Supply chain for CFOs: S&OP decisions that move EBITDA and cash

The supply chain conversation is no longer purely operational. In markets with volatile demand, uncertain lead times and margin pressure, S&OP has become a first-order financial lever. A CFO who brings planning, procurement, manufacturing, logistics and sales under a single decision framework doesn’t just cut noise: they accelerate the cash cycle, steady EBITDA and release working capital. This article translates operational jargon into the language of the P&L and the balance sheet, highlighting which metrics matter, where the trade-offs lie, and how a modern planning system turns data into decisions with measurable impact. Today we’re talking about supply chain for CFOs.

Why should the CFO be aligned with supply chain planning?

Planning determines what to sell, when to produce, what to buy and which orders to prioritise. Each of those choices shifts cost-to-serve, margin mix, inventory needs, capacity usage and, ultimately, liquidity. If S&OP runs in silos, the company chases partial targets (for example, “OTIF 100% always”) that erode margin through expedites, overstock and needless complexity. When the CFO sponsors the process, they set the economic guardrails (cost of capital, inventory limits, tolerance for stockouts by segment, prioritisation rules) and ensure decisions are anchored to the P&L and balance sheet—not to operational averages.

From operational efficiency to EBITDA: speaking the language of the P&L

The link is direct: better forecast accuracy produces a realistic sales and operations plan. Using capacity and procurement more efficiently lowers unit cost and reduces expedites, lifting contribution margin. On the revenue side, well-segmented OTIF avoids lost sales and non-compliance penalties. On the cost side, a stable plan cuts changeovers, scrap and overtime. For the CFO, the key message is traceability along this causal chain: each percentage-point gain in forecast accuracy lowers variability, and less variability means less inventory and fewer expedites. Translated into the P&L, that’s lower OPEX and COGS and more stable net revenue.

Balance sheet and working capital: inventory, DSO/DPO and the cash conversion cycle (CCC)

Working capital condenses to CCC = DIO + DSO − DPO. Supply chain decisions heavily influence DIO (Days Inventory Outstanding) via safety-stock policies, lot sizing, replenishment and multi-echelon flows. They can also support reductions in DSO by meeting service agreements that prevent disputes and returns. In parallel, sound purchasing plans enable negotiating DPO without hurting cost or service. The finance lead should require every policy change (e.g. moving to continuous review or updating ABC/XYZ parameters) to be translated into DIO points and euros of tied-up capital. With that traceability, S&OP choices become balance-sheet decisions, not just warehouse ones.

Metrics that matter to the CFO

Operational metrics are useful only if they explain money. The CFO needs indicators that tie explicitly to margin and cash, avoiding “nice” but toothless indices. Three blocks are enough to steer the ship: profitability by segment, the inventory/service/expedite trade-offs, and discipline in executing the plan.

Cost-to-serve and contribution margin by channel

Cost-to-serve totals the direct and indirect costs to fulfil an order: transport, extra handling, packaging requirements, delivery windows, admin complexity, returns and demand variability. Cross this with contribution margin by channel/client/SKU to see where the business truly makes money. Two common findings: first, high-volume customers with complex logistics requirements that eat into margin; second, a long tail of slow-moving SKUs consuming capital with disproportionate holding cost. With this visibility, the CFO can push for segmented service levels, portfolio simplification, or price and logistics surcharges grounded in facts.

DIO/OTIF/expedites: the trade-off triangle

There is no “maximise everything”. Very low DIO with very high OTIF typically drives expedites; a blanket 100% OTIF inflates inventory and cost. The answer is segmentation: set OTIF targets by profitability, criticality or channel; size stock accordingly; and reserve expedites for cases where margin justifies them. Measure the expedite rate (as a % of orders or sales) and break down its cost (premium freight, overtime, scrap) to decide when to accept a stockout and when to accelerate. Linking DIO to target service levels by segment also prevents inventory being pushed towards “dangerous averages”.

Execution KPIs: time to “frozen” plan, scenarios evaluated, forecast variance

S&OP quality shows not only in outcomes but in discipline. Three KPIs make the difference:

• Freeze window: how far ahead the master plan is “frozen” relative to production; stable windows reduce changeovers, scrap and expedites.
• Scenarios evaluated: the number and quality of “what-ifs” assessed with real constraints; more scenarios aren’t better if they ignore finite capacity and material constraints.
• Forecast variance and bias: controlling volatility and penalising systematic optimism prevents over-inflated plans that lead to overstock. For the CFO, these KPIs are leading indicators of the P&L.

From data to decision

Most companies have an ERP, spreadsheets, BI and a host of interim files. The issue isn’t a lack of data; it’s the lack of governance and a decision engine. Information arrives late, there are multiple versions of the plan, and teams optimise locally. “More data” does not equal “better decisions” without rules, simulation and traceability.

Why Excel falls short for governing the P&L

Excel is superb for ad-hoc analysis, but fragile for steering critical decisions:

• Versioning and traceability: multiple copies, no change control, no reliable audit trail.
• Scalability: models break with more SKUs or variable lead times.
• Real-world constraints: hard to model finite capacity, calendars, setups, BOMs or yield.
• Simulation: producing coherent, comparable scenarios is slow and error-prone.
• Compliance: without fine-grained permissions and segregation of duties, enforcing data policies is tough.

When the P&L depends on assumptions scattered across spreadsheets, operational and financial risk spikes.

What a modern SCP brings to financial control

An SCP (Supply Chain Planning) platform integrates demand, inventory, purchasing and production with a digital twin of the chain. For the CFO, it delivers five critical capabilities:

• A single version of the plan with data governance and a full audit trail.
• Dynamic inventory policies (ABC/XYZ, safety stock, ROP) that tune DIO to the real risk of each SKU and channel.
• Optimisation with constraints (finite capacity, materials, calendars) to avoid impossible plans and unnecessary expedites.
• Fast scenario simulation with direct impact on P&L and CCC, incorporating cost-to-serve and price.
• Integration with ERP/BI to close the loop: decision → execution → measurement.

The result is faster, more transparent decision-making aligned to financial goals.

Three levers with measurable financial impact

This isn’t about “doing everything”, but focusing on three levers that typically explain most of the improvement in EBITDA and cash: inventory, segmented service and control of expedites.

Dynamic inventory (ABC/XYZ, safety stock, ROP): less capital tied up

Classifying by value (ABC) and variability (XYZ) lets you set safety stock to the real risk of each family. Add lead time and its reliability and you have a sound reorder point (ROP). Moving from static parameters to dynamic policies fixes two common problems: excess stock in “C” SKUs with erratic demand, and insufficient stock in “A” SKUs with rising variability. The financial effect? Lower DIO, less obsolescence and reduced holding cost. Measure both euros released and the days of capital returning to cash to show this isn’t “cutting” but risk optimisation.

Service at a controlled cost: OTIF by profitability segment

OTIF is a goal, not a religion. Setting service levels by segment (strategic customers, premium channels, lead SKUs) prioritises what truly sustains margin. Link each OTIF target to an acceptable cost-to-serve. In low-contribution segments, a slightly lower OTIF may be more profitable; in critical ones, protect coverage with reserved inventory or capacity. Also distinguish fill rate from OTIF: a high fill rate with missed delivery windows can destroy margin through penalties. Managing by segment prevents “over-investing” in service where it doesn’t pay and “under-investing” where the return is highest.

Capacity and expedites: the expedite rate and its impact on margins

Expedites are the thermometer of disorder. They cost money through premium freight, resequencing, scrap and overtime. The lever isn’t to ban them but to govern them by rule: realistic freeze windows, sequence planning that minimises setups, buffers where margin justifies them, and clear criteria for when to accelerate. Tracking the expedite rate and unit cost enables concrete targets (e.g. reduce by 40%) and proves the direct effect on EBITDA. In parallel, a stable plan lowers upstream variability and shrinks expedites before they arise.

A worked example with numbers (baseline vs improvement)

To illustrate the approach, here’s a simplified case any finance team can audit. The aim isn’t to make “promises”, but to show how levers connect to the P&L and balance sheet.

Current state: OTIF 93%, turns 4, average inventory €10m, expedites 2% of sales

Assume sales = €100m and gross margin = 25%. Average inventory is €10m with turns = 4, implying DIO ≈ 365/4 = 91.25 days. OTIF sits at 93% and expedites equal 2% of sales (≈ €2m a year in total cost). Forecast volatility is high, stressing changeovers and scrap; stock policies are misaligned with seasonality and channel profitability.

SCP action: +5 pp forecast accuracy, dynamic policies, expedites down 40%

Within 12 months, S&OP is run on SCP:

• +5 percentage points in forecast accuracy and bias control.
• Dynamic ABC/XYZ policies recalculating safety stock and ROP by SKU/channel.
• Finite-capacity sequencing with an agreed freeze window.
• Segmented service (OTIF targets by profitability).
• An expedite plan with rules and limits aiming for −40% expedites.
• Ongoing traceability and measurement of DIO, cost-to-serve and contribution.

Results: inventory −12% (lower holding cost), OTIF 96% (+revenue), fewer expedites, EBITDA and CCC improve

Expected, auditable effects:

• Inventory −12%: €10.00m × 12% = €1.20m cash released. With a 20% holding cost, annual saving of €0.24m. DIO falls from ~91 to ~80 days (≈ −11 days).
• Expedites −40%: €2.00m × 40% = €0.80m direct saving to OPEX/COGS.
• OTIF from 93% to 96%: fewer lost sales and fewer penalties. If service-related leakage was 0.5% of sales, recovering 3 pp can add ~€0.16m net (adjust to your case).
• CCC improves via DIO (−11 days). With €100m sales, one day of CCC can equate to hundreds of thousands of euros in avoided financing, depending on seasonality and receivables/payables.
• Illustrative EBITDA uplift: €0.80m (expedites) + €0.24m (holding) + €0.16m (net service income) ≈ €1.20m. No “magic”: operational levers with traceable financial impact.

CFO checklist: what to demand from an SCP

The right tool doesn’t just “plan”; it governs data, makes every assumption traceable and aligns decisions with the P&L. This checklist helps evaluate solutions and insist on results.

Assumption traceability, data governance, ERP/BI integration

When selecting a software provider, look for the following capabilities:

1. Data lineage: who changed what, when and why; full auditability.
2. Governed masters: products, routes, calendars, stock policies and lead times with approval and expiry.
3. Integration: bi-directional sync with ERP, and KPIs exposed to BI in (near) real time.
4. Security and permissions: segregation of duties, roles and access logs aligned to corporate policies.
5. Assumptions catalogue: cost of capital, holding cost, transit times, yield and scrap defined and visible.

Financial KPIs: DIO, OTIF, cost-to-serve, contribution by customer/SKU

And to be useful day-to-day, the software should also provide:

• DIO by family/SKU and channel, with deviation alerts and “what-if” simulation.
• OTIF segmented by profitability and criticality, with penalties modelled.
• Cost-to-serve breakdown (transport, handling, complexity, returns, premium).
• Contribution by customer/SKU/channel and profitability ranking.
• Expedite rate and cost, freeze adherence, approved scenarios and forecast variance.
• Link to CCC with a joint DIO/DSO/DPO view and working-capital targets.

A planning platform can be the CFO’s best ally

When the CFO leads S&OP with economic rigour, the supply chain shifts from cost centre to engine of value creation. The combination of dynamic inventory, segmented service and controlled expedites tends to deliver quick, sustainable gains in EBITDA and cash, provided there’s an SCP capable of turning data into decisions with real constraints, comparable scenarios and full traceability.

If you want to land this approach in your business, with your margins, your lead times and your customers, start with a short DIO/OTIF/expedite diagnostic and a focused pilot that proves the economics. Want to see how an SCP can move your EBITDA and your CCC in 90 days? Book a demo with our experts and let’s talk with data.