Tuesday, July 22, 2008

Fuel Costs on the Mind: A Little Innovation Required

As Duke University/CFO.com released their Global Business Outlook Survey, it came as a real shock that as much as inflation or the weak US dollar, rising fuel costs were identified as a key concern for many CFOs. Equally surprising, that almost half of the companies surveyed are dealing with this by raising prices (by up to 4%), while wage increases are estimated to grow by only 3%. Most surprising, that we’re just now dealing with fuel costs as a major business impact. Fuel costs have been rising for years. Every commuter has watched their gas bills jump, often to the point of impacting their monthly household finances. As a finance community, we have only to look as far as our own households, take the lessons learned, and apply them to our companies to find cost-saving opportunities.

For several years now, chip manufacturers have battled as hard on energy efficiency as processor speeds. Why? Because energy costs have soared and companies know that there are huge savings to be found in lower energy-consuming server farms. Technology companies have had telecommuting programs for years, realizing diverse savings from facility management to employee retention. To what percent can we reduce business travel? What opportunities exist in our manufacturing departments, shipping, alternative fuel source options? What are the impacts to our internal processes and external stakeholder groups as we consider these changes?

There is still opportunity for companies to streamline operations, even within manufacturing, where most companies tend to focus efficiency programs. Unfortunately, it tends to be at points where we hit economic crises that we get creative about searching for these opportunities. This is one area where the Finance team has the chance to take a leadership role in driving change within your organization. Finance teams that have access to both the financial and operational data have a unique perspective into the entire business model. Who better to be able to identify opportunity, model scenarios and impacts to internal and external stakeholders, and educate line of business teams on potential areas for improvements across business lines?

The Global Business Outlook Survey provides a bleak picture for the economy, with raised prices and layoffs in the forecast. But it is exactly at these points when the true value of the innovative CFO can be felt across the organization. Ours is the only team that has access to the financial and operational data, combined with the tools to analyze and model the impacts of potential scenarios on the business. By working with the executive team and lines of business, we can explore creative improvements or alternatives to current processes and company business practices. The opportunities are myriad.

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