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Most executives acknowledge that integrating key functions and processes is critical to maximizing profits; however, few businesses have formal integration programs. Generally speaking, businesses either leave integration to chance (no emphasis at all), or in the hands of C level executives who may assume that integration will be a natural outflow of strategic business planning.

The rewards of actively pursing an integrated business strategy can be significant, and failure to do so can be catastrophic. Take the case of a rapidly growing heavy manufacturing business that failed to align financial, sales and manufacturing strategies. The company was justifiably proud of its rapidly growing order book and manufacturing capacity, but failed to engage finance in a decision to continue to order parts and build inventories of completed goods while at the same time managing a constraint resulting from faulty design of a drive train component. The constraint resulted in large build up of WIP and completed goods that could not be invoiced against. The company’s customers refused to accept new product until the fault was corrected, and by contract were not obliged to pay on the delivered goods until the fault on delivered units was corrected. The company quickly found itself in a cash crisis as inventories built up and commitments to suppliers came due, while at the same time customers were not paying for delivered goods or accepting new deliveries.

So how could this situation have been avoided? Hindsight is 20/20, but one would expect that had finance been engaged in the decision to continue manufacturing at accelerated rates despite the constraint created by the design fault earlier the likely impact on cash flows could have been mitigated. As it was, the decisions appear to have been made exclusively by manufacturing and operations to continue manufacturing product and procurement of materials at an accelerated rate despite the constraint, resulting in a serious threat to the company’s viability.

When the design flaw came to light the company CEO could have formed a cross-functional team (aka integrated project team consisting of manufacturing, engineering, finance, supply chain management, sales and quality to understand the issue, develop plans for corrective actions, and assess the business risk posed by the fault. Each of these critical functional areas could have provided valuable inputs to the risk assessment and corrective action plans. For instance, marketing could have provided the potential for customer’s to withhold payments or defer deliveries, supply chain management should have been asked to assess the potential strategies to engage the support of key suppliers in managing inventories, engineering could have provided assessments on the seriousness of the design issue and the potential time required to correct the problems. With this information finance could have assessed the potential cash flow impact and provided the CEO with recommendations on what the company could afford to produce given the cash projections. Such an integrated process may have averted or mitigated the cash crisis by giving the company leadership a more complete picture of the risks posed by the design flaw.

There are a number of tools and activities that can be used to further functional and process integration within a company. Activities such as adopting a balanced scorecard for the business, introducing integrated project teams, implementing a knowledge management system, and establishing a cross-functional training program, to name a few. Whiles some of these activities are more easily applied to particular situations than others, it is important that every company has a plan and a method to integrate its key functions and processes. Failure to do so can be catastrophic as seen in the example above.