The FINANCIAL -- A
global survey of CFO’s and supply chain leaders by professional
services organization EY, finds that companies with evidence of strong
“business partnering” between the CFO and the supply chain leaders
report better results than those with a more traditional finance model
Among business partner respondents, 48% report EBITDA (Earnings before income tax, depreciation and amortization) growth increases of more than 5% in their company over the past year, compared with just 22% of those with a more traditional relationship, according to Ernst & Young.
Partnering for performance, a global survey of 423 CFOs and heads of supply chain at companies, half of which have revenues of US$1b+, as well as a series of in-depth interviews with CFOs and heads of supply chain, also finds that despite the positive impact on revenues, only 26% of finance executives and 21% of supply chain executives say that the CFO’s contribution to the supply chain is primarily based around an enabling, collaborative, business partnering role. However, 70% of CFOs and 63% of supply chain leaders say that their relationship has become more collaborative over the past three years.
“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," Andrew Caveney, global supply chain leader at EY, said.
“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 added.
Companies that have a business partnering model in place tend to have higher EBITDA growth. They are also more likely to report that the return of a growth agenda is driving the need for a more collaborative relationship: only 4% of traditional CFOs cite this in the top three factors, compared to 18% of business partnering CFOs. In companies that are focused on cost-cutting, however, CFOs are more likely to play a traditional financial role, according to Ernst & Young.
“Although a company’s financial performance will inevitably be determined by a multitude of factors, a strong business partnering relationship between the CFO and the supply chain leader is definitely a contributing factor. Equally, higher growth may also enable greater investment in the resources required for business partnering. This can create a “virtuous circle” in which business partnering and higher growth can reinforce each other," said Caveney.
Eighty per cent of business partner CFO’s report a good or very good overall relationship with the head of supply chain, compared with only 35% of traditional CFOs. They also report stronger agreement over key priorities, better alignment between finance objectives and the supply chain, and a mutual understanding of key risks and opportunities. In the supply chain function, 100% of those in business partnering relationships rate the overall quality of the relationship as positive, compared with only 23% of those in a traditional relationship with finance. More than 90% consider the level of agreement over key priorities and the mutual understanding of key risks and opportunities, to be positive, compared with 18% and 26% respectively of those in a traditional relationship.