Every chief financial officer worth their salt should be taking charge of supply chain integration as a core responsibility. Pushing change from the top helps break down silos to ensure supply chain resilience becomes part of a company’s DNA.
Falling Short on Supply Chain Security
Companies need systems to identify and control the risks inherent in dealing with third-party vendors and logistics providers that were exposed so starkly during the pandemic. To avoid dependency on China, companies need to spread their production to alternative low-cost centers such as India, Vietnam, and the Philippines. That’s an important step toward supply chain resilience, but it also means they need more sophisticated planning to cope with a higher number of vendors and logistics partners as well as more potential disruptions.
Yet companies and their leaders are still falling short. They often lack a unified approach to improving supply chain management. Different departments are usually operating in their own bubbles, with finance working on one spreadsheet, while sales have their own targets and forecasts. Yet all their work is moot if the purchasing department can’t secure the supply needed to satisfy customers. It’s a CFO’s job to knock down those walls and bring teams together so the finance and sales sides of the business are aware of and aligned with issues affecting the supply side.
Helping integrate supply chain management into operations requires a champion and a leader. Here’s what you need to know to become that champion.
Building a Culture of Transparency and Coordination
Properly implementing a sales and operation planning (S&OP) system should be high on every CFO’s list as a way to achieve transparency and coordination. S&OPs are vital for improving coordination across business units to create better decision-making about demand and supply. The end result: better inventory management, more accurate sales and budget forecasting, and ultimately happier customers.
While the idea of S&OP has been around for a while, not every company implements it well and it suffers from some important misconceptions.
One is that S&OP is just for manufacturing firms. In fact, any company — whether in healthcare, technology, or beyond — stands to benefit from a more holistic, integrated approach to operations. A second big misconception is that S&OP just refers to software platforms. While it’s true that there are some excellent S&OP products out there, CFOs need to be thinking about this in a much broader way.
S&OP is fundamentally a human process. If the sales and supply sides aren’t working closely with each other through regular meetings and give-and-take on each side, even the most state-of-the-art tech platform won’t save you. The technology could help inform everyone about a looming supply shortage, for example, but the sales and marketing team then needs to act on that by coordinating with the procurement team and communicating with customers to minimize any impact on satisfaction levels.
The Technology ‘Control Tower’
Once that S&OP culture is in place, technology can indeed be a powerful tool.
One important function of tech is to act as a control tower, delivering real-time data on production schedules and shipments. This has become more challenging and important as companies increasingly rely on third-party strategic partners for production, transport logistics, and warehousing. Machine learning tools can help spot emerging problems and diagnose solutions.
Say a shipment from Malaysia needs to arrive in the U.S. in five days but a typhoon is brewing in the South China Sea. Software can be used to predict any likely delay and provide options for alternative options — such as air transport — to deliver the goods on time.
Robotic process automation is another tech tool that can support S&OP systems. It refers to AI-driven software bots that give customers real-time answers on the status of their orders, accessing multiple systems to provide instant transparency and possible solutions.
Score Your Company’s Performance
No S&OP system is going to be effective if CFOs aren’t also implementing tools to measure its performance and make necessary adjustments. That’s where supply chain operations reference (SCOR) models come in, giving executives the ability to understand the factors driving KPI performance in supply chains, diagnose the causes, and come up with solutions.
Organizational change at this scale inevitably doesn’t always go smoothly, often encountering resistance to change from different departments. People tend to love their silos. That’s why the CFO needs to take charge, using the power of the C-suite to overcome doubts and evangelize the enormous long-term benefits of making the supply chain central to everything the company does.
When the CFO takes up the role of supply chain integration champion, they assure their organization’s continued success through challenges now and in the future.
Arindam Mukherjee is a supply chain operations architect for digital transformation initiatives at Juniper Networks.