Research conducted by industrial enterprise software company Syspro reveals that the role of the CFO within the manufacturing sector will be crucial as the industry moves towards increased digital transformation in the "new normal".
CFOs are increasingly responsible for risk management in their organisations. The research conducted in October in Africa, the US, Canada and Asia Pacific highlights the rise of a more robust role for the CFO within an increasingly digitised manufacturing sector and the acceleration of Industry 4.0 as a means to overcome future disruptions.
One of the key findings outlined in the report includes the return of improved business confidence.
"The study revealed that CFOs will be instrumental in engineering the bounce-back. When asked how they plan to boost their business in the upturn, almost 83% of businesses identified cost-cutting, including the curbing of discretionary spending and reducing overheads, as a strategy. More than 70% of businesses also indicated that they would be exploring new revenue models with the aim for increased customer engagement through digital channels," says Syspro Europe, Middle East, Africa and India CEO Mark Wilson.
When asked about how their business had fared during the pandemic, nearly 47% of businesses indicated that their enterprises had fared well. The ability for businesses to weather the Covid-19 storm was particularly prevalent among manufacturers involved in the production or distribution of essential goods such as food and beverages (25%) during lockdowns, as well as those with the ability to augment their existing digital activities and adapt to e-commerce models.
Further, the size of an organisation also played a vital role in determining its ability to survive the pandemic. Companies with more than 51 employees were significantly more likely to report having fared as well as, or better than, expected.
The research also indicated an overall return of business confidence, with nearly 50% of businesses having already recovered or expecting to do so by the end of this year. A further 30% expected to return to pre-pandemic trading conditions by the end of the second quarter of 2021.
"When asked about their immediate priorities for 2021, 70% indicated that they would prioritise maintaining margins and 67% identified the need to manage cashflow – both traditional CFO functions.
"Surprisingly, however, the study also revealed that in addition to playing a traditional function, CFOs will also be expected to make informed technology investment decisions as a way of ensuring the interconnectedness of all aspects of manufacturing operations, as well as leveraging business intelligence to acquire and assess data that can then be used as the basis for strategic decisions."
While Industry 4.0 has been around for a number of years, the expanded scope of the CFO role will contribute to the acceleration of digital transformation. When asked about areas of technological investment, only 19.3% of respondents confirmed that they would replace ageing machinery in 2021.
"Rather, the emphasis is on investing in technology to make manufacturing smarter and less vulnerable to future disruptions," says Wilson.
More than 52% of businesses identified the investment in enterprise technology, such as enterprise resource planning, business intelligence and customer relationship management, as a key strategic focus area. The goal is better clarity and transparency of information across the business to enhance decision-making in real-time.
"Enterprise resource planning and business intelligence were identified as vital, thanks to their information-gathering, processing and analysis capabilities. In uncertain trading conditions, better, more accurate and more timeous data allows for smarter decision-making, as well as supporting strategic decisions through trend identification and assessment.”
The study also revealed that 44% of respondents singled out warehouse and advanced manufacturing process automation as a key focus area. This is, to some extent, a decision that has been imposed on manufacturing concerns by the pandemic, but it also suggests a longer-term outlook in which many current human roles will be replaced in the name of both efficiency and safety.
“The challenge for the CFO 4.0 will be to continue to deliver financial leadership while also focusing on more strategic and operational aspects. In preparing for the role of CFO 4.0, businesses need to embrace technology, empower people through upskilling initiatives and have a clear business case for Industry 4.0.” concludes Wilson.