Fender’s CFO on Using Machine Learning to See the Whole Picture

The role of the chief financial officer (CFO) has a lot of operational responsibilities today that it didn’t have 10 or 20 years ago. Today’s CFO looks at the operation, data and people.

“In many ways, the CFO is no longer relegated just to the finance and accounting, or maybe [financial analysis] — it’s really the whole shooting match,” Matt Janopaul, CFO of Fender Musical Instruments Corp., told PYMNTS.

Janopaul has been involved with Fender for more than 20 years, serving in such roles as investor, president and chief operating officer. In January, he was appointed CFO of the 75-year-old guitar maker that’s outfitted musical legends from Jeff Beck to Stevie Ray Vaughn and become an icon in its own right in the process.

“As a finance professional, you can talk about IRRs [internal rates on return], cash-on-cash returns, EBITDA [earnings] and so on — or you can talk about helping to grow and build one of the iconic American brands that frankly is influencing culture and society not just domestically but throughout the world,” Janopaul said.

Maintaining a Competitive Advantage

Fender has two large factories — one in Southern California and the other in Mexico — and 4,000 employees. Although guitars can’t be made remotely, the company has been able to keep shipping during the pandemic.

One thing that has made that possible is five years ago, before the pandemic, the company outsourced all its distribution to FedEx. That meant Fender was able to keep shipping product to its customers, even early in the pandemic, because FedEx facilities were considered essential.

In addition, Fender’s finance team was already decentralized, so it could continue to run the back office without having to physically be there.

A third thing that has enabled the company to continue shipping product is the way it works with its overseas suppliers. While Fender makes guitars in North America, it also sources in Asia. By giving those suppliers more visibility about its needs, the company enables them to plan their factories.

“Our real competitive advantage, particularly over the past two years, is that we had supply and that we could get that supply to our customers,” Janopaul said.

Giving Suppliers Visibility Into Demand Forecast

At the same time, like everyone else, Fender must deal with the exponentially higher costs of moving product from Asia to Europe or the U.S. The company has made sure it’s considered everything having to do with shipping and shipping costs. It’s also thinking about other parts of its supply chain it can outsource to speed the movement of product from ports to distribution centers to customers.

Fender also values its solid, long-term relationships with its original equipment manufacturers (OEMs) and its use of electronic data interchange (EDI) and supplier portals.

“We already had that, but we’re taking it to the next level to give them even more visibility into our demand forecast so they could get in front of their planning and have more information,” Janopaul said. “I think that helps set us apart from some of the other manufacturers in our industry.”

Leading the Industry’s Evolution

Fender has a dealer portal, too, which enables it to communicate directly with its independent dealers. These include single-storefront retail stores, pure online stores and larger retailers such as Sweetwater, Guitar Center and Amazon.

Before the pandemic, dealer orders would be placed during an annual trade show. Beginning in 2020, on the heels of the pandemic, Fender launched online dealer events and now offers dealers the ability to buy products online through a B2B portal.

“This industry has evolved, and we hope we’re leading that evolution,” Janopaul said.

Looking ahead, Janopaul said Fender’s finance and treasury team has been looking at automation and machine learning. The team has found that while those solutions historically were meant for much larger companies, there are now middle-market solutions that don’t require a big overhead of people to maintain them but still help the operations to be more productive.

“We are thinking about the journey as a billion-dollar company to a larger company and what role automation and machine learning will play,” Janopaul said. “We’re already starting to experiment in various functions within the finance and treasury team in those areas.”