Today, players in the manufacturing space are witnessing strained businesses due to the ever-growing competitive pressure. This is further coupled by the fact that global events such as COVID-19 and geopolitical unrest has disrupted supply chains, causing fluctuations across raw material prices and unpredictable availability. 

And, if we look at it from a historical standpoint, this sector has  often lagged  in adopting digitization. However, driving innovation and leveraging technology has now become a matter of survival  for players in the manufacturing sector. This  is evident if we look at the decreasing average age of companies who are listed on the S&P 500 Index, from 61 years in 1958 to just 22 years today.

Optimizing Operating Models

Currently, manufacturing companies are now reexamining their operating models, particularly focusing on the important areas that include distributor engagement, delivery mechanisms, supply chain management, and workforce management which can ultimately lead to driving the much needed cost effectiveness. Adding to this, manufacturers must streamline operations, including working capital processes to meet these evolving demands.

This can be carried out by automating routine tasks, reducing manual errors, and enhancing both the order-to-cash and procure-to-pay cycles. These changes are of utmost significance with respect to maintaining competitiveness and achieving long-term success, especially in today’s rapidly changing market dynamics.

Digitalization can streamline CFO office operations by addressing key challenges. For instance, tasks such as invoicing, cash application, dealer management, and accounts receivable/payable reconciliation, if automated, can reduce manual errors and frees up the crucial time for occupying oneself with strategic decision-making. Furthermore, leveraging advanced analytics can provide CFOs with the much needed insights into cost-saving opportunities and operational efficiencies, aiding informed strategic decisions

Additionally, real-time tracking and predictive analytics can enhance supply chain management, leading to better production planning, optimized inventory levels, and most importantly mitigate price fluctuations pertaining to raw material. In this situation, a fintech solution can be a gamechanger when it comes to improving dealer and supplier financing, while  enhancing cash flows. Also to note, digital tools enable quicker, personalized customer responses and effective credit period management; thereby balancing customer satisfaction and cash flow. Moreover, tools for real-time financial data access and automated compliance management enhance transparency, regulatory adherence, and risk management through robust scenario planning. Implementing these digital solutions allows manufacturing companies to streamline CFO office operations, improve efficiency, and drive business success in today’s competitive and dynamic market.

A Favorable Ecosystem

India offers a supportive ecosystem for these advancements. The country boasts of a best-in-class payment stack, and both private and public banks have embraced technology, offering API banking. Distributors and suppliers are digitally enabled with smartphones, and India is becoming a hub for SaaS product development, solving many problems faced by SMEs to larger enterprises.

Slowly, we are witnessing manufacturing companies embracing digital  technologies to achieve considerable cost reductions and enhance customer experience. For instance, one of India's largest interior infrastructure companies, specializing in plywood and allied products, digitized and streamlined its dealer order-to-cash cycle. By implementing a cloud-based Dealer Management System, they addressed challenges such as order processing speed, sales and commercial team productivity, days sales outstanding (DSO), and tracking collections and resolution of disputes with distributors. This resulted in a 5-day reduction in order placement timelines, a 50-60% increase in team productivity, and a 4-day reduction in DSO, directly impacting working capital requirements.

Similarly, a renowned Indian textile company optimized its accounts receivable processes through digital transformation. They saved 35% of the finance team's time on reconciliation and posting activities and effectively mitigated a revenue leak of 4-7 percent.

The Future Prospects

Going forward, manufacturing companies are poised for significant advancements in digitization and process reengineering. Key trends on the horizon include the integration of advanced analytics and AI for data-driven insights, along with ongoing automation of critical processes such as dealer management, invoicing, payments, partner financing, and cash management. So to wrap it up, when it comes to maintaining a competitive edge, companies should prioritize investments in robust digital infrastructure and cultivate partnerships with fintech innovators. Embracing these strategies will enhance operational efficiency and position manufacturing companies favorably in an increasingly dynamic landscape.

About the Author

Rattan Chugh is the Co-founder at Fundflo Technologies with over 30 years of experience and leadership stints in prominent companies such as American Express, Fidelity Investments, Standard Chartered, and Times Internet, where he consistently drove innovation and operational excellence. Rattan has a proven track record of enhancing customer experience and achieving significant cost reductions by leveraging technology, optimizing processes, and implementing best practices.