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How can logistics professionals collaborate with finance teams to improve budgeting?

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Budgeting is a crucial aspect of logistics management, as it affects the efficiency, quality, and profitability of the supply chain. However, budgeting can also be challenging, especially when logistics professionals have to work with finance teams who may have different perspectives, goals, and expectations. How can logistics professionals collaborate with finance teams to improve budgeting? Here are some tips to consider.

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Senthilvelan S

Head - Order Management & Processes at HMD | Built Order management global capability inhouse | Ex-Nokia, Microsoft |…
John McClymont

Getting Retailers & eCommerce Brands More Sales And Better Revenue Through Operations | Ran a $100M / year Operations…
Bello Oyedolapo

Logistics Operations Strategist | I specialize in optimizing processes and reducing costs for businesses through…

1 Understand the financial objectives

The first step to collaborate with finance teams is to understand their financial objectives and how they align with the logistics goals. For example, finance teams may focus on reducing costs, increasing revenues, optimizing cash flow, or achieving return on investment. Logistics professionals should communicate how their activities and decisions contribute to these objectives, and how they measure and report their performance. By understanding the financial objectives, logistics professionals can also identify potential trade-offs, risks, and opportunities that may affect the budgeting process.

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Senthilvelan S

Head - Order Management & Processes at HMD | Built Order management global capability inhouse | Ex-Nokia, Microsoft | MDI
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Logistics has direct impact on organization's financial objectives. Costs associated with - Transportation - Warehousing - 3PL/4PL services - Order management costs have direct impact on organization's opex. Logistics cost forecasts based on yearly plans at various levels of granularities could help in setting realistic targets. Forecasts should consider impact at - Product level - Region/country level - Address customer segment wise - Transportation mode wise

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Avinash Nagar

National Head - Channel Development & Strategy | Smart Retail, Leadership, Analytical Capability
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1. Data transparency: Logistics teams provide granular cost breakdowns and performance metrics to enable accurate forecasting and informed budget allocation. 2. Scenario planning: Jointly analyze historical data and industry trends to develop realistic budget scenarios considering potential disruptions and market fluctuations. 3. Cost optimization: Work together to identify cost-saving opportunities through route optimization, technology investments, and improved supplier relationships. 4. Regular communication: Build a strong working relationship through open communication channels and proactive updates on logistics performance and potential budgetary impacts.

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2 Involve finance teams in planning and forecasting

The second step to collaborate with finance teams is to involve them in the planning and forecasting stages of the logistics process. Planning and forecasting are essential for setting realistic and achievable budgets, as they help to anticipate the demand, supply, and capacity of the logistics network. Logistics professionals should share their data, assumptions, and scenarios with finance teams, and seek their input and feedback. By involving finance teams in planning and forecasting, logistics professionals can also leverage their expertise, tools, and methods to improve the accuracy and reliability of the budgeting process.

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John McClymont

Getting Retailers & eCommerce Brands More Sales And Better Revenue Through Operations | Ran a $100M / year Operations and Logistics Network, 20 Yrs Exp | Dedicated to Destroying the Status Quo | Principal & Founder
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The sooner you can involve finance, the better. This will ensure that there is common understanding of needs on both sides, as well as provide an opportunity to change, align or adapt to a preferred business process. Often, an operations team will measure how money is spent differently, or have a completely different view of it. An example would be hours based cost from the ops team, and a product related cost by finance ($/unit for example). These differences in how projections are made can lead to important variances and cause misunderstanding.

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Bello Oyedolapo

Logistics Operations Strategist | I specialize in optimizing processes and reducing costs for businesses through streamlined logistics operations.
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I have seen some logistics teams prepare budgets without involving the finance team and they ended up having bogus and inaccurate budgets. I have also seen finance teams prepare logistics budgets without involving the logistics teams and the budget failed to address key needs like the cost of tech, returns, claims, etc. To have a good budget both the logistics team and the finance team must be involved in the lifecycle of the budget from planning to spending and even monitoring.

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3 Align the budgeting cycle and format

The third step to collaborate with finance teams is to align the budgeting cycle and format with the logistics cycle and format. The budgeting cycle refers to the frequency and timing of the budgeting process, while the budgeting format refers to the structure and presentation of the budget. Logistics professionals should coordinate with finance teams to ensure that the budgeting cycle and format match the logistics cycle and format, and that they are consistent and compatible. For example, if the logistics cycle is monthly, the budgeting cycle should also be monthly, and the budget should reflect the monthly activities and costs of the logistics network.

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4 Review and adjust the budget regularly

The fourth step to collaborate with finance teams is to review and adjust the budget regularly. The budget is not a static document, but a dynamic tool that reflects the changing conditions and realities of the logistics environment. Logistics professionals should monitor and track their actual performance against the budget, and report any variances, deviations, or issues to finance teams. They should also work with finance teams to analyze the causes and impacts of the variances, and to make necessary adjustments or corrections to the budget. By reviewing and adjusting the budget regularly, logistics professionals can also improve their accountability, transparency, and learning.

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Bello Oyedolapo

Logistics Operations Strategist | I specialize in optimizing processes and reducing costs for businesses through streamlined logistics operations.
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If you don't monitor the actual performance against the budget, one day, you will wake up to a mail from your finance team that you have gone beyond budget. What I do is track actual performance against the budget every month. This way I can see what cost to control before it becomes too high.

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5 Seek continuous improvement and innovation

The fifth step to collaborate with finance teams is to seek continuous improvement and innovation in the budgeting process. The budgeting process is not a one-time or one-way exercise, but a collaborative and iterative process that involves learning, feedback, and adaptation. Logistics professionals should solicit and welcome suggestions, ideas, and best practices from finance teams on how to improve the budgeting process. They should also share their own insights, challenges, and solutions on how to enhance the budgeting process. By seeking continuous improvement and innovation, logistics professionals can also foster a culture of excellence, trust, and value creation in the budgeting process.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Ion Badea

Director of Commercial Operations - Bulk/Ro-Ro/Auto
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It is about the revenue and then, the cost to sustain the revenue. Get that straight basis hard facts. Dreaming is good, but not when you prepare your budget. Once the forecasting is done right using a very serious market analysis, go and get your costs in line. People, equipment, materials, consumables and anything in between. Do a proper P&L and use that as a bible for the 12 budget months. Be aggressive, adjust, and adjust again if need be. If any slide happens, don’t hope some divine intervention will change the course, for the better. Hopes don’t help making budget. And that’s that.

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How can logistics professionals collaborate with finance teams to improve budgeting?

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2

3

4

5

6

1 Understand the financial objectives

2 Involve finance teams in planning and forecasting

3 Align the budgeting cycle and format

4 Review and adjust the budget regularly

5 Seek continuous improvement and innovation

6 Here’s what else to consider

Logistics Management

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How can logistics professionals collaborate with finance teams to improve budgeting?

1

2

3

4

5

6

1 Understand the financial objectives

2 Involve finance teams in planning and forecasting

3 Align the budgeting cycle and format

4 Review and adjust the budget regularly

5 Seek continuous improvement and innovation

6 Here’s what else to consider

Logistics Management

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