Management of supply chain is one of the key drivers in today’s business world with offshore sourcing, foreign competition and global markets. Now to what extent reverse globalization is happening currently is a topic outside the purview of today’s discussion.
To keep the inbound supply flowing with materials, products and to keep store shelves filled, the responsiveness is essential.
Effetive Supply chain management requires reducing costs, increasing inventory velocity and compressing cycle time; and these three may not be compatible or consistent all the times. Doing all these-and doing it well-takes management skill. However, there’s a factor that is crucial for the design, development and implementation of supply chains.
That factor is accounting; accounting is important for logistic whether for supply chain management, both international and domestic, for lean and for outsourcing. Here, let’s see how management accounting is important for supply chain,
What is the supply chain?
Before moving towards the role of accounting in the supply chain, let’s have a word on the supply chain itself.
In general terms, a supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer.
This network includes different activities, people, entities, information, and resources.
The supply chain also represents the steps it takes to get the product or service from its original state to the ultimate end customer.
What is supply chain management?
Typically, supply chain management attempts to control or link the production, shipment, and distribution of the product.
By managing the supply chain, businesses are able to cut excess costs and deliver products to the consumer faster and cheaper.
This is done by keeping control of internal inventories, internal production, distribution, sales, and the inventories of company vendors.
Supply chain management is based on an idea that almost every product or service which comes to market results from the efforts of many organizations that build up a supply chain.
Though supply chains have existed for ages, most small businesses have only recently paid attention to them as a value-add to their operations.
The fact is that good supply chain management can reduce the costs and help companies to remain competitive in the business landscape.
Role of the management accountant
An accountant plays an increasingly vital role in strategies, planning and execution of supply chains management.
An accountant serving on design and implementation teams will provide analytical expertise, an economic perspective and an objective mindset.
These will help to examine, evaluate and prioritize the opportunities and challenges inherited in the management of the supply chain.
Specifically, the accountant provides services to the team charged with design, development and execution of supply chain planning.
These services of accountants are as below:
- Financial analysis Accountants will prepare a financial analysis of the costs and benefits of supply chain management.
- Performance benchmarks Accountants will also create performance benchmarks, milestones, KPIs and measure to support the management of the supply chain.
- Evaluation They will provide an economical and non-financial evaluation of alternative improvement opportunities to facilitate the management of the supply chain priorities.
- Database and technology Accountants enable supply chain transactions by participating in identifying and implementing new database and information technology.
- Identifying effiencies Accountants play a vital role in the redesign process of the supply chain to remove waste, reduce and increase the flexibility and responsiveness of financial transactions across the supply chain.
- Problem solving They will collaborate with finance and operations professionals in the partnering organizations to find creative ways to solve logistics and support problems
- Decision making Accountants will provide analytical support to supply chain management teams, including estimating and benefits of various decisions throughout the design, conversation and execution efforts
- Reporting They will create management reports and evaluation tools to ensure that the supply chain management initiative meets its objectives and delivers the required performance improvements
- Data integrity Accountants will ensure the integrity of supporting databases, internal control procedures, key proprietary technologies, processes, and physical and knowledge assets of supply chain
In supply chain management, the role of an accountant is crucial. By providing all these services, an accountant can support and sustain the supply chain system in its drive for superior service to the customer.
About The Author: Nidhi Donga is a Content crafter at 123Financials – Accounting firm in London. She is a Financials writer, blogger for the last 2 years – she loves travelling, photography, reading and hanging out with friends and family.