CFO: You Are The Weakest Link!

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A recent article in CSM Worldwide Insights about Stress on the Supply Chain: Where is the Weakest Link? about the perilous state of the US automotive supply chain hints at a much deeper question than just who will fail when one of the big three fails. Why will they fail, and how could failure have been prevented?

They’ll fail because they were too reliant on one company that has been essentially financially insolvent for years. What could have been done to prevent this? They could have diversified among not just the big three, but the big three foreign manufacturers who also have, and are opening up plants in, North America. Moreover, they could have diversified beyond the automotive industry. Cars aren’t the only things with gasoline-based engines. We have buses, trucks, boats, airplanes, and even riding mowers. Is it the same part for every vehicle? No, but there are similarities since all gasoline engines pretty much work the same way.

Why did they choose to overspecialize? Most likely because, during the last boom, business was so good that the CFO advised them to follow this path. A CFO who was more concerned with presenting an unrealistically and unsustainably good set of financial statements to Wall Street and investors than insuring the business was diversified and stable for the long term. The same CFO who, when times get tough, cuts New Product Development and Marketing first, the two things that could actually help the company thrive during a downturn, and then, more recently, kicks procurement in the face (and cuts positions, budgets, and new technology implementation) when, in fact, they could be the organization’s saving grace.

For this, I name CFOs, with their reluctance to focus on the big long term picture, the weakest link in the supply chain.