Companies with strong "business partnering" between the CFO and the supply chain leaders report stronger results.
LONDON - A global survey of CFOs and supply chain leaders by professional services organization EY, finds that companies with evidence of strong "business partnering"[1] between the CFO and the supply chain leaders report better results than those with a more traditional finance model in place. 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.
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 CFOs 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.
Andrew Caveney, global supply chain leader at EY, says: "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.
"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."
Business partners focus in on growth
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.
Caveney continues: "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."
Integrated, end-to-end perspective
Eighty per cent of business partner CFOs 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.
Other key findings:
- CFOs and supply chain leaders are most likely to take a business partnering approach if they've been in their role for less than 5 years.
- CFO business partners say that they spend 25% of their time with the head of supply chain, whereas those with a more traditional relationship spend 12%.
- 83% of finance business partners and 87% of supply chain business partners agree that data and analytics present CFOs with an unprecedented opportunity to drive a more collaborative, business partnering relationship with the supply chain.
- 26% of business partnering CFOs and 24% of business partnering supply chain executives see improving organizational design to aid tax effectiveness as one of the top three opportunities for the CFO to play a greater role in the supply chain.
To view a copy of the paper, please go to www.ey.com/cfoandsupplychain.
[1] For the purposes of this study, "business partnering" refers to a relationship between finance and other functional areas of the business that is based around a highly collaborative, enabling and supportive model. A traditional finance relationship refers to one in which the emphasis remains on core finance responsibilities, such as accounting, reporting and controls.
