Supply chain management and Finance should go hand in hand, because a good supply chain strategy and execution can save costs and increase revenue. In practice, however, these two worlds, do not get along together very well. When implementing planning systems, there is typically a complete lack of involvement from financial experts. In some cases, requirements are put forward to the team implementing the planning system, coming from the financial department. And most of these requirements do not make sense at all, from a planning perspective.

For example, when information needs to be provided, any number that is collected and sent off seems to suffice. Perhaps these numbers are used again in financial reports, but never have I seen that numbers were questioned, or refinements to the calculation proposed. Any number that looks like it has been calculated with some serious logic seems to be ok. Figures delivered to financial departments never come back with critical remarks, even if the project team later comes to the discovery that there are problems in the calculations.

Conceptually, it makes sense to use financial information to plan, so better plans can be found from a financial perspective. However, in many cases, financial systems do not hold reliable information that can be used for planning, such as standard times, costs for setups or cleaning. Financial figures are usually too vague, have once been entered in a system, and have never been improved.

There is another phenomenon where finance works against supply chain management, and this is in the end-of-month ritual that can be observed in many large companies. Suddenly, when the end of the month comes closer, stocks need to be reduced, and goods need to be shipped out. Planners and production people are stressing to meet targets, and pushing material out of the door. Visiting a company on the 30th means carefully avoiding all the trucks that are parked near the entrance, whereas one day later, the parking lot can be completely deserted. Such a way of working obviously does not serve any rational objective, it only serves to meet some fictional financial target figure. I once met a planner, who told me she would take samples of stock levels at random times in the month. “I never use the official end-of-month figures, they are completely unrealistic,” she told me.

Logistics and finance, it could have been so beautiful. Where did it go wrong?