January 24, 2025 The Ever-Changing World of a Manufacturing CFO

Manufacturing CFOs must provide detailed financial plans, prioritize supply chain resiliency, create scenario plans and adapt to AI.

By: Rob Bellile, Senior Manager, Manufacturing Advisory at Baker Tilly and Jennifer Finger, Principal with Baker Tilly’s Business Advisory Practices

Today, the demands of a manufacturing chief financial officer (CFO) go well beyond preparing the annual financial statements or filing an annual tax return. The modern manufacturing CFO faces expanded responsibilities, from staying competitive to navigating technological advances like automation, artificial intelligence (AI), inflation and costing pressures that challenge the bottom line.

A Detailed Approach to Financial Planning

As we enter 2025, accurate financial planning is top of mind. Whether the manufacturing company operates in a normal fiscal year, an altered fiscal year or quarters, it is a key responsibility of the CFO to ensure that financial planning is accurate. The past five years have been anything but consistent, from supply chain imbalance to the “Rubber Band Effect” to significant inflation and increased interest rates.

With this constant change, evaluating current market trends is a high priority when working on a financial plan. Start by identifying key factors that could be influencing the profit and losses (P&L) line items by looking at internal factors such as inventory, capacity, labor rates and utilizations as well as external factors like oil/fuel prices, interest rates, GDP, consumer price index and the producer price index.

After this analysis, measuring volume impact on the financial plan is a critical step. Looking at sales demand, inventory targets, production plans and purchasing plans will lead to building P&L inventory and cash flows.

The last step in financial planning is spend analysis. Building out models for key areas such as labor, facilities, utilities and transportation will help organize the largest areas of spending for your manufacturing company.

Supply Chain Resiliency

Following the pandemic, supply chain resiliency is top of mind for modern manufacturing CFOs. Because of the financial impact supply chain issues can have on manufacturing companies, CFOs play a large part in prioritizing supply chain resiliency in their organizations by accurately managing and predicting liabilities from financial reporting.

Successful supply chain hinges on the vendors and suppliers that you work with daily. Performing audits before selecting vendors and suppliers as well as during the partnership will ensure successful collaboration and avoid vendor fraud, one of the most common risk areas for manufacturers. When auditing vendors, location, tariff planning and geopolitical risks should be top of mind as we navigate a new administration.

Aging inventory is another supply chain priority as it can result in unplanned costs. Setting up weekly meetings and processes to pay attention to inventory shelf life and use-by dates will make the most out of in-stock product. For companies that do not need to worry about shelf-life in their inventory, CFOs should direct their focus to excess and obsolete inventory by utilizing “where used” reports that show where inventory is used in a product structure and provides visibility into how much demand there is for the finished products and raw materials.

Costing & Scenario Planning

Dynamic costing is a modern framework that has taken the place of standard costing. This framework is developed under the belief that costs are not static in a business. This model seeks to inform businesses with an action driven cost aggregation that better aligns with what businesses are doing and the costs it is incurring.

Under this framework, scenario planning comes into play. Scenario planning helps with a variety of decisions. Some of the most common include customer pricing and margin management, manufacturing capacity management and ensuring the company meets working capital requirements. Building a customized solution based on the data collected internally often provides the best results for the manufacturing company.

AI Readiness

Balancing the changes in AI along with the transition from Industry 3.0 to 4.0 is a challenge that manufacturing CFOs are working to master. Having strong data and the ability to manage it is the beginning of embracing AI and machine learning models.

To master data, establish owners for major data sets within the company such as suppliers, customers, products, assets and employees. Performing consistent walkthroughs of transactional processes will ensure that the proper data controls exist. Subsequently, identify the most suitable tool for data analysis – whether it is an existing one or a more automated option.

Once the data has been managed and mastered, it will be significantly easier to utilize the data and analytics efficiently in operations. It will also become more manageable to master new technologies and variations of AI.

The Future of the Manufacturing CFO

The financial and manufacturing worlds show no signs of slowing down anytime soon. CFOs, though they are given plenty of challenges, have the ability to utilize resources to navigate financial planning, supply chain resiliency, scenario planning and AI readiness to lead their organizations to success.

About the Authors:

Jennifer Finger serves as a principal with Baker Tilly’s business advisory services practice, co-leading CFO advisory practices. In this role, she assists clients with financial, operation and internal control issues including financial planning and analysis, audit and IPO readiness and accounting standard adoption.

Rob Bellile is a senior manager in Baker Tilly’s manufacturing advisory, with more than ten years of experience working in finance, helping organizations modernize legacy business models with digital solutions. With experience in supply chain and inventory management, Rob helps clients navigate changes and challenges in the manufacturing industry.

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