Syracuse University’s Newhouse School. With a background in marketing, public relations, and advertising, her true passion is for business journalism.