Partnering for performance: CFO and the supply chain
Business partnering benefits for CFOs and supply chain
Business partnering relationships between the CFO and the supply chain yields rich returns
CFOs and supply chain leaders who say they are in a business partnering relationship are more likely to pinpoint organic or inorganic growth as the single most important priority for their business over the next three years. Below are five ways in which companies can benefit from business partnering between finance and the supply chain:
1. Drive cross-functional innovation
The best ideas frequently happen when companies look at a problem from a new perspective. By eroding organizational boundaries and bringing together teams from different functional areas, business partnering can act as a powerful catalyst of new ideas and innovation.
“Breakthroughs in performance and innovation happen when there is true partnership in place between functions to solve problems,” says Brian Meadows, Americas Supply Chain Leader at EY. “They don’t occur in functional areas in isolation; they happen when you break down organizational barriers and introduce connectivity into how work gets done.”
2. Creating alignment around priorities
Companies perform better when there is focus and alignment around corporate priorities. Yet, all too often, performance targets in different functional areas can have unintended consequences elsewhere in the business.
Business partner CFOs can serve as the “broker” between the commercial and operational sides of the business, and help ensure that there is consistency and alignment around objectives. “Once we have a good idea of how much product we are going to sell, we can build a strategy around that and optimize our manufacturing footprint to deliver it,” says Matt Hilzinger, CFO of UGS, a building supplies company.
3. Strengthen investment decision-making
Business partner CFOs play an active role throughout the investment life cycle. By bringing rigor and insight to support and challenge decision-making, they help to maximize the chances of making the right decisions.
Over time, this collaborative approach helps to educate partners in the supply chain to be more effective in making investment choices. “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,” says Simon Dingemans, CFO of GSK.
Collaboration also helps to defuse the tensions that can often accompany decisions around resource allocation. Andrew Caveney, Global Supply Chain Advisory Leader at EY says, “The supply chain is in a better position to know what the organization needs to produce, and can start to direct capital investment to building the right capabilities in line with that strategy.”
4. Use end-to-end visibility to drive performance
Business partner CFOs help to eliminate information silos. This creates end-to-end visibility across the commercial and supply sides of the business. With better information flowing through the system, companies can create an accurate picture of demand. This helps to strengthen planning and forecasting, leading to much stronger working capital performance.
“To really make a difference in terms of working capital, you need to redesign your supply chain so that you speed up the manufacturing cycle and shorten production times,” says Mr. Dingemans. “If you can make the supply chain more responsive to the front end by centralizing demand planning in one place, then you can run with lower stock levels. And that creates a real benefit in terms of speed and responsiveness.”
5. Provide a stronger early warning system of risks
By embedding in the supply chain and improving the flow of information across the company, CFO business partners can develop a much deeper understanding of risks. Using tools such as analytics and scenario planning, they can also adopt a long-term and strategic perspective on risk, and ensure that the business is able to respond effectively when the unexpected happens.
“We are never going to get the same degree of control over our external suppliers as we do over the internal network, but we have processes in place to try to get as close to that as we can,” says Anthony Maddaluna, President of Global Supply at Pfizer. “We have a lot of quality indicators to tell us what’s going on and a very strong technical support group. So, when issues come up – because they do – we deal with them very quickly.”