Business Assurance - Viewpoint

Competitive advantage through supply chain resilience

Leaders: Impact and Approach

How are the companies considered to be leaders in supply chain management impacted and tackling the COVID-19 situation? In the latest ViewPoint survey Competitive advantage through supply chain resilience, we took a closer look at the 120 companies (10% of total sample) who are the most mature, comprehensive and agile in their approach.  

A thorough approach to supply chain risk management 

COVID-19 is not the primary reason for leaders’ mature supply chain risk management approach.  A total of 59.1% had a mature approach already, increasing slightly to 65% today. Moreover, leaders stand out as conducting complete risk assessments of their supply chains. On average only 26.2% map sub-suppliers (tier 2 and beyond), while all leaders include sub-suppliers in their supply chain risk management programs. 

An articulated portfolio of mitigating initiatives  

Leaders identify primary risks to center around quality (63.3%), market volatility (63.3%), epidemic/pandemic (62.5%), and shortage of manpower (60.8%). While indicating risks at higher percentages, leaders do have a wider range of mitigating actions implemented and are able to quickly adapt when things happen. They communicate and monitor suppliers at significantly higher rates. To spread the risk and ensure flexibility, leaders have primarily expanded their suppliers base (52.5%), rather than shortening (9.2%). At lower rates, but double that of the average sample, a total of 27.5% have implemented insourcing for certain activities.   

Disruptions negatively impact business 

While being at the forefront of supply chain management, leaders report their supply chains to have been affected by COVID-19 at equal or higher rates compared to the average. A total of 60.9% vs. 55.8% have experienced supply chain disruptions. The primary causes are delays in supplies (52.5%) and an interrupted flow of goods due to issues with delivery/logistics (46.7%), limitations to international trade (37.5%) and lockdown of suppliers (37.5%). Leaders also report reduced sales (60%) and increased operational costs (55%) at higher rates than the average.  

Remote audits essential to robust supplier programs  

Interaction with suppliers, including continuation of assessments, is essential to leaders’ supply chain risk management. During the pandemic, they have found ways to continue engaging regularly. Remote audits increased by 25.8% (vs. 15.6% average) and document-based qualification increased by 21.7% (vs. 13.9%). The drop in physical on-site audits for leaders was 29.2%, which is on part with the average sample.  It is not surprising, therefore that 68.3% (vs. 51.8) of the leaders indicate remote audits as a viable means to ensure robust supplier qualification programs.  

A flexible approach to ensure continuity  

A recommended practice to tackle a crisis is to know your suppliers, set priorities, and increase communication and collaboration. Leaders tick all the boxes, including being more flexible to ensure continuity. In particular, they have allowed more favorable lead times (42.8%) and reviewed commercial terms for suppliers at rates double the average (41.7% vs. 19.8%).  

COVID-19 prompt fine tuning of strategies 

Only 7% of leaders do not plan to finetune their supply chain strategy in the next 3 years. Changes will primarily concentrate on pursing alternative suppliers (80.9%). This is followed by review of stock management practices (55%). In addition, leaders intend to diversify their business strategy (53.3%), introduce digitalization (50%), revise qualification criteria of suppliers (47.5%) and insource activities (48.4%).   

Introducing technology more widely  

Leaders plan to increase the use of technology to support supply chain management efforts within the next 3 years. A given application area is remote audits (57.6%).  But leaders are eying more advanced technologies such as big data analytics to support decision making (48%) and AI and machine learning for insight (31.6%).  

A sustainable supply chain is more resilient  

More than 90% of the leaders agree that a sustainable supply chain is also a more resilient supply chain. In fact, in the next 3 years, 62.5% intend to implement and communicate a sustainable supply chain strategy.  Over half will also require suppliers to provide information on sustainability (55%) and undertake dialogues with suppliers to share understanding of sustainability challenges (54.2%).