CFOs must be informed of supply chain management practices to measure the performance of executives in supply chain. If the supply chain is a black box to the CFO, it's likely the company's supply chain talent will reflect this deficiency.
We're living in wild economic times. The only things we can count on are uncertainty and unpredictability. Today's headlines seem to spell bad news for the global economy:
These and other foreboding economic prognostications present real challenges—but unique opportunities to you as a supply chain leader.
To capitalize on these opportunities, I would advise supply chain managers to become more financially astute. Spending quality time with your company's financial executives can yield big dividends for you and your organization.
With supply chain management taking center stage in boardrooms from Manhattan to Manitoba, CFOs can impart a great deal of wisdom to your supply chain operations. Take your CFO to lunch and talk about your respective worlds. Get an in-depth financial perspective on your organization—inventory, operating costs, financial forecasts, risk management, metrics, commodities, etc. Explore the role of the supply chain in the global marketplace. Discuss current economic issues to help you make the best SCM decisions. Talk to him or her about the impact of logistics and supply chain management on the bottom line.
A thorough understanding of your company's financial picture will give you the competitive edge you need to win. Your CFO's insights will enable you to decipher global economic events, then distill this information into a meaningful supply chain business plan.
A volatile global economy will undoubtedly continue. One component of this is a phenomenon I call supply chain whiplash. This refers to the rapid fluctuation of costs in a compressed time frame, resulting in predictability dysfunction as well as extreme pricing pressures. One example of this would be in the packaging industry, where many materials are petroleum-based: the rollercoaster costs of oil can have a devastating effect.
Yet it is this very uncertainty that inspires the creation of revolutionary new technologies and process improvements in logistics and supply chain management. Today's global supply chains offer unprecedented opportunities to communicate and collaborate with suppliers and customers all over the world. SCM entrepreneurs with a foundation of financial understanding will blaze new trails in areas such as inventory management and the delivery of goods and services.
Savvy supply chain leaders have a history of innovation during tough times, and opportunities for supply chain managers have exploded worldwide. Therefore, talent in our profession will be at a premium. Twenty-first-century supply chain leaders must possess extraordinary interpersonal and consensus-building skills while steadfastly remaining ambassadors of customer service.
But the individuals whose stock will rise highest in their companies are the ones who understand the finer points of finance. This skill set is critical for organizations that wish to compete globally, and professionals who demonstrate financial acumen will be aggressively recruited for executive-level positions.
Economic extremes are cyclical—we will work our way back to a booming economy. In these turbulent times the most successful companies will be those that streamline their operations to become leaner and more competitive. And the most successful supply chain managers will be those who know as much about S&P as they do about SCM.
Understanding the supply chain's role in the profitability of your company, and the ability to use that knowledge to your company's advantage, can be your best weapon in the economic battles ahead. And your CFO will be your best ally.