Uniqueness and individualism are the by-words of anyone selling consumer products these days – from clothes to iPhones, consumers have never had such a breadth of choice. This, coupled with ever-shortening product cycles, is causing a major headache for manufacturers. They must ensure that new products are developed, tested and shipped, within that timescale and with all the appropriate ancillaries – such as documentation, training and marketing – in place.
Within all this, the focus for CFOs is quite rightly on the money-management side of the business. However, all too often this means the operations side is overlooked. While day-to-day management is clearly best left to COOs and divisional managers, CFOs can’t afford to go totally hands-off. Not only are operational issues hugely important to financial management, but the position of CFOs makes them the perfect exec to help maximise revenues and minimise cost.
A good example of this from the manufacturing industry is the issue of product information – from product’s technical documentation to users’ manuals.
The aforementioned shortening of product cycles and proliferation of customisation creates a problem with all the documents that are invariably with most products. Whether it’s a simple how-to manual or an extensive training protocol for a new software solution, the data that accompanies every variation of a new product is expensive and financially crucial – failure to produce timely literature might mean missing a shipping date, with a major impact on cash flow and loss of future expected revenues.
An effective CFO can make the crucial difference between success and failure here, by enforcing compliant information management processes to ensure that these peripheral areas are not only remembered, but also contribute to the organisation’s overall financial standing. After all, information and document management account for 15 per cent of a company’s total expenditure, so cost management in this area is clearly key.
One technique used by many manufacturers to manage costs is the ‘just-in-time’ method. However, in many organisations this technique hasn’t been implemented for product information processes. Rather than stockpiling user manuals or producing multiple handbook translations for limited markets, tailored information and documentation can be distributed only when required to end-users or supply chain operatives. This will enable savings in paper, printing, translation, storage and shipping.
Another opportunity to manage costs comes with giving staff tailored, up-to-date product information Research shows that this can cut questions to supervisors from service technicians by over 90 per cent, which reinforces the logical truth that giving accurate information to the correct people reduces inefficiencies. A further example: advance publication of training materials means sales and service staff can be ready to respond to issues from launch date, maximising the company’s competitive advantage.
As well as finding cost management opportunities within this area, there’s also an opportunity to generate revenue. In sectors where an after-market for information exists – as for recycled aerospace turbines – replacement manuals come at a premium. A CFO aware of these peripheral opportunities to create additional income is in a position to make sure that they’re exploited and turn unutilised resources – like product information – into profit generators.
At first glance, these issues seem to be more the business of the COO than the CFO. However, implementing these kinds of policies takes investment. An engaged CFO can work with the relevant departments to identify where the return justifies the investment and act accordingly.
More broadly, however, CFOs should recognise that their position within the company structure – removed from day-to-day operational issues, but with an eye on the bottom line – gives them the ideal ‘outsider’s perspective’ to identify inefficiencies and opportunities.