Companies Do Better When CFOs, Supply Chain Heads Collaborate
By Dinah Wisenberg Brin
A new study suggests that companies do better financially when their chief financial officers collaborate with their supply chain leaders. Most CFOs aren’t engaged in such “business partnering” relationships now, although the numbers are increasing, the research discovered.
An Ernst & Young global survey of 423 CFOs and supply chain heads, combined with in-depth interviews, found that only 26% of finance execs and 21% of supply chain leaders considered their company CFOs to be contributing to the supply chain in a collaborative, business partnering role.
Seventy percent of CFOs and 63% of supply chain leaders, however, say their relationships have become more collaborative in the past three years, according to the survey, which defines “business partnering” as a “highly collaborative, enabling and supportive model” relationship between the finance office and other company areas.
Of those executives who reported being in business partnering relationships, 48% reported that EBITDA (an earnings measure) grew more than 5% in the past year, compared with only 22% of those with more traditional corporate relationships, EY said.
“When cost reduction leapt to the top of the corporate agenda at the height of the financial crisis, supply chains – which typically hold a large proportion of many companies’ costs – were one of the first places that CFOs turned to for savings. However, as companies looked to stimulate growth, manage economic uncertainty and the impacts of globalization, the supply chain has also become a source of competitive advantage,” EY global supply chain leader Andrew Caveney said in an announcment of the study results.
“To really unlock both the cost and agility advantage of the supply chain, it is key that the CFO and head of supply chain really collaborate effectively. Through this collaboration, the CFO can support the supply chain leadership in ensuring greater alignment with corporate strategy, better investment decisions, better risk management and improved supply chain insights through analytics capability,” he said.
Companies in the United States, South Korea and Singapore lead in CFO-supply chain chief collaboration, according to EY, which also noted that business partnering is well established in the United Kingdom. Companies reporting strong business partnering are more likely to report closer alignment between the finance and supply chain functions, and these models are more strongly associated with growth, EY reported.
An overwhelming number of business partners agreed that data and analytics help CFOs develop a more collaborative relationship with the supply chain, the survey found. In also found that 80% of business partnering CFOs report a good or very good relationship with the supply chain head, versus 35% of traditional CFOs.
By partnering, companies can spur cross-functional innovation, align priorities, strengthen investment decision-making, use end-to-end visibility to improve performance, and provide a better early warning system of risks, EY said.
“It’s not about finance telling the organization what it can and can’t do; it’s about serving the right information and engaging with the business in a collaborative way to make better informed decisions,” Simon Dingemans, CFO of GSK, said in the report.
Among the steps for CFOs to become successful supply-chain business partners, EY suggests that they make time for the supply chain, allocate resources to it, participate in the sales and operations planning process, stay involved throughout the investment cycle, build an integrated operating model, focus the supply chain on the most important metrics, consider centralizing business functions and look deeply into the supply chain for risks.
Alistair Davidson, head of staff at IKEA Group, told EY that collaboration always has been strong in the organization.
“I think the interdependence between the different functions and processes is growing all the time nowadays. If you tried to do your role in isolation of what others are doing, it just wouldn’t work,” he said. “I have to work with an end-to-end understanding, and so do the teams in the supply chain. It’s very collaborative, and it’s getting more so as we go along.”
