CFOs have seen their responsibilities expand over the past five years, in part due to opportunity, and in part due to necessity. Supply chain, most often nested under the operations side of the business, has since become more connected to the finance function.
Supply chain disruptions, such as the Suez Canal blockage, and of course the COVID-19 pandemic’s lockdowns, tasked finance chiefs to play a larger role in solving significant business problems. And many organizations learned costly but valuable lessons in the process. The lessons, which at times involved advancements in both technology and sustainability, required a broadening of CFOs’ strategic leadership skills.
A Balanced Approach for Survival
“Anyone who tells you they didn’t learn some type of lesson during the pandemic when it comes to managing their supply chains is lying,” said Yoana Land, CFO of L'Oreal’s Transformation North America division. Land, who at that time was chief financial officer of a line of L’Oreal products developed by dermatologists, dealt with the pandemic’s effect amid her team’s growth targets.
Land said that supply chain issues inhibited the division’s ability to keep pace with consumer demand even before the pandemic. Then, when shutdowns began, things became much more difficult.
The division was used to making the best of what it had in production and what could be outsourced. “Because we were small, we were always agile, flexible, and scrappy about finding solutions to our problems,” Land said. “We were deprioritized [by the company] in our shipments for a lot of production during the toughest parts of the pandemic, but we did what we could to find ways to maintain growth like we always had.”
The need for a balanced approach, according to Land, is what she took away from the pandemic’s shortages and their impact on her company.
“We can’t be [totally] reliant on manufacturing because those companies have their own challenges that may come up and impact our ability to satisfy [logistical needs],” she said. “We can’t rely on our factories for absolutely everything we need either because they have lots of things going on with other parts of the company, too. I think there’s a balance that every CFO at every company needs to find. To be balanced is to be ready for survival mode.”
Communication With Supply Chain Leadership
While many companies rose to the occasion by using their supply chains to create personal protective equipment (PPE), these efforts, on top of trying to maintain their usual product production levels, revealed cracks in many supply chains early on and the need to better factor in risk.
“I think after the pandemic, CFOs are now beginning to step up and realize their supply chains need to factor in risk resilience,” said Maria Villablanca, co-founder and CEO of the Future Insights Network, a supply chain and manufacturing leadership networking group. “This includes collaborating and [supporting] dual sourcing strategies, nearshoring, onshoring, and having conversations about bringing manufacturing closer to the finished product.”
In what she referred to as an “overabundance of cool new technology,” Villablanca believes the issues aren’t the implementation of them at scale but their ability to disrupt antiquated business practices that resulted in silos across the business. “These are not only technology problems; these are people problems,” she said. “It’s a problem rooted in mindset and a desire to cut costs.”
“I think a lot of the problems that faced supply chains before and after the pandemic were driven by cost and, more importantly, cost reduction,” she said. “Sourcing [inexpensive] products from the other side of the globe creates an incredibly complex, globalized system that doesn’t make sense from an overall business perspective, only from a cost perspective.”
“I’ve always tended to call the finance leader Mr. or Mrs. No,” she said. “And often, that translates to a no to innovation, which translates to a no to an investment into the business.”
Sustainability and Collaboration’s Positive Effects
With the brutal bottoms of supply chains being somewhat exposed during the pandemic, consulting leaders believed it turned a topic that was seldom discussed into a conversation that is being had, with intentions of creating meaningful change.
“The pandemic certainly highlighted the importance of supply chain transparency,” said Tony Caleca, manufacturing and distribution partner in charge at Armanino. an accounting and consulting firm. “The disruptions caused by the pandemic underscored the need for visibility into every aspect of the supply chain, from sourcing and production to distribution and delivery,” said Caleca. “As a result, [we’re seeing] stakeholders, including consumers, governments, and investors, increasingly demand transparency and sustainability in supply chain operations.”
Caleca suggests CFOs work with the broader C-suite to “establish clear and measurable sustainability goals which can then be communicated to supply chain partners or used to evaluate if existing partners match these goals or need to be switched.”
The targets to aim for range from reducing carbon emissions and improving ethical sourcing practices to minimizing waste or using smarter packaging methods. Caleca also recommends finance leaders develop relationships with their supply chain partners to improve efficiency, innovation, and collaboration. While some of these partnerships have already started during the pandemic, he advises finance chiefs who wish to strengthen their supply chain resilience to be present with suppliers.
“One interesting aspect the pandemic spurred is the improved communications between companies and their supply chain partners, especially things like more frequent Zoom check-ins,” Caleca said. “Significantly enhanced communication between manufacturers and distributors shows [its] benefits.”