Supply Chain Leaders Must Work With CFOs to Optimize Costs

Effective supply chain leadership and strategy depend on communication and engagement with the C-suite.

Although supply chain leaders recognize the importance of engaging and collaborating with the finance organization, many believe the relationship is not truly collaborative. How supply chain leaders work with finance varies depending on the persona of the CFO who’s leading the finance organization. What’s effective for a supply chain leader in one company may not be in another.

Supply chain leaders can be more effective interacting with their CFO by recognizing and adjusting their approaches based on the three most common CFO personas:

This CFO focuses on managing traditional finance activities and tracking and reporting results to ensure the soundness of financial data. There is limited direct involvement with supply chain strategies and initiatives, and this CFO may be an inhibitor unless initiatives are supported with accepted financial justification.

When working with this persona, consider focusing on reporting and analysis activities, and provide the data needed to support reporting to the CEO and board of directors. When justifying initiatives requiring financial investments, seek the CFO’s help with return on investment analysis.

Also known as an operational CFO, this persona is focused on defining targets and driving results, with the primary goal of fulfilling CEO and board requests in a timely and accurate manner. This CFO is likely to be heavily involved with supply chain functions and will demand short return on investment timelines. This persona may dictate targets and objectives that are too high-level or broad, and only focused on cost.

If your CFO fits this persona, focus your business cases on highly defensible, tangible benefits. Submit suggestions for changes to operations for approval and involve the CFO or a designee in sales and operations planning meetings. 

This CFO is focused on monitoring the market and formulates options and strategies to implement initiatives based on changing conditions and opportunities with the objective of driving sustainable enterprise growth. This persona is generally more involved with longer-range decisions such as supply chain network redesign and can potentially be a key advocate and executive champion for supply chain initiatives. This CFO is likely to lack an appreciation for the detailed implications but will consider and weigh the strategic and tangible benefits of proposed initiatives.

To work effectively with this CFO, partner with the finance and commercial teams to define and executive transformation programs. Keep finance apprised of operating performance and pursue opportunities for cost and performance improvements through structural changes.

Supply chain organizations focused on improving overall business performance have demonstrated that trade-offs between cost, service and quality aren’t always necessary. Supply chain leaders can drive organizational alignment and collaboration by reframing the objective from cost control or optimization to the delivery of effective outcomes that profitably fulfill demand. Failure to take this type of systemic approach makes it impossible to optimize total supply chain performance and cost.

When engaging the CFO, supply chain leaders must communicate and quantify the challenges associated with operating their complex supply networks to deliver outcomes that support the business strategy by fulfilling demand with competitive service to capture operating margin. Supply chain, business and financial roles must ultimately align and collaborate around operating outcomes that satisfy both commercial strategies and financial performance targets.

When presented with the need to take immediate action, supply chain leaders have an opportunity and responsibility to understand enough about financial performance to develop plans that contribute value. Analyze business financial drivers before taking action, conserve cash and protect service for lagging demand, and comprehensively align demand and supply to improve margins.