5 Ways CFOs Can Improve Margins in Their Supply Chains

As a CFO, you have a lot on your plate. You’re tasked with reducing costs to improve margins, assessing and mitigating risks, creating accurate forecasts, and ensuring your company is prepared for whatever unknown challenge lies just around the corner.

In light of the last few years, you’ve become more attuned to supply chain challenges. But how do you know you’ve been doing enough to unlock more profitability in your company’s supply chain?

In a recent Coupa survey, 90% of CFOs reported increasing struggles to maintain a competitive edge, exacerbated by tradeoffs between cutting costs and investing in growth. They reported lacking full visibility into spend data across the company, as spend data is siloed across multiple sources and hard to gather in one place.

One place your spend might get overlooked but definitely shouldn’t be?

You guessed it: your supply chain.

That’s because the old supply chain ways are changing. Supply chain leaders are embracing the concept of continuous design. Technology is bounding ahead to help supply chains adapt faster and plan better for disruptions. Supply chains are complex — but these advancements mean there are increasing opportunities to optimize for agility, margins, cost, service, risk, ESG — or whatever your business objectives are.

Here are five ways CFOs can work with their Chief Supply Chain Officers to better manage supply chain spend, improve margins, and increase overall profitability:

1. Think of your supply chain as your competitive edge

Business leaders have long thought of supply chains primarily as cost centers. They have always been essential to sourcing, manufacturing, and distributing products. At the same time, the majority of a supply chain’s costs were seen as fixed. But that’s no longer the case. With the right people, processes, and technology, supply chains can become a strategic business differentiator.

In an environment where disruption and uncertainty are the new normal, supply chains that can stay agile, avoid shortages and overages, and navigate delays and disruption help businesses outperform their competitors.

2. Gather the right data to reduce financial and supply chain risk

Getting the right data is always challenging, and supply chain data is no exception. However, once you get the right data (and make sure to update it on an ongoing basis), you can identify where the potential risks are in your supply chain. That might include risky suppliers who might fall short of their commitments or embroil your company in potential human rights or ESG violations.

3. Aim for precise cuts to maintain agility and resilience

Any cost reductions to improve operating margins must be done thoughtfully and in close collaboration with supply chain leaders. First, you need visibility across your whole supply chain — you don’t want to cut something that will hamstring your supply chain’s ability to bounce back quickly if and when a disruption occurs, resulting in lost sales. Second, you want to make sure any cuts don’t reduce deals like volume discounts on particular components. Visibility across your end-to-end supply chain, combined with visibility into all areas of spend can help you identify those strategic cuts.

4. Embrace digital planning technology to optimize profits

Today’s supply chain technology allows you to prepare for Plans A–Z and make sure you’re ready to tackle any scenario. It can help you identify better logistics options, reduce spending on transportation, ensure you have the right amount of products at the right time, and more. Supply chain design technology makes sure you’re getting the most out of your supply chains so you can maximize the value of every dollar spent.

5. Bring in the experts

More and more customers are embracing supply chain design in their core business. When finance and supply chain work closely together, they can help each other identify the most strategic places to cut costs, renegotiate contracts, identify alternative suppliers, and more. They can also identify the best opportunities for important capital expenditure decisions, such as where to build new plants or distribution centers, or how best to combine supply chains after a merger or acquisition.

Unlocking profitability in the supply chain doesn’t have to feel like climbing Mount Everest without oxygen. With the right mindset, people, technology, and data, you can navigate to the top with greater ease.