How to make your CFO a supply chain superfan

From the November 2024 edition of Supply Chain Management Review.

November 2024

Another year, and another successful NextGen Supply Chain Conference. I’m just back from our annual NextGen conference in Chicago—this was my second conference since joining Peerless Media in 2023—and it was an…

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By Karin Bursa

A superfan isn’t just an ordinary fan. According to Fluentslang, their passion completely envelops a superfan, and they are so dedicated that they are personally invested in their team’s success. Supply chain executives need the CFO to be more than just aware of supply chain operations—we want them to be completely engaged, excited, and fully on board with supporting supply chain innovations. Why? When your CFO becomes a supply chain superfan, their buy-in, commitment, and advocacy drive transformative change.

Understand the CFO’s perspective

For many CFOs, the supply chain is often seen as a significant cost center rather than a driver of growth and competitive advantage. To change this perception, you must position the supply chain as a vital strategic asset; one that can drive revenue, enhance profitability, reduce risk, and boost the company’s overall performance. Here’s how to take your CFO from skeptic to superfandom.

To make your CFO a supply chain superfan, it’s critical to first understand their priorities. CFOs are tasked with ensuring profitability, managing returns from cash and capital flow, and controlling costs. Unfortunately, they often view the supply chain as a drain on resources—tied to the significant asset costs of inventory, manufacturing, transportation, warehousing, and labor.

CFOs are also driven by data, and that’s where supply chain professionals can make their case. The truth is that the modern supply chain is not just a cost center; it’s a dynamic force capable of driving significant financial improvements through efficiencies, automation, and risk mitigation.

In today’s global environment, characterized by supply chain disruptions, labor shortages, inflation and volatility, CFOs are keenly aware of the risks involved. According to a 2023 Protiviti survey, 72% of finance executives reported significant disruptions and delays due to supply chain challenges and inflationary pressures. For a CFO, these disruptions aren’t just operational headaches—they’re direct threats to profitability, shareholder value, cash flow stability, and overall asset return.

Superfans love visibility and control—so does your CFO

Superfans crave information and control over every detail of the game, from player stats to play-by-play commentary. Similarly, CFOs want visibility into every aspect of the supply chain and the ability to manage risks with precision. Supply chain technology, especially in areas like artificial intelligence-driven demand and supply planning, transportation management, and sales & operations planning (S&OP) becomes essential to effective asset return and profit management.

A digital supply chain with real-time visibility provides the CFO the level of control and resilience they crave. Imagine giving your CFO the ability to predict disruptions, assess the financial impact of delays, and optimize inventory levels with a resilient response to demand fluctuations. When supply chain leaders can provide actionable data in financial terms, they bridge the gap between operations and financial decision-making.

For example, AI-driven forecasting can reduce safety stock levels by up to 30%, freeing up working capital and improving cash flow with zero negative impact on customer service. These supply chain operations management benefits will speak directly to the CFO’s financial goals while illuminating the strategic value of supply chain innovations and investments.

The financial impact of inventory management innovation through optimization

Inventory management is a significant intersection of supply chain operations and finance’s strategic priorities and performance metrics. For CFOs, inventory is a double-edged sword. Too much inventory ties up cash and increases carrying costs, while too little inventory risks stockouts, expedited shipping costs, and missed revenue. This delicate balancing act can drain profitability or drive significant improvements in free cash flow and operating margin.

As a supply chain professional, it’s your responsibility to show your CFO the power and opportunity of optimized inventory policies. Implementing digital AI-enabled supply chain management technology and automating replenishment drastically reduces excess inventory while ensuring that stock levels are appropriate to meet market demand.

Gartner’s 2023 Future of Supply Chain Survey of high-performing supply chains found that companies using AI and machine learning (ML) in demand forecasting saw significant improvements in revenue, inventory optimization, and fulfillment. These results speak directly to the CFO’s need for visibility, profitable cost and price control, and efficiency improvements.

Transforming complexity into simplicity

CFOs love simplicity. Reducing complexity by managing complications makes business more predictable, reduces risk, and increases resiliency—key financial and board priorities. Simplifying product portfolios is a cost reduction opportunity that many companies overlook but can significantly impact the bottom line especially when uncontrollable commodity market costs increase. The fewer product configurations you have complicating the response to demand fluctuations, the easier it is to plan production, manage inventory, and control costs.

Product rationalization or simplifying your product offering by consolidating options can lead to more efficient production runs, fewer changeovers, and lower safety stock requirements. This translates into reduced operating costs, higher profitability, market pricing resilience, and reduced working capital requirements.

 “When supply chain leaders can provide actionable data in financial terms, they bridge the gap between operations and financial decision-making.”

The COVID-19 pandemic taught many businesses the value of simplifying their supply chains. With product complexity reduced, many companies were able to focus demand on a narrower set of SKUs, which in turn allowed for greater predictability, pricing flexibility, and lower costs. This is the kind of outcome that will earn your CFO’s loyalty.

Automation as a game-changer

Just as superfans appreciate efficiency in the way their team plays, CFOs want efficiency in their supply chain operations. Automation can be the key to unlocking both cost savings and productivity improvements.

Automating routine tasks such as demand forecasting, replenishment orders, and transportation planning frees up supply chain professionals to focus on higher-value activities. For instance, AI-driven robotic process automation (RPA) and/or autonomous mobile robots (AMR) in fulfillment and replenishment can reduce planner and operator workloads by up to 60%, allowing your team to focus on strategic initiatives rather than daily firefighting.

To the CFO’s delight, when labor is scarce and costs are high, automation can help companies do more with less, mitigating the impact of talent shortages while driving down costs.

Speak in financial terms—because that’s what CFOs hear

Superfans speak the language of statistics—yards per carry, completion rates, and scoring efficiency. To convert your CFO to a supply chain superfan, you must learn to speak their language, which means translating supply chain metrics into financial impact terms.

Instead of talking about lead times, stockouts, or warehouse efficiency, frame your conversations in terms of working capital, free cash flow, and revenue. For example, instead of saying, “We’ve reduced lead times by 20%,” say, “We’ve freed up $10 million in working capital by optimizing inventory.” This approach aligns supply chain performance with the financial metrics that matter most to CFOs. These kinds of improvements not only enhance profitability but also position the supply chain as a key driver of financial health.

The importance of risk management

Superfans appreciate a well-executed game plan that mitigates risks and capitalizes on opportunities. CFOs, likewise, are focused on risk management, especially when it comes to the supply chain. The past few years have highlighted how ecosystem supply chain disruptions can directly impact a company’s financial health.

“For CFOs, inventory is a double-edged sword. Too much inventory ties up cash and increases carrying costs, while too little inventory risks stockouts, expedited shipping costs, and missed revenue.”

Supply chain risk management is more than just reacting to disruptions. It involves predictive analytics, scenario planning, and continuous monitoring. By leveraging digital tools to create a more resilient supply chain, you can help your CFO sleep better at night.

Real-world example: Converting the CFO into a superfan

Consider the case of a large global manufacturer that was facing pressure from its CFO to reduce costs, particularly in inventory. Rather than making across-the-board cuts, the supply chain team leveraged supply chain planning technology that allowed it to optimize inventory investments based on an AI-enabled demand forecast, reducing inventory by 25% while maintaining service levels, liberating millions of dollars in working capital, and reducing inventory obsolescence. The CFO not only saw the financial benefits but also became an advocate for further supply chain investments in innovation.

Creating a superfan CFO

Your CFO is not just a financial gatekeeper—they can be your greatest ally in driving supply chain innovation and investment. By understanding their priorities, speaking their language, and demonstrating the financial impact of supply chain excellence, you can turn your CFO into a supply chain superfan.

When your CFO is fully invested, they’ll be cheering for your initiatives and advocating for the investment to transform your supply chain from a cost center into a competitive weapon. In today’s volatile and uncertain environment, having a CFO on your side is not just a nice-to-have—it’s essential. You may want to order your CFO a supply chain team jersey.

About Global Links

Global Links appears in each issue of Supply Chain Management Review. Richard J. Sherman, retired guru of SCM, is the Global Links column editor. If you are interested in participating in the column, he can be reached at [email protected].

About the author

Karin Bursa is the CEO of NIRAKIO, LLC, and can be reached at [email protected].

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