Reshaping the Role of Finance: What Matters Most After the COVID-19 Pandemic in 2020

Introduction

Covid-19 pandemic in 2020 (Nasereldin et al., 2020) gave humanity a new perspective of life, time, business and how to prioritize what matters most for each of us. As a result of these radical changes, business came into a conclusion where the reorganization of supply chains was acceptable for a world before the pandemic; we all suffered the face masks shortages, spike in commodity prices and identified that cost was a matter with less leverage that time and availability of goods.

We saw domestic challenges, international challenges, and identified that countries where not ready for a new reshaping of supply chains, inventory management, time to market (Medina-Quintero et al., 2023), market share shifting from some areas to other and a threat to economy as we are now it and, in some cases, national security.

The manufacturing industry is one of the most relevant economic contributors for many countries, such sector has been growing in skills, automation and as well has been the trigger for some of the most relevant changes in trade regulation and how economies plan their budgets around the globe, such as:

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  International trade regulations

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  Standardization of global regulations such as ISO, FDA regulations, Aerospace, among others

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  Ports development and logistics standards

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  Workforce development

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  Assets investment and asset management for companies

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  Labor arbitration

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  A key index of countries industrialization, education, and GDP

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  Among others

As an example, one of the most relevant trade agreements is the USMCA in which the United States, Mexico and Canada define the rules of the ground to manage commerce within them. The USMCA daily trade is estimated to be $3 million dollars a minute with 2022 trade data. Such a large figure includes material costs, indirect costs such as labor and support and utilities and other fixed costs. Companies in the USMCA region, such as any other trade agreement, have created companies that, despite the sector, need to be resilient, sustainable, innovative, and scalable; so, manufacturing technologies have shaped economies and will reshape them in the next 5 years. Furthermore, we need to assess in those companies Environmental, social and governance (ESG) responsibilities; this creates a manufacturing system that will need to be managed differently.

State Of The Art

Finance and accounting are areas that have been evolving at a slower speed than manufacturing, such lag is due to regulations, having accurate financials take deep analysis and numerous of iterations to reflect accurately what the company did and will be doing; and if a company is publicly traded there is a need to comply with several SEC, IRS, and other agencies standards. Despite this, we need to understand that the finance role is a key element on any manufacturing site, if the finance executive understands and acknowledges that there are gaps in the level of information that is managed in the shop floor is different to what is managed in their accounting records. I am not talking about general ledger only, I am talking about cost accounting, inventory management, payroll costs, manufacturing overheads, allocation of cost, sales and cost of goods sold, in other words linking the shop floor to the financials has been difficult. There has been great progress in the financial function applying lean techniques, and one of my favorite books on this topic is “Who is counting?” by Jerrold M. Solomon (2003), which provides us with a high-level view of how a finance executive gets into the world of manufacturing, lean manufacturing, six sigma and other interesting projects that are day to day activities in quality, materials, engineering and other areas.