If the Supply Chain is Crucial...

...then why aren't strategies and operations linked together? CFO study reveals some hangups for corporations

...then why aren't strategies and operations linked together? CFO study reveals some hangups for corporations

Atlanta — August 20, 2003 — While a majority of corporate America's chief financial officers (CFOs) view supply chains as crucial to achieving corporate objectives, only 33 percent say business and operational plans are well integrated, and another 62 percent say their companies seem capable of making only incremental improvements, according to a survey released by UPS Consulting, the strategic consulting arm of UPS.

The survey of 247 senior financial executives also found an increasing number of CFOs determined to make improvements. In fact, nearly half of CFOs anticipate playing a vital leadership role in supply chain decisions by 2005. That figure is currently 34 percent.

"The supply chain is a critical and influential component of any business strategy and can impact, on average, 75 percent of operating results," said Gene Long, president of UPS Consulting. "The role of the supply chain has long been underrated. As the chief caretakers of value creation, many CFOs are working to correct this by literally taking matters into their own hands. In the end, it's important for a company to empower the CFO to ensure that business strategies and operational plans are well-integrated."

The survey, conducted by CFO Research Services, a unit of CFO Publishing Corp., polled senior financial executives on their involvement in and perceptions of supply chains within their companies. Some 61 percent agreed that management of their supply chains was crucial to corporate success.

The survey found CFOs most likely to cite two key objectives in explaining the importance of supply chain management: 93 percent cited the need to reduce operating costs, and 82 percent identified the need to improve customer service.

CFOs also had an opportunity to cite the weakest links within their supply chains:

  • Fragmented supply chain control. CFOs are dissatisfied with traditional decentralized management of the supply chain, with 36 percent citing processes not being managed in a single location as problematic, and 34 percent saying the lines of authority are unclear.

  • Inability to measure total supply chain costs. Only 17 percent of CFOs say they are "very" or "completely" satisfied with their ability to measure total supply chain costs, despite the fact that monitoring inventory levels is the single-most popular metric used to assess supply chain performance.
  • Numerous obstacles to be resolved. CFOs report numerous obstacles standing in the way of supply chain changes, with 58 percent citing resistance from operations or other functions as a main reason, and 40 percent citing a lack of internal leadership.

"The supply chain is one of the largest determinants of where cash flow will be derived and where capital will be consumed," Long said. "It only makes sense for the person who handles a company's financial strength overall to share in the authority to make quick, decisive supply chain changes. Companies are starting to recognize the value of a strong alliance between their supply chain and financial experts, representing an evolution in traditional corporate structure."

In fact, 20 percent of respondents say their company's senior supply chain professional already reports to the CFO.

With more than 80 percent of respondents from the retail, manufacturing and healthcare industries, industry-specific results include:

  • While 74 percent of manufacturers and 68 percent of retail/consumer products executives view the supply chain as important, only half of healthcare executives hold the same view.

  • Difficulty in accurately forecasting demand is seen as the No. 1 problem with supply chains today, according to 69 percent of manufacturers, 61 percent of retail/consumer products executives and 56 percent of healthcare executives.

Complete survey results are available on the Web at www.ups-consulting.com/research