Manufacturing CFOs face numerous challenges and opportunities in operationalizing long-term business strategies. To navigate these effectively, CFOs should take the lead on these five discussions that are essential for fostering innovation and ensuring financial success:
Sustainability expectations in supply chain: Sustainability in the supply chain is no longer optional. Nations are imposing penalties on companies that fail to prove ethical sourcing and manufacturing free of human rights violations. For instance, the German Supply Chain Due Diligence Act (SCDDA) can fine companies up to 2% of their revenue for violations.
CFOs must integrate sustainability into corporate strategy, set measurable targets and implement practices across the supply chain. This not only addresses environmental and social risks but also appeals to investors and customers who prioritize responsible business practices. A proactive approach to sustainability can also provide a competitive edge, as consumers and partners increasingly favor companies with robust environmental and social governance (ESG) commitments.
Workforce planning: The inability to attract and retain employees is a significant challenge for manufacturers, exacerbated by an aging workforce. According to the National Association of Manufacturers Q1 2024 Manufacturers’ Outlook Survey, 65% of manufacturers cite workforce challenges as their top concern.
CFOs should lead discussions on filling the talent gap using a mix of strategic alliances, outsourcing and automation. Partnering with educational institutions, industry associations and economic development boards helps source and develop new talent while enhancing accreditation programs.
Additionally, outsourcing specialized roles and implementing technologies like robotic process automation (RPA) can improve job satisfaction for existing employees. RPA can handle repetitive tasks such as data compilation, bill-of-materials creation and invoice filing, freeing up human workers for more strategic roles. Investing in workforce development through continuous learning programs and upskilling initiatives is also crucial for retaining top talent.
Footprint agility: Supply chain volatility and rising raw material costs necessitate reshaping manufacturing and distribution footprints. Many U.S. manufacturers are reshoring production or diversifying their supplier base to uncover tax breaks and mitigate geopolitical risks. According to Forbes, in 2023, 82% of U.S.-based manufacturing executives had either moved overseas factories back home or were in the process of doing so.
However, the cost implications and potential loss of offshore expertise make this a complex decision. CFOs should evaluate the benefits of reshoring, nearshoring, or offshoring, considering supply chain resilience, cost analysis and the potential for building local talent. A comprehensive assessment of total landed costs, including logistics, tariffs, and labor, is essential for informed decision-making. Additionally, understanding the regulatory landscape and potential incentives in different regions can guide strategic footprint decisions.
Active M&A landscape: Mergers and acquisitions (M&A) are driven by competition reduction and aging ownership. Manufacturers seek agility and recession-proofing through strategic vertical integrations. CFOs need to understand business culture, technology and sustainability priorities beyond financial results to ensure successful transactions. Evaluating whether a merger or acquisition will improve customer value, increase profit margins, or expand resources is crucial.
Defining the "why" of a transaction helps create a post-close plan to generate shareholder value. When assessing potential targets, CFOs should consider existing tech infrastructure, R&D capabilities and automation investments. Determining whether it is cheaper to acquire a competitor or invest internally to achieve similar results is vital. Additionally, assessing whether the company is financially positioned to yield the highest valuation is crucial to determining when to enter the M&D landscape.
Strategic technology investments: While traditionally slow adopters, manufacturers now face a more agile and cost-effective technology environment. CFOs should discuss investing in technologies that align with organizational goals and building a technology roadmap that includes assessing the trade-off between cost, effort and impact associated with each investment.
Leveraging data from new systems for improved forecasting, decision-making and pricing strategies is essential. Employing advanced analytics and machine learning can optimize revenue and customer behavior insights. However, higher reliance on technology increases cybersecurity risks, making data security and compliance critical discussion points. IBM’s X-Force Threat Intelligence Index 2024 reported that the manufacturing industry accounted for more than 35% of all cybersecurity incidents last year. Implementing robust cybersecurity measures and maintaining compliance with data privacy regulations are essential to mitigate these risks.
These discussions are vital for navigating industry complexities, capitalizing on emerging opportunities and ensuring competitiveness in a global marketplace. By fostering a culture of innovation, sustainability and strategic investment, CFOs can position their organizations for sustained growth and resilience.
