Finance in supply chain is often discussed in terms of cost control, budgets, and working capital. As Keith Wright, procurement author and consultatn, and Elva Ingólfsdóttir, supply chain expert, explain, this narrow view misses the bigger picture. Procurement, inventory, and supply chain decisions shape revenue, margins, cash flow, and customer loyalty long before figures appear in a financial report.
When supply chain and finance operate in silos, businesses struggle to explain performance, align priorities, or make confident decisions. When they work together, supply chain becomes a powerful driver of financial success rather than a cost centre to be managed.
Read on to uncover their valuable insights.
Supply chain as the financial heartbeat of the business
Keith argues that procurement and supply chain sit at the centre of almost every organisation, regardless of industry. Every product or service has an origin, a cost structure, and a journey to the customer. How well that journey is managed can determine whether a business makes money or loses it.
Having the right products, at the right price, in the right place, at the right time directly affects revenue and margin. Weaknesses in supply chain design, supplier reliability, or inventory positioning show up quickly in financial results. Missed sales, excess stock, write-offs, and service failures all erode profitability.
Elva reinforces this point by highlighting supply chain’s role in enabling strategy. A business that competes on innovation, speed, or trend responsiveness needs a very different supply chain setup from one that sells stable, functional products. When supply chain strategy does not support commercial goals, financial performance suffers, even if individual cost metrics look acceptable.
How finance in supply chain shows up in financial statements
Finance teams often look to high-level indicators such as revenue growth, EBITDA, and cash flow. Supply chain decisions influence all of them.
Elva points out that availability drives revenue. If products are in stock when customers want them, sales potential increases. Service failures limit growth, regardless of demand or marketing effort.
Costs are equally affected. Cost of goods sold includes purchase prices, logistics, handling, customs, and operational labour. Inefficient replenishment, rework, or excess handling all inflate costs and reduce margins.
Inventory adds another layer of complexity. Stock is an asset, but it also ties up cash. Holding more inventory reduces available liquidity and increases risk through depreciation, obsolescence, or write-offs. The financial impact depends on strategy. Bulk buying may reduce unit costs, while faster stock turns may improve cash flow and flexibility.
Keith adds that these impacts rarely occur in isolation. Right range but wrong stock, or plenty of stock in the wrong locations, can lock up capital without improving service. Finance in supply chain is therefore not about minimising inventory at all costs but about making inventory work harder for the business.
The customer link that finance cannot ignore
One of Keith’s most important observations is that supply chain decisions shape the customer experience, which in turn affects financial performance over time.
In B2B environments such as building materials, customers rarely buy a single item. They purchase baskets of products to complete a job. A missing item can jeopardise the entire order, reducing revenue well beyond the value of one SKU. Service reliability also affects reputation, repeat business, and share of wallet.
From a finance in supply chain perspective, these effects are often hidden. Lost future sales, customer churn, and reputational damage do not always appear immediately in reports, yet they have long-term financial consequences.
Supply chain teams that understand who the customer is and how they buy can make better decisions about range, availability, and service promises. This customer-centric view strengthens the financial case for inventory investment where it matters most.
Service level as a financial lever
Service level is one of the clearest points where supply chain and finance perspectives collide. Holding more stock can improve availability but increases carrying costs. Holding less stock frees cash but risks lost sales.
Elva explains that even small improvements in service level can have a disproportionate impact on revenue. Moving from, for example, 93 percent to 95 percent availability can translate into significant incremental sales. That scale of impact is meaningful to finance leaders.
Measurement matters. Service level definitions must reflect how customers actually buy. In wholesale, partial order fulfilment may still represent a service failure if one missing line delays the entire order. Understanding these nuances helps finance teams see why service targets are set where they are.
Keith adds that communication is critical when service issues arise. Disruptions are inevitable. What matters financially is how quickly problems are identified, communicated, and managed. Surprises erode trust and increase costs. Transparency allows customers and internal teams to adapt, reducing the financial fallout.
Data, interpretation, and shared accountability
Both Keith and Elva emphasise that finance in supply chain relies on shared, trusted data. Numbers alone are not enough. Context and interpretation matter just as much.
Keith describes working closely with finance analysts to avoid “marking your own homework”. Independent analysis helps distinguish between improvements driven by genuine operational change and those caused by accounting effects such as stock valuation shifts.
The same data can tell different stories depending on perspective. A margin increase might reflect price action, cost reductions, or changes in inventory valuation. Without open discussion, teams risk acting on the wrong assumptions.
Elva highlights the importance of cross-functional collaboration. Procurement, finance, sales, and operations must align on goals and metrics. Inventory decisions affect marketing campaigns, cash requirements, warehouse capacity, and supplier negotiations. No function can optimise outcomes in isolation.
Focus where it matters most
A recurring theme in Keith’s experience is the danger of spreading effort too thinly. Many organisations manage vast assortments, yet a small proportion of products drive most of the value.
Applying focus through principles such as the Pareto rule allows supply chain teams to prioritise what truly impacts financial performance. Finance in supply chain improves when time and analysis are directed towards items, suppliers, and customers that move the needle, rather than reports or activities that add little value.
This focus also simplifies conversations with finance. Clear priorities make it easier to explain why certain investments are justified and others are not.
Supply chain as the organisational connector
Elva describes supply chain as the physical and operational connector within the business. Products flow through procurement, logistics, storage, value-added processes, and finally to customers. Along the way, decisions intersect with nearly every function.
Strategic questions about sourcing, lead times, payment terms, and inventory levels all have financial implications. Negotiating longer supplier payment terms, reducing lead times, or turning stock faster can improve the cash-to-cash cycle dramatically. In some cases, businesses can sell products before paying suppliers, fundamentally changing their cash position.
These decisions require alignment with finance, sales, and leadership. When supply chain is included early in strategic planning, businesses can balance growth ambitions with financial constraints more effectively.
Why finance in supply chain is ultimately about people
Despite the focus on numbers, both speakers return repeatedly to the human side of finance in supply chain. Customers, suppliers, and internal teams all make decisions based on trust, communication, and shared understanding.
Healthy debate, respectful challenge, and openness to different interpretations of data strengthen decision-making. Organisations that encourage this behaviour are better equipped to navigate uncertainty and disruption.
Making finance in supply chain work
Finance in supply chain is not about choosing between cost control and service. It is about understanding trade-offs, aligning metrics with strategy, and using data to support informed decisions.
Keith and Elva show that when supply chain professionals speak the language of finance and finance teams understand supply chain realities, businesses gain clarity, resilience, and financial performance that is grounded in how the organisation actually operates.
In that sense, supply chain is not a hidden link in financial success. It is the mechanism through which financial outcomes are created every day.
Related resources: Key metrics that connect supply chain and finance
Many of the challenges discussed in this episode come down to measurement. Supply chain teams and finance teams often track different metrics, even though they describe the same underlying performance. Building a shared understanding starts with speaking the same metric language.
If you want to go deeper, these AGR resources explore the financial and operational metrics that matter most when aligning supply chain and finance:
- Cost of sales
Learn how purchasing, logistics, and inventory decisions directly influence profitability in What is cost of sales and how to calculate it. - Return on investment (ROI)
Understand how to frame supply chain initiatives in financial terms with What is ROI? Learn how to calculate your business returns, and use the ROI calculator to quantify potential impact. - Days inventory outstanding (DIO)
See how long inventory ties up cash in Days inventory outstanding: formula and practical guide. - Inventory turnover ratio
Explore how efficiently stock is converted into sales in Inventory turnover ratio: definitions, calculations, and examples. - Single source of truth for inventory data
Read why shared, trusted data is essential for cross-functional alignment in The power of a single source of truth in inventory management. - Inventory management KPIs
Get a broader overview of metrics that matter to both operations and finance in The ultimate guide to inventory management KPIs: definitions, formulas, and applications.
Taken together, these metrics help supply chain professionals build stronger financial narratives, while giving finance teams clearer insight into how operational decisions drive results.
Watch the full Chain Reactions episode
This article is based on a live episode of Chain Reactions: The Spark Behind Smarter Supply Chain Decisions, where Elva and Keith explored how finance in supply chain really works beyond spreadsheets and siloed KPIs.
If you want to hear the full discussion, including the examples, debates, and context behind their perspectives, watch the complete episode.
