Fudging the supply chain to hit the number: five common practices that sacrifice the supply chain and what financial analysts should ask about them

Abstract

PurposeThe purpose of this paper is to describe and detail practices that are commonly used to pursue short‐term functional targets (e.g. end of month sales targets) at the expense of supply chain integration. It also aims to identify the key questions that financial analysts should be asking companies to ensure that they are not using those practices and thereby destroying shareholder value.Design/methodology/approachThe insights were gained from the authors' hands‐on supply chain management experience and validated in discussions with supply chain executives across a range of industrial sectors (including electronics, consumer packaged goods and logistics service providers).FindingsThe paper identifies three sales and customer service practices, and two financial practices that undermine the performance of the integrated supply chain. In response it suggests alternative practices and four key questions that financial analysts should ask companies to ensure that the performance of the integrated supply chain is not sabotaged – thereby helping supply chain managers.Practical implicationsThe paper can help supply chain managers dispose of value‐destructive behaviour in their organizations by offering them screens/descriptions of poor practice which they can hold up to their peers as a mirror. It provides the business imperative for change, by identifying the key questions analysts should ask to uncover value‐destroying activities.Originality/valueSupply chain managers often share their frustration with peers in anecdotal ways. The paper describes common practices and sources of frustration, using actual data and examples.