International Finance
MagazineOpinionSeptember - October 2018

Why CFOs should be involved in the supply chain for financial stability

Why CFOs should be involved in the supply chain for financial stability
Greater involvement in the supply chain will help CFOs achieve financial stability in the age of disruption

Leading CFOs are forging a greater synergy with supply chain operations to safeguard their organisations against further financial disruption. Previously sitting in the periphery of the supply chain, those CFOs now recognise it as a source of cost reduction through increased efficiency and optimisation.

The shift in CFOs’ supply chain involvement is a direct result of the cost-pressure that organisations are faced with in increasingly competitive markets – markets that have also become prone to various waves of disruption. From the financial crisis to natural disasters and political upheaval, there are associated costs that CFOs must contend with and a better understanding of their organisations’ supply chains, helps CFOs be better prepared for all eventualities.

Disruption on the rise

Will Lovatt Vice President EMEA, LLamasoft
Will Lovatt
Vice President EMEA, LLamasoft

In 2016, one in every three organisations reported losses exceeding $1 million (approximately £750,000) in just one year according to the BCI Supply Chain Resilience Report, with loss of productivity, cost of working and damage to brand reported to have had the biggest impacts on organisations. And those losses are on the rise. Between 2015 and 2016, the loss of productivity rose from 58 percent to 68 percent while the cost of working rose from 39 percent to 53 percent. Reported damages to brand or reputation rose by almost 30 percent in the 12-month period, but the most shocking figure is the 43 percent of organisations that failed to insure for losses they encountered.

CFOs that are yet to take a deeper interest in their organisations’ supply chain can mitigate the risks associated with disruption, no matter how unexpected. But achieving this requires the CFO to have the clearest possible visibility of the supply chain as a whole. 2016’s Supply Chain Resilience Report also revealed that 66 percent of respondents did not have full visibility of supply chains, so those CFOs ready to roll up their sleeves must be provided with a high level of visibility.

A clearer view

Once CFOs are provided with a greater view of the supply chain, they will be able to effectively recognise problem areas where greater efficiency and other cost saving measures can be applied, with the added ability to plan and model the supply chain for various disruptive scenarios.

Nike is a prime example of an organisation using supply chain design to improve its competitive advantage and safeguard against disruption. The sports brand is in close competition with its rivals and has identified the reduction of lead times to the end customer as the area where it can glean a strong consumer-driven competitive advantage. Through close analysis of its supply chain, Nike has been able to meet is consumer target, reducing the lead time from 60 days to just ten days, reformatting its shipping network with strategically located nearshore facilities and investments in automation increasing efficiency.

Such a feat is only achievable with relevant data easily accessible for analysis, as well as the ability to collaborate easily with supply chain executives and other internal stakeholders invested in the supply chain. Providing CFOs with a clear view means ensuring that data is easy to access, digest and adjust for various readings and angles, providing separate narratives and outcomes when planning for different scenarios.

The key to supply chain success

In order to assert their influence on the supply chain, CFOs require the right supply chain design software that enables them to access, manipulate, share and discuss live data from all points of the supply chain. Only when provided with this digital toolkit can CFOs make informed decisions that impact the bottom line.

Data manipulation is essential to effective scenario planning, ensuring that the supply chain is safeguarded against any potential disruption. Software that enables the user to run different scenarios and simulate the effects of disruption on the models being tested will help CFOs make certain that the supply chain can withstand the same real-world scenarios.

Collaboration with executives and stakeholders across the supply chain is perhaps one of the most important aspects for the CFO, yet traditionally there would have been very little communication between either party. Effective supply chain design software must provide all who are invested in the supply chain with easy means of communication within the platform, providing an even greater level of visibility in supply chain operations while also promoting collaboration.

While organisations are becoming increasingly prone to disruption and are counting the costs, the CFO is presented with a significant opportunity to take greater control in the organisation’s financial stability through smarter, more informed decisions based on clever use of data and easier collaboration. With the right supply chain design software, this is now entirely possible.

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