Last Updated: January 27, 2021
Welcome to the third installment of “A CFO’s Perspective.”
The goal of this 3-part series is to help more CFOs realize the benefits of economic intelligence using the experiences of Doug Garis, a then Division CFO at Masonite International, as a guide. Doug shared his story at the 2019 CFO Live conference.
In previous blogs, we looked at the role of economic intelligence in financial planning and followed Doug’s journey as he integrated Prevedere into the S&OP process. In this final blog, we cover Doug’s take on how better visibility into economic drivers and future demand has helped the manufacturer operate more efficiently.
Need for a Better Forecast
Masonite is a global manufacturer of doors. According to Doug, the business case for Prevedere at Masonite was to improve top-line forecasting. The company had been overly optimistic in some of its forecasting and was caught off-guard by a slower-than-expected recovery in the residential housing market.
Bad forecasts are costly. And that’s especially true if you’re a manufacturer with a vertically integrated supply chain. Masonite handles components production, assembly and fabrication and serves customers in 64 countries. The company has a lot of money tied up in working capital—and a lot at stake when it comes to accurately forecasting demand.
Insights to Improve Operating Efficiencies
Doug believes Prevedere has given Masonite “a much better directional sense of where the business is going” and “put some confidence behind our short and medium-range planning.”
He said that using Prevedere to improve forecasting has been a big advantage in supply chain planning.
For one thing, the company is less likely to be sideswiped by an unexpected downturn or uptick in demand. Executives in sales and operations have a clearer view of when and how economic factors will impact their end market and can plan accordingly.
In addition, the business has been able to improve its margins and reduce net working capital. Doug pointed to several areas where having a better handle on demand can increase operating efficiencies and take costs out of the supply chain:
- Inventory: The business can limit inventory write-downs by not over-buying or having products sit too long. “Our reduction of obsolete and slow-moving inventory is a huge value proposition,” Doug noted.
- Logistics: The business has reduced shipping costs by optimizing the movement of goods between facilities and to customers. Masonite has more than 65 manufacturing locations and customers around the world—so this is a big area for savings.
- Facilities: Doug said it’s expensive to keep Masonite’s manufacturing facilities up and running. “On a fixed and variable cost basis, being able to better plan for demand allows you to better operate your facilities and organize your labor.”
Return on Investment
Doug’s experience with Prevedere highlights the financial value of economic intelligence to manufacturers, especially when it comes to supply chain planning.
Materials management, inventory management, capacity planning, logistics—they all benefit from a demand outlook based on economic drivers. As do CFO decisions like when to enter or exit a market, or whether to invest in a new manufacturing facility.
There’s no doubt forecasting can be tricky for manufacturers. But getting it right can add millions of dollars to the bottom line.
As Doug told the roomful of CFOs at CFO Live, “You don’t even have to do the math to understand that a SaaS-based model, at a fraction of your total SG&A investment, was a good idea.”
Want to Learn More?
Check out the webinar “Beyond the Factory Floor” to hear how Timken Steel uses economic intelligence to predict and prepare for swings in the market. Or, get in touch with our team of experts to discuss how insights into economic factors can benefit your organization.
Prevedere was named one of
2019’s Top 10 Manufacturing Intelligence Solution Providers
by Manufacturing Technology Insights