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Jul 14 2015

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The CFO’s Guide to Increasing ROA from Manufacturing Operations

ROI-sealThe requirements of the modern CFO have changed. Gone are the days when they could bury themselves in spreadsheets and refrain from getting involved in the dynamic, day-to-day business environment. They must now understand their business from end-to-end, well beyond financial statements. Understanding what drives growth for the business, and leveraging this knowledge with the operational intelligence needed to increase profits, are the skills fundamental to success.

As innovation in business transforms traditional roles, individuals must be flexible and welcome fresh approaches. Today’s financial leaders must embrace an expanded set of responsibilities by investing time, resources and energy into improving operational visibility. Transparency is key when it comes to effective management and analysis. This will impact future profitability, improve the likelihood for a positive return on investment and shareholder value, and reduce borrowing costs at the same time.

Of course, this is more easily said than done!

In the manufacturing industry, many businesses have made great strides towards understanding operations performance thanks to Enterprise Resource Planning (ERP) systems. By essentially building a clear pane of glass across the whole business, those in charge can spot areas for improvement, possible pain points and conduct detailed analysis and reporting. Such accurate and timely insight feeds into the financial reporting conducted by the CFO and their team.

The challenge with this vision, however, is that ERP alone is not enough. All too often, global manufacturers see their ERP system(s) creak under the strain and ultimately, fall short of expectations. If a CFO is unable to guarantee visibility, control and synchronization across all operations with just an ERP system, then they must seek additional tools to achieve this objective.

The Age of Big Data

Businesses across all industries are witnessing a deluge of data across operations. It is a question of how this “big data” is used that is dictating success. If it is collected, analyzed and then used to inform decision-making, the business can rest assured it is acting responsibly. On the flip side, if data cannot be processed quickly, opportunities for improvement fall short.

Given this transformation, best-in-class CFOs are investing in Manufacturing Execution Systems as a complement to their ERP as a powerful solution to quickly extract the right data, in the right time frame, to make better decisions. After all, information that can’t be provided in a timely manner loses its purpose and value. CFOs and the rest of the management team must be armed with all the information they need to take action quickly and decisively in the interest of their business.

A recent report published by Dassault Systèmes, “The CFO’s Guide to Increasing ROA,” details how financial leaders can gain the necessary visibility and control in manufacturing to synchronize operations and increase valuation. Download a free copy.

This approach provides a “layer” between ERP and the machines and equipment running on the shop floor. This layer provides a funnel to effectively collect and aggregate the data and intelligence necessary to make detailed models of plant operations. This type of solution provides greater flexibility, making it easier for management to spot areas in need of attention.

Adding an operations management layer to complement existing ERP system(s) can have significant benefits, beyond improving visibility and flexibility. This approach can:

  • Improve return on assets (ROA), having a direct impact on the efficiency and effectiveness of how plant assets are utilized
  • Compress the order-to-cash cycle time, enabling faster implementation of continuous process improvement initiatives
  • Reduce idle inventory and improve tracking accuracy at a highly granular level
  • Vastly improve risk management capabilities, reducing quality and reliability risk through increased product traceability and containment efforts
  • Improve governance, risk and compliance capabilities through the delivery of electronic batch records, providing tighter traceability across plants.

Traditional ERP systems have helped increase reporting standardization and accuracy. In today’s world of big data and the Internet of Things, however, their role to manage shop floor operations is now limited. In the same way ERP set a new standard in the CFO’s office in the past, Manufacturing Operations Management solutions are now making the same impact. By removing the reliance on disparate systems, multiple spreadsheets, paper reports and hearsay from operations, smarter financial decision-making is now possible. This approach is now transforming the manufacturing industry for the better.

Complementing existing ERP with an operations management solution delivers the insights needed to bridge the gap between operations and finance. Today’s smart CFOs are using these tools to make timely and critical decisions based on fact, not speculation. Ultimately, a well-informed CFO is the tool every business needs to progress within their market, and exceed valuation expectations.

 

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Permanent link to this article: http://www.apriso.com/blog/2015/07/the-cfos-guide-to-increasing-roa-from-manufacturing-operations/

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