Date: Thursday, April 27, 2023
Source: Wall Street Journal
As if finance chiefs didn’t have enough on their plates before the pandemic, surging shipping costs, freight logjams and factory disruptions in China over the past few years have laid bare their need to adapt and step up their involvement in boosting supply-chain resilience.
“Supply chain is obviously always an important part for us,” said Conagra Brands Inc. Chief Financial Officer Dave Marberger. At roughly $9 billion, it is the single biggest line item when looking at the cost of goods sold for the Chicago-based food manufacturer, which makes Hunt’s ketchup, Healthy Choice frozen meals and Slim Jim meat sticks. “But obviously with Covid and the significant impact it’s had on supply chain, it’s been even more of a priority for me.”
Even as businesses have seen some relief as congestion eases and shipping costs plummet, CFOs expect their focus on supply-chain resilience to stick. That entails everything from coordinating and communicating with supply-chain and logistics officers more frequently to allocating funds to improve inventory tracking, boost automation and diversify supply lines to ensure that companies aren’t over-reliant on any single source of production.
During the pandemic, Mr. Marberger started talking to Conagra’s chief supply chain officer daily, instead of just frequently throughout the week, as the company worked to meet a pandemic-fueled spike in demand. That has largely continued even with Covid-19 disruptions and demand spikes easing, he said, particularly as interest rates rise and inflation remains elevated.
An uncertain economic environment means third parties in Conagra’s supply chain, including suppliers, sometimes require extra assistance, especially smaller businesses, he said. “It will stay; my involvement will be higher than it was pre-Covid,” Mr. Marberger said of his supply-chain focus.
The pandemic also exposed the importance of automating certain aspects of the supply chain, which Mr. Marberger said he is closely involved with. “You need to be able to get more output for the same or less input,” he said, explaining that Conagra is continuing to accelerate capital as well as resource investments in technology and automation.
At Cincinnati-based business-services provider Cintas Corp., the finance team is now more closely monitoring such things as inventory movement and the amount of stock to carry, said CFO J. Michael Hansen.
“I would say from a financial perspective—my accounting and finance team as well as me—we are spending more time having discussions with our global supply chain,” he said. “We are spending a little bit more time than we did prepandemic for sure, just trying to make sure we are all on the same page in terms of what may be coming.”
This amounts to meeting more with members of the global supply chain and with the accounting and finance teams, he said. These aren’t necessarily regularly scheduled meetings, the CFO added, but informal discussions if, for instance, there are disruptions in certain ports or supply-related developments involving customers.
Mr. Hansen said he is also digging into particulars around inventory. “I’m diving into the details more and I want to know: ‘How do the turns look on various products within garments?’, for example.” he said, referring to inventory turnover. “I want to know, not just overall turns, but I’m diving into more levels of detail to understand so that I’m not getting fooled by just simply an average.”
For Jimmi Sue Smith, who leads the finances at Koppers Holdings Inc., supply-chain priorities have shifted. Before the pandemic, Ms. Smith said, supply-chain-related priorities included what costs and inventory levels were and the terms the Pittsburgh-based maker of treated-wood products was getting from vendors. Now, she said, she is giving priority to increasing the company’s supplier base.
“I’m not sure anybody was focusing on [increasing their supplier base] as so much of a risk before because…it had not really happened where all of the sudden you couldn’t get things or the ports were jammed up or all of the containers were in China,” she said. “After the disruptions that we saw during the pandemic, the focus has shifted a little bit.”
Reducing the risk has meant bringing in suppliers from new geographic regions, Ms. Smith said. This, she explained, also means having suppliers that may hold more inventory and can respond to demand quickly as well as finding suppliers who are closer to the end location so logistics aren’t as much of a risk.
“There’s definitely a focus on having a diversity in your supply base, so not being single sourced, if you can avoid it at all,” she said. “Things that maybe you didn’t put as much value on before, you do today.”