Partnering for performance: CFO and the supply chain
Bridging the gap between CFOs and supply chain
CFOs must change how they work with the supply chain
The CFO’s transition from a role focused on monitoring, reporting and controls to a broader business leadership role, has been the subject of much commentary. CFOs require a business-partnering model, with a collaborative focus on improving organizational performance.
Is the shift to business partnering happening?
When it comes to the supply chain, business partnering CFOs are still in the minority. Only 26% of finance executives and 21% of supply chain executives we surveyed say that the CFO’s contribution to the supply chain is based around a business-partnering model.
However, 70% of CFOs and 63% of supply chain leaders say that their relationship has become more collaborative over the past three years. In the next few years, we are likely to see the CFO increase their involvement in the supply chain further still.
Our survey suggests that collaboration is associated with stronger corporate performance. 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.
A focus on costs drive the CFO and supply chain together
When the crisis first hit in late 2008, many companies quickly faced severe liquidity constraints. To free up cash, improve working capital performance and strengthen balance sheets, companies embarked on ambitious cost-cutting programs. For many CFOs, the supply chain was the first place to look.
Five years on, the worst of the crisis is behind us, but the need for strong relationships between finance and the supply chain continues to grow. Although cost cutting remains high on the agenda, companies are turning their attention back to growth.
Today, the nature of growth opportunities has changed. Globalization and the rise of emerging markets present significant new opportunities, but also require companies to realign their supply chains and product portfolio to meet the needs of these non-traditional markets, while still ensuring that traditional developed markets remain served.
“CFOs should be taking active steps to align the finance organization with the manufacturing and supply chain to make sure that finance is right at the heart of that discussion,” says Simon Dingemans, CFO of GlaxoSmithKline, a pharmaceuticals company. “From my point of view, the supply chain is a very high priority in terms of shaping the operations of the company to support the strategy, but also to make it more efficient and agile.”
Evolving risk landscapes requires collaboration
In recent years, natural disasters and other events affecting global supply chains have rarely been far from the news. Worse, many companies struggle to identify the risks that lurk in their supply chains, particularly in secondary and tertiary layers.
Thanks to their broad perspective across the business, the CFO is in a position to improve end-to-end visibility across the supply chain and help identify and manage risks. They also have an opportunity to take a holistic view of the firm’s data and help protect both the financial and reputational health of the business using analytics and scenario-planning techniques.
Historical complexity creates opportunities for streamlining
Many companies’ supply chains have evolved in a piecemeal fashion. They have bolted on additional capacity to meet new demand, shifted internal resources to outsourcing relationships or acquired new assets through M&A deals.
As a result, global supply chains are often not only highly complex, but also poorly integrated, with a lack of end-to-end visibility and a reliance on different, often incompatible, systems and processes. In collaboration with the supply chain leader, the CFO can unpick the complexity and identify ways of improving visibility.
The supply chain’s increasing significance creates opportunities for alignment
In recent years, heads of supply chains have seen their role elevated within the corporate hierarchy. Many now hold board-level positions and have greater influence over strategic decision-making than ever. This is a major opportunity to create a new level of strategic alignment across finance and supply chain.