6 Advantages of Aligning Financial Planning With Sourcing During Uncertainty

On the heels of a global pandemic that disrupted sourcing processes for 95% of companies, businesses now have a new challenge to tackle: economic uncertainty. Stock market volatility and unstable supply chains amid the war in Ukraine have created a ripple of repercussions across the globe, disrupting the energy market and pushing prices higher in every industry. Recently, the United Nations predicted global inflation to increase to 6.7% this year. In the U.S. alone, inflation reached a 40-year high over the summer and, while consumer sentiment is on the rise, many are opting for discounted items and making less purchases to navigate economic uncertainty. 

These price pressures are hitting businesses from both sides. On the one hand, rising inflation is tightening consumer wallets and affecting demand. And on the other, suppliers are increasing their prices and pinching company budgets. In the U.S., the producer price index (which measures business costs) rose by 8.7% from 2021, challenging companies to find creative ways to address increased prices while growing the business. 

Many companies rely on two critical teams to help the broader business set budgets and keep costs down as economic uncertainty looms: their financial planning and analysis (FP&A) and their procurement and sourcing teams.

Now more than ever, it’s important that these two teams work closely together. Traditionally, they’ve collaborated using shared spreadsheets, email, and ad hoc meetings. As economic conditions continue to evolve, however, these teams require a connected solution that enables constant collaboration and provides real-time insights to remain agile in a rapidly changing world. Using technology, these teams can break down cross-functional silos and give their business the visibility it needs to plan strategically and navigate economic uncertainty. 

How Sourcing and Planning Collaborate to Build Business Resilience

When sourcing and FP&A teams are empowered by technology, they can stay tightly aligned to maintain business continuity and agility despite disruption. The conventional modes of collaboration—email chains, spreadsheets, and shared drives—require teams to work off of data that’s outdated as soon as it’s recorded. Meetings between sourcing and FP&A often happen after the budget has been set, reducing opportunities for knowledge-sharing. 

Connected sourcing and planning, however, breaks down communication silos, gives access to real-time data, and strengthens cross-functional relationships for better decision-making. Rather than creating a fixed budget that sourcing must follow, FP&A teams can use technology to proactively work with procurement to settle on a budget that best supports the broader business goals. 

For example, when planning for capital expenditure (CAPEX) projects, FP&A professionals that leverage technology such as Workday Adaptive Planning are able to share projected budgets with sourcing ahead of time. Using these budgets as benchmarks, sourcing can then set out and find the right suppliers at the right rates, driving savings during the request for proposal (RFP) process and contract negotiations.

This shared data ultimately empowers the planning team to create more accurate budgets and forecasts that reflect continuously changing market conditions. Having access to real-time savings information also enables FP&A leaders to reallocate savings to other projects, begin new projects, or bank them for later use. When FP&A and sourcing are aligned, they can help the business remain flexible and resilient while navigating uncertainty. 

6 Advantages of Connected Planning and Sourcing

Sourcing and planning teams that are equipped with best-in-class solutions drive better business outcomes across the enterprise. Data centralization and automation help keep sourcing and FP&A teams in lockstep and ultimately power better collaboration, more informed decision-making, and strategic planning for the future. Here are just a few ways connecting sourcing with planning can benefit your business.

1. Gain proactive insights. Sourcing teams with easy access to sales forecasts and production planning can provide an accurate projection of planned spending. In manufacturing, for example, sourcing teams can use this information to secure volume commitments from suppliers before creating purchase orders (POs). This gives finance a preview into upcoming spend without waiting for requisitions to come through. FP&A and finance teams also get a clearer picture of the expected pricing mix in real time, giving them the ability to plan ahead.

2. Identify best supplier partners. In the case of logistics, sourcing can determine optimal suppliers using model shipping forecasts created by FP&A and comparing vendor lane rates. Once sourcing has chosen a logistics partner, they can then update the supplier’s rates, which automatically feed into the budget. This allows FP&A to understand the impact to the total business before sourcing finishes negotiations. 

3. Increase product cost accuracy. Many businesses often base their plans and costs for a new product around outdated benchmark data and rigid forecasts. This stale information makes predicting the cost of operationalizing new products tricky at best and inaccurate at worst. By connecting sourcing with planning, procurement teams can provide finance with real-time supplier pricing, allowing FP&A to create dynamic forecasts that reflect the most current supply mix. 

4. Drive time savings with automation. Cut down on manually updating spreadsheets and communicating through lengthy email chains by integrating sourcing and planning software. Sourcing can take advantage of automation by directly sending actual negotiated savings to FP&A at the push of a button. FP&A can use this real-time data to adjust its plans and budgets, giving time back to both teams for additional projects.  

5. Prioritize strategic contracts. Technology gives sourcing teams the ability to track contract pricing levers such as scalability and look beyond only which contracts are expiring and which are expensive. Sourcing teams who have access to financial planning are able to determine if current contracts require renegotiation due to a change in plans. Sourcing teams can also get ahead of contracts that are likely to have major increases and lead more informed negotiations with suppliers. 

6. Increase visibility with centralized finance data. Workday Adaptive Planning gives FP&A teams a space to combine sourcing data with other savings drivers from across the business, such as headcount management, demand reduction, and more. This gives finance executives a single source of truth for company wide planning and savings, enabling better decisions and accelerated execution of plans. 

Sourcing and Planning Are Better Together

As economic volatility heightens around the globe, sourcing and FP&A teams can no longer rely on manual processes and static data to guide the business and maintain continuity. Companies now require real-time insight into their savings to allow for agile planning and faster decisions. Cloud-based technology helps both teams give finance partners complete visibility into savings initiatives across the business. On the sourcing side, technology helps teams identify and prioritize strategic suppliers that ultimately drive more value for the business. 

With increased collaboration and time savings, teams that connect planning and sourcing are better prepared to adapt to economic uncertainty and build better futures for their business. 

Curious to see how businesses are using Workday Adaptive Planning and Workday Strategic Sourcing to maximize procurement and planning value? View this webinar for an in-depth demo of how these two solutions work together to provide real-time insight and visibility into companywide savings.