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Supply chain uncertainty is costing mid-market businesses an average of $21 million per year. There is an urgent need for effective navigation tools to predict and mitigate disruptions, optimize inventory, and reduce financial losses. CFOs, the financial controllers of their organizations, report a 94% improvement in predictability by using tools such as forecasting software to navigate this complex environment. However, there are still pitfalls on the road to successful software adoption.
An astonishing 74% of executives regret their most recent supply chain software purchase, highlighting the importance of making informed decisions when selecting and implementing these tools. The risks are high and the room for error is small.
As supply chain disruptions continue to impact businesses around the world, CFOs need to take a strategic, data-driven, and collaborative approach to software procurement and implementation to help their companies weather this crisis and emerge stronger.
Quantifying the true cost of supply chain uncertainty
The economic impacts of supply chain disruptions could be widespread and significant. For example, supply chain issues played a major role in the resurgence of inflation in 2021 and 2022, with specific concerns in areas such as semiconductor chips, energy supplies, and labor shortages. The microchip shortage alone is estimated to have cost the U.S. economy $240 billion in 2021. While some of these pressures have eased, the possibility of future disruptions remains a concern for businesses around the world.
Another important consideration is the impact of geopolitical events on supply chain stability. Recent attacks on cargo ships in the Red Sea have forced some carriers to reroute goods to longer distances, delaying deliveries of goods and increasing transportation costs by 250%. CFOs should keep a close eye on such developments and assess their potential impact on the company’s operations and financial performance.
Labor shortages in the supply chain sector exacerbate the challenges posed by supply chain uncertainty. Experts predict that by 2030, there will be a shortage of 85.3 million skilled workers worldwide, costing the global economy $8.5 trillion. A shortage of skilled workers impacts operational efficiency and the ability to adopt and maintain advanced technologies that could mitigate disruptions. Additionally, the difficulty of finding qualified talent to manage and optimize supply chain processes hinders the agility and responsiveness needed to adapt to unexpected disruptions.
CFOs need to have a clear view of the potential financial impact of disruptions and make informed decisions about allocating resources, such as workforce development and technology investments, to mitigate risk. By investing in the right technology solutions, such as RFP tools, CFOs can improve visibility and predictability within the supply chain and reduce the burden of supply chain uncertainty. This process may also include diversifying suppliers to reduce reliance on single sources or building inventory buffers to ensure continuity of supply. Strategic software choices can significantly enhance CFOs’ ability to effectively navigate and manage supply chain challenges.
Maximizing investments through data-driven software procurement and implementation
CFOs play a unique and critical role in driving software selection decisions by aligning software investments with the company’s broader digital strategy and business goals. Focusing on these key areas can help ensure investments deliver the greatest value and drive long-term growth:
Ensure that software investments align with your company’s digital strategy and business goals, deliver value, and drive long-term growth. Consider factors beyond the initial purchase price, such as implementation costs, ongoing maintenance and support fees, and the potential for the software to deliver cost savings and efficiency gains in the long term. Use predictive analytics and scenario planning tools to proactively identify potential supply chain disruptions so you can respond quickly and effectively to changing market conditions. Conduct supply chain stress tests and develop contingency plans to mitigate the impact of disruptions and ensure business continuity. Work closely with key stakeholders across the organization to define your company’s requirements and ensure the software you select meets the needs of all relevant departments. Evaluate the software’s technical suitability, scalability, flexibility, and integration capabilities, and evaluate the vendor’s track record and ability to provide ongoing support and maintenance. Work with IT and other key stakeholders to develop a clear project plan, set implementation milestones, and communicate regularly with stakeholders to gain buy-in and prepare for potential disruptions. Establish clear metrics and KPIs to track progress. Understand the impact of your software on key business outcomes, and continuously monitor and optimize its performance to deliver ongoing value creation.
By focusing on these key areas, CFOs can maximize the value of their technology investments and build a more resilient and adaptable supply chain for the future.
The power of collaboration in software selection
Effective software selection and implementation requires a collaborative approach that leverages the expertise and insights of key stakeholders across the organization, including finance, procurement, logistics, and IT. Collaboration allows CFOs to take a holistic view of the company’s needs, challenges, and opportunities to make informed decisions. Opening up the software selection process to different perspectives, departments, and stakeholders helps identify solutions that benefit the entire organization (rather than optimizing individual functions or business units).
CFOs must take the lead in breaking down silos and encouraging greater communication and collaboration across different departments. Combining diverse perspectives and expertise will enable CFOs to make software decisions based on a comprehensive understanding of the company’s needs and challenges.
Additionally, your Chief Information Officer (CIO) should also be involved in the selection process as they can provide valuable insight into the technical aspects of different solutions. This partnership will ensure technically sound and scalable software investments that are aligned with your company’s overall IT strategy. For best results, effective collaboration with key stakeholders and leaders should continue to learn, adapt, and improve supply chain processes and technologies.
As supply chain disruptions continue to impact companies around the world, CFOs must take a strategic, data-driven and collaborative approach to software selection and implementation. By quantifying the true cost of uncertainty, maximizing investments through effective software selection and fostering cross-functional collaboration, CFOs can position their organizations to meet the challenges of today’s complex business environment and emerge stronger.
