Nothing focuses a supply chain manager's mind like discovering a way to improve the supply chain network. Given this, a new Ernst & Young survey should interest supply chain managers. It reveals that, when chief financial officers (CFO) and supply chain leaders form a closer business partnership within a company, they report better results in a number of areas, including the company's financial position.
“Among survey respondents with an established business partner model in place, 48% report EBITDA growth increases of more than 5% in their company over the past year, compared with just 22% of those that have not yet adopted this approach,” Ernst & Young said in a report on its survey. Two other key data points suggest that business operations improve when supply chain managers and CFOs work together:
- “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.”
Ernst & Young interviewed 423 CFOs and heads of supply chains at technology, automotive, manufacturing, aerospace and defense, and other companies. The importance of the relationship between the CFO and supply chain leaders cannot be overstated and seems to be getting stronger. According to the report, “70% of CFOs and 63% of supply chain leaders say that their relationship has become more collaborative over the past three years.”
CFOs can enhance supply chain operations in several key areas. They can create consistency across the supply chain and strengthen the alignment between the supply chain and a company's business strategy. They can challenge investment choices from the inception of an idea to managing an asset's performance to retiring it or reinvesting in it. In particular, when companies conduct mergers and acquisitions, CFOs can challenge the rationale for new investment, and they can use data analytics to support and challenge business decisions.
Because CFOs take a long-term approach to formulating business strategy, they are in a unique position to manage risk and plan for business continuity — two areas that pose enormous challenges for supply chain managers. This involves working with direct, secondary, and tertiary suppliers across the supply network. “The CFO also has the opportunity to work with procurement and treasury [departments] to determine the extent to which risk is owned and managed by the company, and to what extent it is pushed further down the supply chain.”
The three factors most commonly cited by supply chain leaders cited as influencing the need for a closer relationship with CFOs were supply chain globalization (38%), the pace of change (34%), and rising external costs (32%). When these leaders were asked to pick the most important priority for their business over the next three years, the top choice was improving product or service quality (25%), followed by cost cutting and efficiency (22%) and investing in products, talent retention, and research and development (21%).
As high-tech companies plan ahead and supply chain leaders adjust their supply chains in the aftermath of the financial crisis, it may be advisable to seek the advice and counsel of the company's CFO — especially now in an economic environment where companies are seeking to stimulate growth, manage risk, and operate in an increasingly competitive global environment.
This report suggests that the collaboration between the CFO and the supply chain leaders can help improve a company's supply chain efficiency, as well as its financial position. The question is how much you think such collaboration can help your company. Do you think it could help you manage risk, enhance supply chain performance, and improve your company's financial position? Does your company encourage a working relationship between the CFO and supply chain leaders? If it does not, why not? If it does, has that relationship born tangible results? Share your thoughts below.