Amid all the uncertainty caused by the COVID-19 pandemic, Chief Financial Officers (CFOs) in the manufacturing sector should be playing a strong, central role, alongside their executive peers, in stabilising the business and positioning it to thrive as conditions improve. By Sanjay Galal.
The CFO is the leader who contributes most directly to a company’s financial health and organisational resilience on a daily basis. The actions that manufacturing CFOs have taken during the pandemic will have put their companies on a sound financial footing and should also help to reduce some of the fear and uncertainty.
Most manufacturing businesses are still in the midst of a stabilisation process, and longer-term preparations for companies to make key strategic moves during the recovery period are underway. Manufacturing CFOs will be instrumental in engineering the bounce-back from the pandemic and are uniquely placed to influence how and when it will be achieved.
As the CFO role grows and evolves because of the pandemic, they are becoming more aware of the vital contribution that technology can make to achieving business priorities and mitigating risks during the recovery.
The expanded CFO 4.0 role
Cost-cutting, debt collection and revenue expansion are all ultimately traditional key responsibility areas (KRAs) for CFOs, whereas restructuring roles and functions to optimise best employee skills usage reveals an expansion to the CFO that is being called ‘CFO 4.0’.
Within these priorities is evidence of the shift to CFO 4.0 ,and 40% of respondents in the SYSPRO 2020 Manufacturing CFO 4.0 Survey Report identified improving visibility into performance and operations, while 46% said they are utilising Enterprise Resource Planning (ERP) software for automation, data accuracy and reporting.
The most significant aspect of the CFO 4.0 role, as identified by survey respondents, speaks directly to how Industry 4.0 will inform and facilitate CFO 4.0: strategic business knowledge for the ongoing planning, monitoring, analysis, and assessment of all organisational requirements across other functions to meet overall objectives was flagged by almost 80% of respondents,
A key CFO task going forward will be evaluating the CAPEX costs of new technology investments versus the ongoing operational costs associated with less-skilled workforces.
Upskilling the workforce is a key focus
With Australia’s manufacturing industry set to boom, amid growing innovation and digitalisation, we need to be fully prepared to compete in a global market. The required digital capabilities will be essential for all employees to ensure that Australian manufacturing businesses can take full advantage of the anticipated growth.
Whereas human factors might traditionally have been outside the remit of CFOs in the past, they have a direct causal link to the financial performance of the business. Two complementary trends can be identified: reducing headcount to save costs; and upskilling employees to enable them to add value using new technology.
The upskilling of employees is emerging as a key focus area for manufacturing CFOs and provides further evidence of how the role of the CFO 4.0 will take shape with a focus on highly skilled technicians that understand ERP and Business Intelligence (BI) systems.
These technologies were identified in the SYSPRO research as being vital, thanks to the information-gathering, processing and analysis capabilities. In uncertain trading conditions, better, more accurate and more timely data allows for smarter decision making, as well as supporting strategic decisions through trend identification and assessment.
Automation will reduce costs
Whereas a lot of people have been able to work remotely, manufacturing processes cannot easily be distributed from existing locations. Automation will play a key role in reducing manufacturing costs as workforces are optimised and shift towards having fewer but more highly skilled talent available.
Some 83% of respondents identified cost-cutting, including curbing discretionary spending and reducing overheads, as a recovery strategy to boost their businesses through the pandemic recovery period. The emphasis is on investing in technology to make manufacturing smarter and less vulnerable to future disruptions.
The study goes on to reveal that 44% of respondents singled out warehouse and advanced manufacturing process automation as a key focus area. This is to some extent a decision that has been imposed on manufacturing concerns by the pandemic, but it also suggests a longer-term outlook in which many current human roles will be replaced in the name of both efficiency and safety.
Embracing the recovery
Although CFOs must manage the tension between short-term COVID-19 responses and the long-term recovery phase of this cycle, it was inevitably found that 69% of respondents stressed that maintaining margins and managing cash-flow were the most important risk-management strategies.
It is becoming clear that the role has already shifted to CFO 4.0 and the Australian manufacturing sector’s impressive response to the pandemic will give CFOs a unique opportunity to cement the gains made. In preparing for the role of CFO 4.0, manufacturers need to embrace technology, empower people through upskilling initiatives, and have a clear business case for Industry 4.0.
Sanjay Galal is the Asia Pacific CFO at SYSPRO.