Supply chain concepts applied to organizational expense management

Abstract Traditional organizational expense management, like traditional supply chain management, ignores so‐called pipeline inventory. For those who have ever played MIT's Beer Game, the problem is easy to recognize: people who are purchasing inventory don't have insight into what they've ordered but not yet received. They respond to current shortages by increased purchasing. After the pipeline delay passes, masses of inventory pour in. Then those purchasing inventory typically shut off further spending, to no further short‐term avail. Eventually the pipeline clears and the inventory excess turns into a shortage, at which time the cycle repeats. The correction is fairly simple: include the pipeline inventory in the calculation. Gaining that visibility is key to establishing a financial control system which responds stably to changes.