How we can help solve the supply chain crisis, and drive our businesses into the future

Up until very recently, supply chains, while critical, often operated behind the scenes. Today, supply chains are top of the agenda in the boardroom. In fact, 42% of business leaders now rank suppliers as a top-3 important stakeholder according to a recent survey by PwC. That’s up from 13% the previous year. And many executives are building and implementing plans to build trusting, strong relationships with their suppliers.

This renewed focus on supplier relationships is largely because consumers and employees are feeling the effects of supply chain disruptions in their everyday lives, between delays and shortages of everything from cars and furniture to semiconductors. Under more scrutiny than ever before, businesses and their stakeholders are taking a closer look at supply chains and evaluating the function’s role in creating efficiency, improving resiliency and supporting ESG commitments. It is clear the supply chain plays an important role in resiliency and – now more than ever – a business’ agility as it navigates pressures from inflation, geopolitics and unsettled equity markets.

In my experience, there is a lot of lost opportunity surrounding the supply chain – where should leaders focus to create value and improve performance while meeting stakeholder expectations? Here are a few insights and observations that can help leaders think differently about their supply chain over the next 12-18 months.

Now is the time to invest in supply chain technology. A connected supply chain has never been more important. The pandemic highlighted the world’s need to fully embrace digitization, and supply chains may make the strongest case. A connected supply chain helps automate processes and offer real-time visibility – particularly valuable to leaders wanting operations to stay nimble while navigating a volatile landscape. Understanding how vulnerable businesses are to a diverse and widespread list of risks, supply chains can be an important strategic lever in ensuring operations are intact and customers are receiving goods with minimal disruption. 

For example, with embedded intelligence and the Internet of Things (IoT), supply chain leaders can be more effective in modeling and forecasting to prepare for disruption and reduce risk. They can also make pivots when needed. But a connected supply chain is not turnkey and its ability to be effective in the market is still challenged by barriers in technology and talent. Last year we released research showing that budget and investment concerns also are preventing leaders from investing into the technology that fuels their supply chains, as well as a lack of technical ability within the organization. It’s clear that to design and build a more connected supply chain, leaders will have to make a strong case for its value and work with both suppliers and employees on adopting new technologies and processes. This is a large undertaking, but long-term value could mean a lot to the companies’ operations, efficiency and long-term costs.

The connection between ESG and supply chains will only intensify. Consumers and businesses just witnessed the power of social disruption on supply chains during the public health crisis and related shutdowns. The same is happening, and will only continue to happen, with environmental disruption as well. As natural resources and environmental conditions become more stressed from climate change and severe weather, our ability to use and move natural resources, products and supplies will be increasingly affected. 

Take semiconductor chips for example, which require a lot of water to produce. In 2021, Taiwan, a major hub for semiconductor manufacturing, experienced a major drought. That environmental issue caused a ripple effect, impacting a wide swath of products that require semiconductors, including personal electronics and cars. If leaders are thinking about risk management and resilience of their organizations, they may want to think about how climate change impacts their organization through their supply chains, and what actions they can take now to help address those environmental concerns. While leaders can of course diversify their material dependencies or locations for manufacturing, that is likely only a band-aid solution long-term. ESG and supply chains are undeniably connected and it is not a problem we can run from as leaders.

Supply chains may cause some leaders to shift away from globalization. Supply chains could change how leaders operate and drive growth. With perpetual supply chain issues and mounting risk, many leaders are re-looking at how they have structured supply chains and reconsidering their decentralized approach. The scales have tipped: is a larger footprint worth losing control? Years ago, tight control was less of an issue. It became a universal understanding that globalization and expanding a company’s footprint would help drive growth and scale. But with too many touchpoints in various geographies, a global supply chain is weighed down in risk from societal, environmental and economic issues. Some leaders are now looking to shrink their supply chains and sourcing more materials and inputs locally. With a tighter supply chain, leaders can minimize exposure to a diverse set of risks, which may be more valuable than the many advantages of a global supply chain such as cost and availability. Individual organizations will have to weigh the risks and rewards independently, but every leader should be modeling multiple supply chain scenarios to determine the best fit for them.

Supply chains are no longer just a support function. By looking solely at costs or supply and demand, and thinking through how to “fix” the symptoms of a disrupted supply chain, leaders are doing their businesses a disservice. By prioritizing their supplier relationships, investing in technology, promoting understanding of how a supply chain can help different functions meet their goals and rethinking how the supply chain fits into an overall business strategy, leaders can realize new value and improved operations.