Why Should a
Supply Chain Manager
Care About
Financial Performance?

Human beings tend to be nostalgic. We have fond memories of how life used to be, how business operated, and how people behaved. Fact is, life then was just as difficult as now, people were just as rude, and businesses failed just as often.

On your last job search, how much effort did you put into understanding the financial stability of the potential employer? Did you study the public financials? If it was a privately held company, did you ask to see the latest financial results? No?

Are you in a position to choose the carriers and service providers for your company? Do you ask for their financial reports? If they are publicly traded, do you keep track of their earnings? How much of their cash comes from financing or debt? How much of their revenue does your book of business represent? How deep is their Balance Sheet? What is their exposure to the failure of major customers? What is their debit load?

Are you in the position to evaluate customers? How much at risk of failure are they? What is their profit margin? How do they make their money?

Knowing how to read and understand the financial performance of your employer, your service providers, and your customers allows you as a manager or employee to understand the risks your company faces and the potential risks and rewards your trading partners present. If you were downsized in the recent recession, do you think you could have predicted your employer’s weakness? You might have been able to with visibility and understanding of the financial performance of the company. Knowledge, when combined with the ability to think and reason, is a source of power, and it enables you to make decisions that can protect you, and that can help you grow and thrive.

This is not theoretical advice. I learned the language and the fundamentals of business early in my working life. I used these skills to decide whom to work for and when to leave. Knowing how to understand the financials allowed me to know when to press for a raise and when not to. With that power, I knew how to position the proposal to sell a project that would create cash for the company and earn me a raise. Knowing our financial position and the carrier’s performance, I held a strong edge in negotiating better pricing and better payment terms, and my knowledge gave me the ability to spot failure risks. The knowledge of financial metrics helps me sell deals and enables me to frame a compelling argument that moves a project forward. My understanding of the financials helped me figure out how a crook on the other side of the table was cheating my employer.

Knowing the language of business helps me identify the amateurs—the people in business who are dangerous because they really don’t know what they are talking about. It enables me to have a meaningful conversation with the CFO, CEO, and board of directors.

In short, my knowledge of the language of business allowed me, a logistician, to create massive profits for the organizations I served. It allows me to continue to serve, creating more cash and more success.

Knowing the language of business allows you to contribute more to your company, to your community, and to yourself. That is why you must understand the language of business. Your success depends on it.

Hello! My name is Dave Schneider, I'm founder of WATP.
Most Supply Chain Managers don't realize how critical (and beneficial) it is to care about their company's financial performance. I'd love to help you get started working with yours. Give me a call anytime at 877-674-7495.