Widespread supply chain disruptions throughout 2021 have delayed and reduced sales, increased manufacturing costs, created unexpected excess production capacity, and resulted in customer disappointments1—all of which have driven volatility in financial results and reduced the reliability of forecasts and projections. Chief financial officers (CFOs) responding to our Q3 2021 North American CFO Signals™ survey indicated that they would pursue multiple strategies to combat future supply disruptions, including multisourcing and changes in regional sourcing.2
Finance should consider partnering with supply chain operations and procurement groups to analyse the financial impact of various mitigation strategies for their organisation. Such strategies may include identifying product materials or components presenting the biggest risk to production and performing cost/benefit analysis for various strategies (such as supplier diversification, increasing safety stock levels, regional sourcing, and joint venture relationships with suppliers) that can be activated to mitigate those risks.
For the strategies highlighted above, finance may need to be mindful of the following:
As strategies to mitigate supply risks continue to be a focal point for many organisations, it may be beneficial for finance to work across functions to interpret and plan for potential impacts.
CFOs know finance transformation can be difficult and time-consuming. But they also know it’s an effective way to keep up with the changing needs of the business. Whether it’s technology disruption, business model innovation, or a new industry ecosystem, Deloitte helps finance organisations look ahead to what’s next while keeping the ship on a steady course.