CFOs: Get involved in supply chain management

     

Many organizational roles have had to undergo transformations to address new employee and customer demands. As businesses face greater pressure to more reliably and quickly deliver products and services, they must find ways of doing so without creating excessive risk - as any disruptions in normal operations could have productivity and reputational consequences. This evolution of responsibility has even been felt in the C-suite: according to a recent Ernst & Young report, the CFO must now think beyond the scope of corporate financial resources and risk. 

"CFOs' contributions now go far beyond the traditional finance remit to encompass a strong strategic and commercial focus," the report stated. "In order to do this effectively, CFOs are collaborating more closely with other internal functions - not just from a monitoring, reporting and risk management perspective, but also as supporters and enablers of performance."

Looking at supply chain management, analysts identified several key areas that would benefit from deeper collaboration between the CFO and supply chain leaders, including:

  • Ensuring consistency in supply chain management practices throughout the organization
  • Guiding IT and new business investments 
  • Increasing supply chain performance
  • Creating long-term strategies for minimizing risk

describe the imageThe CFO's value in the supply chain management arena comes from the role's traditional focus on detail and results. As EY suggested, creating more specific metrics to determine success and crafting clearer growth goals for the supply chain can potentially enhance activities ranging from new technology partnerships to the overall supply chain management strategy. Furthermore, the CFO's insight into organization-wide risk allows him or her to maintain alignment between strategic supply chain decisions and the overall path the organization is taking.

"A 'partnering' mentality is a core cultural attribute behind innovative breakthroughs, where the success of your colleagues is as important to you as your own success, with everyone focused on delivering the customer promise," said Brian Meadows, Americas Leader of Supply Chain and Operations at EY.

A tighter grip on supply and demand
One area that supply chain leaders have turned their attention to is the balance between supply and demand. In a perfect world, organizations would only have as many products as they needed. However, the potential for sudden spikes in demand or disruptions to supply make this an untenable practice. Supply chain expert Robert Cowan recently touched on this challenge in an EBN article, noting that this means supply chain and risk management should go together like peas and carrots. The reality is that many organizations do not effectively merge the two disciplines. One common problem is a lack of visibility, with only 21 percent of businesses having insight beyond their Tier 2 suppliers.

"The areas where tactical effort should be devoted can be prioritized and better focused using business impact analysis approaches such as Dr. David Simchi-Levi's Risk Exposure Index," Cowan wrote. "This promotes the idea that we shouldn't necessarily focus on where we have our biggest procurement spending or where we assume our supply chain faces the biggest risk. Rather, we should focus on suppliers that would have the biggest impact on our supply chain in terms of recovery time and our bottom line."

Collaboration among business leaders enables organizations to adopt more proactive strategies to supply chain management, Cowan argued. For example, instead of responding after a supply shortage has occurred, stakeholders can minimize the risk that such an event would happen in the first place as well as the chance for over supply. Proactive measures can also aid in the event a disruption takes place. By gaining more visibility into suppliers and who to contact when a problem arises, businesses will have the framework in place for a faster recovery.

Communication at all organizational levels
Most business leaders understand the importance of communication in a general sense. The problem is that it is difficult to gauge precisely how much poor communication costs an organization. However, there are widespread benefits for organizations to implement solutions that enable internal collaboration as well as the ability to work more closely with partners. This will also impact how businesses should go about procuring technology. Especially for major purchases, it is no longer enough to hand the IT department a list of features and goals. The solely top-down approach has lost considerable steam in the software development arena as the agile methodology takes hold, and the same principles can be applied to broader business decisions.

For example, a more collaborative approach to software implementation can still have IT leading the project. However, allowing all stakeholders to provide feedback on potential applications would better enable technology teams to meet the demands of the rest of their organizations. One of the reasons that business processes have become more complex in recent years is that they rely on a number of different factors and require multiple types of expertise to orchestrate effectively.

If you liked this article, check out:

4 ways to make supply chain management more efficient

The top pressures impacting supply chain management in 2014

Supply Chain Management Cost Cutting: Smart Decisions

A strategic partnership between the CFO and SCMs can help you improve supply chain operations, check out a more comprehensive guide of supply chain best practices and predictions below: