Part 4 of the “State of the Mill Industry” series
Traditionally, the mill products industry has been marked with specialized and profitable niches that are a part of consumers’ everyday life. Yet even highly commoditized products – even those made from paper, wood, metals, glass, or cotton – are not immune from the disruption of ever-evolving relationships of people, process, and technology.
For CFOs, signs of change in what is typically perceived by consumers as a “stable” industry become more evident with every transaction. But very few ever truly understand how deeply the business will be affected as long as their accounts receivable and payable requests, shop floor and manufacturing transactions, and sales orders remain in disparate applications and organizational silos.
How can finance govern and initiate change when it’s just assessing the business from a 10,000-foot view? The CFO can just anecdotally say “reduce costs.” However, data is needed to support that decision; otherwise, it’s gut-based, which often leads to incorrect conclusions.
Help wanted: A consistent financial lens on disruption
Like most industries, success for mill products businesses comes down to data. From manufacturing and production to finance and procurement, decision-makers have to evaluate all transactional and related data to truly understand what’s going on.
Without an accurate view of changes in supply chain costs, raw material inventory, and order rates, decision-makers cannot safeguard top priorities such as revenue growth, optimization of operating margins, and cost reduction. As a result, they cannot respond to the elasticity of regulations and federal laws, tariffs and other economic factors, and standard accounting practices. For example, when material costs go up, component and manufacturing costs increase – an uncontrollable dynamic that cannot be covered just by cutting corners in the production process or raising the price of the final good.
The presence of a single source of truth can significantly impact a company’s ability to compete, execute business strategies, and drive financial performance and, ultimately, profitability. Growth can be viewed through a forward-looking lens into organic opportunities and potentially beneficial mergers and acquisitions. This level of insight informs strategic moves including the purchase of a mill, new market entry, product-line introduction and diversification, and partnership with adjacent industry players – all while optimizing asset management and costs.
This new reality recently became apparent when we met with an executive from a copper wire producer. The price of its products fluctuates depending on the availability and use of flawless copper – and settled contracts make it impossible to pass on the costs. With full visibility across its supply chain, procurement, and production operations, the company can weigh the risk of exposure when selling products of different quality levels – especially when reviewing specifications for a large order.
Visibility promotes speed and proactive action
One of the most transformational outcomes of increased visibility is the acceleration of business operations – and we don’t mean just stepping up the pace of production. Speed is equally important when understanding the reality of the business and market dynamics and making adjustments to take advantage of emerging opportunities to solve issues proactively and grow the enterprise.
The faster information is received, the more runway is available to make a decision and the more valuable the outcome. This notion is very similar to navigating a ship: significantly less energy is needed when you’re four miles away from something you don’t want to hit, as opposed to 400 feet. It’s a lot safer, efficient, and easier to steer the business with a longer-range view.
Incorporating this tactic into the financial close can eliminate the need for forensic costing. It’s not unusual for finance and business leaders to analyze their costs at the end of the month and not recognize certain line items or see that some charges are missing. With immediate visibility into costs, decision-makers can stop questioning those reports and react sooner to control processes better. This way, less money is being thrown down the drain because of excessive scrap and suboptimal machine efficiency.
Finance becomes the center of intelligence – from record to report
Throughout mill operations, there’s always a variety of things occurring, transpiring, and transferring simultaneously. And for this reason alone, acquiring immediate insight to sense, analyze, and respond to emerging shifts should always be a priority.
With the right strategy and right data, mill products companies can leave behind the bottlenecks that affect employee productivity. Now, they can move in real time to stay ahead of a continuously accelerating market of fluctuating consumer demand and a volatile global economy.
Please listen to the replay of our “Pathways to the Intelligent Enterprise” Webinar, featuring Phil Carter, chief analyst at IDC, and SAP’s Dan Kearnan and Ginger Gatling.