Fraser Robinson, Co-founder and CEO at Beacon
Earlier this month, AG Barr, the soft drink manufacturer that acquired Fentimans and Frobishers, announced that “supply chain issues” led to around £10m being wiped off its revenue. The reasons behind this loss were attributed to lower stock availability that mainly came from the company’s internal capability and also third party manufacturers.
Internal capability could mean a variety of things. There are of course practical distribution issues at play here. But whatever the specific reasons, it illustrates how quickly supply chain costs can compound when disruption takes place – and how difficult they are to prevent without a clear, connected view of what is happening across the operation.
For a CFO, what matters is how they respond when disruption hits. That is the hard part of the job. While the supply chain is one of the largest opportunities they have to reduce costs for their business, its opacity makes it one of their toughest obstacles to do this too. Their ability to make quick, effective decisions that minimise costs depends on having data that shows context.
The cost of acting vs. not acting
It’s tempting to look at AG Barr’s stock availability and ask why they weren’t holding more safety stock. While that is one way to look at the issue, I would look at it from a different angle. Businesses typically hold excess safety stock for one of two reasons: they have the budget to spare, or, far more often, they don’t trust their data enough to run lean and therefore need the safety net. So, the more useful point to focus on is what connected operational and financial data would have them do instead.
Disruption will always be a part of supply chains. But costs can quickly rise when responses to issues like emergency procurement decisions or rerouting shipments are made reactively and impulsively due to a lack of real-time data. Connected data gives finance leaders the context to find the most cost-effective response, rather than reacting blindly. And this is crucial for overcoming a key dilemma. When disruption happens, CFOs generally face two costs. There is the cost of not acting, where stockouts, like AG Barr experienced, missed sales and other charges such as D&D fees can accrue. And there is the cost of acting, where decisions around whether to pay for a premium freight, split the shipment or expedite it are required. Instead of relying on gut feeling, finding the balance between these tradeoffs should come from contextual data – knowing, in the moment, which option actually costs less.
Connecting the data to uncover valuable context
The data exists. The problem is that it sits across different systems – forwarder portals, spreadsheets, carrier contracts, operator inboxes – and without connectivity between them, it’s effectively out of reach . These systems aren’t designed to communicate with each other and, while the insights are there, they can’t be accessed easily.
What CFOs would benefit from the most is a way to connect all of this data, so that it’s possible to view operational data and its financial impact in real time. When they can see these connections, risks get flagged quicker and they can use this contextual data to deduce their next best steps. The challenge is many companies aren’t equipped with the infrastructure to consolidate, standardise and organise data in one location. Yet the technology exists to achieve this.
By connecting supply chain and finance data into one workspace, CFOs can acquire the necessary context to make data-driven decisions to best respond to disruption and proactively prevent issues like stockouts. They can see the reasons behind a late shipment, for example, and how it might impact costs for the business as a whole, context that would remain hidden if data remained in separate systems.
A connected approach
Disruption will always be present in supply chains. But AG Barr’s recent losses show how supply chain issues can have massive knock-on effects for an entire business. There is a real difference between disruption that couldn’t have been avoided and the costs that could be..
That’s why one of the most immediate and effective actions CFOs can take is to build a connected, accurate view of their operational and financial data. With this foundation, they are then in a great position to take data-driven steps that help to de-risk their supply chains over the longer term. If CFOs can make connecting their supply chain data a core priority in the months ahead, they will be able to start building a key competitive advantage.
