Time was when the term CFO and “chief accounting officer” were considered — at least outside the C-suite — roughly equivalent. Both roles are vital — somebody has to mind the books and tax returns, of course — but today’s manufacturing CEOs understand that the financial officer can do much more with advanced analytics and creative strategies for growth.
Our most recent survey takes the pulse of top manufacturing executives on financial issues that demand a strategic approach. Built on top survey findings, The Value-Added CFO series will examine, for example, how leading CFOs can tap into the analytics of modern manufacturing to make intelligent determinations about where, when and how their companies can make better decisions, or at least better-informed decisions, and thus improve margins.
Major opportunities await manufacturers and their executives
It’s a great time to be a manufacturer: Revenues are rising, employment is up, and the potential
to increase profits has rarely been greater. Our survey gathered C-level insights into how to make the most of the extraordinary opportunities on the horizon in these vital areas:
- Add value throughout the supply chain — CFOs and senior executives have opportunities to boost supply-chain quality and reduce risks amid increased regulations and customer requirements. Approximately 85% of executives said that supply-chain management is important1 to their company’s strategic vision.
More than ever, it’s necessary to hold the supply base accountable for both the goods they provide and how they provide them. How vendor agreements are crafted and enforced — for supplier quality, compliance, governance — is just the first step in adding value throughout the supply chain.
- Leverage manufacturing economics to improve capital and security — Executives are using business analytics to find creative ways to improve overall company financial performance, facility/location performances (costs, quality, speed, safety, energy) and capital allocation (to plants, domestic and global regions, and services). CFOs are forging the future of manufacturing economics, using data in ways similar to those used by “Moneyball”-style baseball executives — that is, taking an analytic, evidence-based approach to gauge success. Nearly 60% of executives said their companies improved both strategic and operational decision-making through the effective use of business analytics.
The emergence of the Internet of Things (IoT) — in which machines and devices share information across factories and supply chains — also means that executives now have real-time data about operations and process performance. But amid this environment, executives also shoulder the burden of managing risks associated with intellectual property, customer and supplier information, and cybersecurity within the IoT, especially as manufacturers migrate to the cloud.
- Take a fresh look at taxes — The tax landscape has shifted dramatically in the recent past with the implementation of the Affordable Care Act, evolution of global supply chains and indirect taxes associated with such moves, and constantly changing federal, state and international tax structures. As a result, it is time for executives to strategically revamp their tax strategies and compliance procedures. Approximately one-third of executives who responded to our survey have led or been involved with their company’s tax strategies.
Our Value-Added CFO series will help CFOs step back from incremental tax positions that have accumulated internally over the years and replace them with a comprehensive tax strategy, one that positions the company to adapt to changing circumstances in the future.
- Fund the innovation engine — A growing economy makes it imperative that manufacturers innovate — not just in products and services but in processes as well. Yet too many executives have a limited understanding of how to properly prepare ROI analyses on these efforts. Even fewer are aware of all the tax credits and incentives available to help fund the innovation. Ninety percent of executives say product or service innovation is important2 to their company’s strategic vision.
Most CFOs recognize that their organizations must continue to innovate to remain competitive, yet most organizations continue to leak millions in profits as they haphazardly pursue these innovations. The best CFOs know they have the ability to turn that situation around because they hold the information keys to strategic, profit-generating innovations; they recognize the exponential impact of R&D on all facets of a company and find ways to cost-effectively support the right innovations.
- Get ready for manufacturing M&A — Almost every index of M&A activity is on the rise. But if past experience teaches us anything, not all these deals will work out. And even those that are successful will be vastly more complex in negotiations and integration than their eager pursuers ever imagined. Success will hinge on how CFOs and colleagues find, analyze and close the right deals through tax-advantaged strategies and due diligence. CFOs can also play a significant role in integrating new businesses.
Among the many insights revealed in our survey, more than one-third of the respondents cited a difficult or lengthy integration process as a primary reason for failures in their companies’ M&A activities.
A CFO’s life at a manufacturing firm is still about the numbers — but in innovative ways, CFOs can make valued strategic contributions.