In India, A View Where CFOs Should Focus Their Supply Chain Energies (Part 2)

For Part 1 of this post, click here.

What I found most curious about some of the suggestions in this Indian logistics executive's interview in The Hindu, is that it seems that Indian CFOs are more actively involved -- or should be -- in direct everyday decisions that impact the supply chain than their Western counterparts. Taken on face value, this may make sense on a regional basis. After all, the uncertainties and volatility within markets like India when it comes to commodity prices, inflation, transportation lead-time and variability are just as critical to minding the books and budgeting/forecasting accurately as the effective management of receivables, increasing inventory turns, etc. in such an environment. Yet even in the West, CFOs should not just increase their interest in similar areas, but overall responsibility of some as well.

Commodity management is a great example. Outside of select CPG and oil and gas/energy companies organizations, few CFOs are on top of commodity risk exposure in their organizations, with an organized trading and commodity management function with direct linkages into procurement and finance. Yet given the great volatility we've seen recently in markets ranging from copper to oil to cotton, it's clear that a singular area can have a critical impact on not just the near-term financial earnings and health of an organization, but the longer-term ability to accurately plan and forecast.

In contrast to the logistics perspective offered in the article that suggests the CFOs "most important financial indicator is the measurement of logistics and supply chain cost as a percentage of revenue", I believe CFOs and general finance leaders should concern themselves more aggressively with a range of additional buy-side related areas. Granted such operational areas as "transport cost, warehousing cost, and other logistics costs, for each brand, product category, and for each location" as well as weighing "stock-outs vs. stocking costs" are no doubt important, especially in less reliable and predictable transportation and consumer markets like India. But I think we're losing the big picture of what matters the most if CFOs concern themselves more with how they manage what they buy versus the "how and what" of their purchases in the first place.

Jason Busch

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