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The CFO’s critical role in transforming the supply chain

By Nick Jackson, president at CIMA and finance transformation leader at Oracle


Many supply chains have faltered during the current crisis. Some have failed completely. The C-Suite can learn from this, to make sure that the supply chain of the future is much more resilient, and agile enough to adapt to change.

For the CFO, this will require a complete rethink on how they see the supply chain. For years, if not decades, the focus has been on how to make the supply chain as ‘lean’ as possible. This approach appeared to work just fine – until Covid-19 exposed the fragility of modern supply chains.

Investing into the supply chain

The first step will be working with supply chain managers to understand the state of the current supply chain. Have they been operating on the same legacy systems for years or have they already begun the digital transformation process? What vulnerabilities have been exposed?

In particular, CFOs may want to consider how their company is approaching resilience and crisis management in relation to the supply chain. It’s likely they’ll find that the business has not been properly addressing these components of the operation. That’s not to say that business leaders have neglected it. Rather, they would have looked at nodes or regions being affected, and not necessarily the entire supply chain. The supply chain has faced major issues in the past, if we take the Icelandic volcanic eruption or the Japanese Tsunami as examples. Nothing, however, has compared to the scale of the challenge created by the COVID-19 pandemic. But the lessons learnt during this crisis could spur change.

By working closely with supply chain managers and identifying the current state of the supply chain, CFOs can understand where their vulnerabilities lie and exactly where they can make changes.

This may well be a completely different approach to other departments. Right now, CFOs are primarily focused on cash flow and cost-cutting, to ensure financial stability. However, in concert with this, CFOs should start looking at shoring up the supply chain – and investment will make this possible.

Increasing visibility

One of the fundamental problems likely to be identified is a lack of supply chain visibility. This does not just mean visibility of where products are, but visibility into the partners and stakeholders that supply chains rely on. Many lean supply chains simply did not have good enough visibility across their operations to spot new, critical issues and adapt accordingly.

Some of the issues we’ve witnessed are symptomatic of the global nature of supply chains today. Supply chains have expanded geographically and organisationally, but companies lack an end-to-end view and will often view the supply chain in silos, causing them to be slow to discover, and react to, issues. What’s more, a lot of the IT systems and technological solutions were built for traditional operations – not the global, flexible supply we need today.

But there is no use having transparency for transparency’s sake. Companies need to gather more information about the supply chain, so they can analyse situations, make predictions and act on insights.

Fixing the issue of visibility is an area where a CFO can effect rapid change. Business intelligence is the key – being able to see the small things is what makes the difference. Supply and demand can change by the hour. Bottlenecks can stall production. Maintenance issues can seriously hinder productivity. Environmental or political issues could delay or halt shipments. Having the ability to see and respond quickly to these changing scenarios will make the crucial difference for supply chain managers.

Getting the technologies in place to achieve this is undoubtedly is a long-term project. Right now, CFOs should be working closely with supply chain managers to identify and prioritise the changes that matter the most. For businesses that still operate on decades old infrastructure, it may be simply getting the right IT systems in place, before gradually adding elements like IoT to improve product visibility. For those further along with digital transformation, it might be integrating AI and blockchain to expand partner and supplier visibility.

Strengthening the supply chain

The supply chain has to change. Most CFOs have already recognised this – 89% think that diversification and strengthening of supply chains will increase long-term following the pandemic. To ensure that this transformation is successful, the role of the CFO is critical. They need to lead the charge, moving away from ‘lean’ amidst cost-cutting, and instead making clever investments that will create resilience. The sooner this shift happens, the better the business will fare.

 

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