Supply chain risk management: issues, costs and solutions

Top five supply chain risks from procurement leaders

The risks supply chain leaders worry most about this year reflect the current global environment. In a survey of 750 senior procurement leaders, supply shortages topped the list of risks they were most concerned about.¹

Top five risks procurement leaders are most concerned about in the next 12 months:

1. Supply shortages – 35%
2. Commodity price inflation – 32%
3. Cyberattacks – 32%
4. Logistics/transportation – 29%
5. Regulatory requirements – 29%¹

Cost of supply chain disruptions?

According to Interos, the average business suffers four supply chain disruptions a year, costing them US$82m annually in lost revenue.¹ While John Gattorna of Gattorna Alignment says that once every 10 years, companies can lose around 42% of EBIT due to a major disruption.

Average yearly cost to organisations (in $US millions)

• Restrictions (e.g. export controls or sanctions on entities and technologies) $47m
• Catastrophic (e.g. extreme weather, natural disasters and factory fires) $45m
• Geopolitical (e.g. wars, terrorism, global trade disputes) $45m
• ESG (e.g. carbon emissions, pollution, forced and child labour) $44m
• Financial (e.g. supplier health and insolvency) $44m
• Cyber (e.g. data breaches, attacks on physical and digital infrastructure, ransomware demands) $43m¹

68% of supply chain executives say they’re caught in a cycle of significant supply chain disruptions and have little time to recover before facing the next one.² While the next disruption may be right around the corner, according to Accenture, the average time it takes a company to be alerted to that disruption, and then stage a full recovery is 3 months. ³ And, according to BlueYonder, the most common result of a supply chain disruption is a delay in customer delivery. ⁴

Watch John Gattorna’s Thought starters episode

Mastering global disruption

The road to supply chain risk management 

Businesses believe they could gain US$37 million a year by being better prepared for disruptions and risks.¹ But, interestingly, the main motivation behind businesses adopting Supply Chain Risk Management (SCRM) isn’t to reduce the US$82 million cost of disruption. It’s to improve customer service and experience. This makes sense since disruptions lead to customer order delays which can reduce trust and damage brand reputation.

The top five biggest drivers for SCRM 

1. Improve customer service/experience 
2. Cost reduction/efficiency (i.e. reducing that US$82m loss)
3. Protect brand reputation
4. Gain competitive advantage
5. Grow sales revenue¹

Supply chain risk management solutions

There are two main supply chain risk management solutions:

1. Restructuring supply chains 
When it comes to physically changing supply chains to improve resilience, two strategies dominate – increasing inventory buffers and dual-sourcing.

Learn more about restructuring supply chains

2. Digitalising and automating supply chains³
A digitalised world demands a digitalised supply chain. From manufacturing and warehouses, through to delivery, smart decision-making and documentation, supply chain technologies are enabling automation, innovative solutions, increased productivity, lower costs and efficiency.⁵

Learn more

² BlueYonder
³ Resiliency in the making - Accenture
⁴ BlueYonder
⁵ SUPPLY CHAIN TECHNOLOGY: Improving Efficiency, Resilience, and Transparency - Citi

About Goodman insights

Explore more insights