In India, A View Where CFOs Should Focus Their Supply Chain Energies (Part 1)

In Western countries, large and middle-market CFOs are increasingly looking at the potential impact of working capital and purchase-to-pay strategies on their operating pictures. In certain cases, procurement and supply chain functions may report up to them (which is no surprise, given the disappearance of the COO role inside many companies). Yet CFOs, especially those at the smaller scale of the SMB market and in emerging markets, must concern themselves with much more than just a handful of cost and cash driven purchasing metrics. A recent interview with a logistics adviser in Indian publication The Hindu does a decent job of explaining the ins and outs of where CFOs should involve themselves in supply chain decisions. Nearly all of these areas are relevant for western companies as well.

Perhaps most important is monitoring and forecasting good old-fashioned inventory levels, the interviewee suggests, especially in cases of new product introductions where the ability to respond quickly to changing market conditions primarily focused on customer demand is key. Other general CFO areas of supply chain oversight should include logistics (and the choice about owning more of the process in-house or working with outsourced providers) in such areas as transportation, warehousing, handling and back-office administration. Curiously, in India, "while most of the companies have outsourced transport, only a few have outsourced the warehousing operations." I would suggest that the market penetration of 3PL providers in the US is significantly less than it could be in comparison with India if this statement is indeed true.

The article also suggests that CFOs should monitor customer service levels and "what level of stock-outs the company is willing to accept" (editors note, I had to laugh at this last statement compared to practices in the West, where stock-outs are rarely tolerated because of both direct loss of revenue as well as lost customer loyalty). In India, the supply chain implications of domestic taxation is a major concern for CFOs compared with US companies operating domestically (we don't have to deal at the same level with cross-border transactions between states that impose different VAT and sales taxes unless we're in the retail markets). Contrast this with India, where "logistics decisions are often made based on the taxation policy rather than on optimum supply chain systems."

Stay tuned as we continue this analysis on global trade week here at Spend Matters, in honor of our first event, taking place tomorrow. Spend Matters readers can watch the live simulcast of the event tomorrow for free starting at 8:00 AM tomorrow, register here!).

Jason Busch

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