According to an April 2009 study by Accenture and CFO Research Services, CFOs recognize that their world has grown far beyond numbers and spreadsheets to one that embraces an active role in delivering operational and supply chain performance excellence. Whether that world resembles Heaven or Hades depends in part on the CFO’s participation in leading and affecting supply chain effectiveness.

A CFO’s responsibilities and analytical skills are a natural fit for driving cross-functional execution in process management. The Accenture study reports that over 96 percent of the finance executives surveyed say they are involved with improving operations performance. In addition, 57 percent report that they are consistently involved with operational improvement.
Over the past decade, CFOs at Tesco-the UK-based global retailer-have often held dual finance and operations roles. Companies like Tesco have learned that a CFO’s financial training often translates into excellent skills in evaluating the bottom-line impact of system-wide changes.

When paired with knowledge gained from a comprehensive supply chain management strategy, the business acumen and rich operations insight possessed by today’s CFOs can drive tremendous, enduring performance improvements, from significant cost savings and increased customer satisfaction to critical product movement fluidity, improved contract price/terms and more effective spend aggregation. To achieve this level of impact on operations and bottom-line success by way of the supply chain, many CFOs need to expand the supply chain metrics and data sets that they focus on beyond direct costs (i.e. the cost of purchasing and goods and transporting them). Supply chain-focused CFOs incorporate metrics and data into their analyses that reveal essential savings and performance numbers. The result is a more comprehensive view of the sophisticated give and take of supply chain operations, which allows for better decision-making and long-term planning. Such metrics include stock outs, inventory obsolescence, pricing fluctuations, and overcharges.

Effective supply chain management is not just a question of data. It’s also a question of strategy and vision. ArrowStream advises CFO’s, and all business leaders focused on transforming supply chain performance, to adopt the following three guiding principles.

Three Guiding Principles of Supply Chain Management

1. Focus on Enterprise Performance
Performance of the company as a whole, rather than just financial performance, is paramount. It is tempting to make business decisions based solely upon financial reports. However, as the Accenture report demonstrates, there are a great many benefits to looking beyond the numbers toward operational issues and objectives that may reveal investments that deliver long-term profitability.

The recently retired CFO of pharmacy chain CVS, David Rickard, was well-known for his focus on operational efficiency as integral to financial strength. His ability to deliver increasing value to CVS customers while gaining financial savings through supply chain efficiencies is well-documented. In fact, it has become a key component in the company’s growth and part of the reason it has received numerous awards, such as JD Power awards for customer care service efficiencies. CVS was also the first retail pharmacy to be accredited by the National Association of Boards of Pharmacy for wholesale distribution because of its supply chain effectiveness.

2. Support Revenue Growth through Customer Satisfaction
Outstanding CFO’s have achieved stable growth by supporting a supply chain that not only cuts costs, but builds revenue by fulfilling customer expectations. The challenge for an organization is to be financially efficient while creating an experience that fulfills, or even surpasses, customer expectations. It was a CFO, Darren Jackson, who played a critical role in making Best Buy the customer-focused company it is today. In the 1990’s, Best Buy was a typical grab-and-go warehouse store. The company had to compete in both cost-efficiency and customer satisfaction with Wal-Mart and Dell, Inc. In the early 2000’s, Best Buy launched its tremendously successful initiative for “customer centricity,” which created the Geek Squad and other service and process improvements for the company. With the active involvement of its CFO, a cross-functional executive team developing services and a supply chain that efficiently supported customer needs, Best Buy was able to effectively strengthen its market position and profitability.

3. Visibility Delivers Decision-Making Effectiveness
The executives surveyed by Accenture note that company business units rely on their financial reporting to make smart decisions. However, they also recognize that they must understand and participate in the total business fully. Said one survey respondent, financial executives must “Be actively involved in the operating units in order to understand their markets, competition, customers, and supply chain.” We couldn’t agree more.

Communication and information sharing are key to building a two-way street where finance and supply chain understand each other’s objectives and processes. Access to a network that delivers timely visibility enables the CFO to lead an informed supply chain strategy and shift away from reporting only past or current performance to sharing and leading a long-term, strategic vision. Supply chain visibility also enables those in supply chain and operations to share in the critical responsibility of fulfilling the financial objectives of the company

It is common for finance executives to hold the responsibility of “truth bearer” for the company, no matter what that truth is. But how does one determine the truth in business? One essential gateway to business performance truth is supply management and strategy excellence. Comprehensive supply chain data is a valuable, motivating tool. CFOs can and should leverage that information across functions and business units to increase focus on the performance of the company as a whole and-above all-drive that performance to new, more strategic heights.